The suggested minimum amount for a Malaysian to retire gracefully varies from RM240,000, RM600,000, and RM1,000,000. This amount will differ depending on locations, individual needs, and spending habits as well as post-retirement lifestyle. If you are thinking about ways to build up your retirement kitty, here are four ways you can grow your wealth in the long run (more than a year).
1. Employees Provident Fund (EPF)
EPF is a retirement scheme for private sector workers in Malaysia. It offers a mandatory and consistent ways to accumulate funds for our golden years. Each month, an employee and their employer contribute 11% and 13% of the employees’ salary respectively into their EPF.
EPF just announced its full-year 2023 dividend rate at 5.50% for conventional savings (5.40% for shariah savings). Between 2000 and 2023, the average dividend rates for conventional and shariah savings were 5.60% and 5.43% respectively.
Source: EPF Source: EPF
Is EPF a good retirement tool? Let’s project the potential EPF balance for a fresh graduate by the age of 60 to understand the power of consistent savings as well as compound interest. The average fresh graduate monthly salary in Malaysia was RM2,876 according to Indeed.
Assumptions:
Starting monthly salary: RM2,500 (conservative estimate amid calls to give fresh graduate a monthly salary of RM3,000) Yearly salary increment: 3.0% Combined monthly employer and employee EPF contribution: 24.0% (11% employee, 13% employer) Estimated average annual dividend rate: 5.6% Partial withdrawal of approximately RM33,000 from EPF at age 35 for a home down-payment (remaining down-payment from savings) YearAgeMonthly Salary (RM)Annual EPF employer and employee Contributions (RM)Estimated 5.6% Annual Dividend Distribution (RM)EPF Balance (RM)2024252,5007,2004037,6032025262,5757,41684115,8602026272,6527,6381,31624,8152027282,7327,8681,83034,5132028292,8148,1042,38745,0032029302,8988,3472,98856,3372030312,9858,5973,63668,5712031323,0758,8554,33681,7612032333,1679,1215,08995,9722033343,2629,3945,900111,2662034353,3609,6766,77392,466*2044454,51513,00416,623313,4682054556,068^16,74839,334741,7262059607,03519,41657,3701,081,832*About RM33,000 is withdrawn to partly settle the down-payment to buy a house. ^Monthly employer contribution rate is reduced to 12% when monthly salary exceeds RM5,000.
With these assumptions,
