Is early retirement feasible for Malaysians?

It's an integral part of life many of us look forward to. After all, it's the much needed break and easy life that you look forward to after years of dedicating your life to work and even raising your family. Retirement is something many Malaysians want according to a Nielsen survey report. Malaysians are the highest among Southeast Asian consumers who planned or have retired below the age of 60, standing at 50%.

It's good to want to retire, but is it possible especially for those in Malaysia? After all, a number of articles have shown that many Malaysians are not financially ready to retire, even after the retirement age was pushed up to 60. With the rising cost of living looming ahead, it does feel as though retirement is just nothing more than a dream. When in reality, retiring early is feasible depending mostly on your financial understanding.

Should your consider early retirement?

While many may believe the current interest rate in Malaysia is discouraging and doesn't amount to much, as long as you are keen to retire early and take the necessary steps such as budgeting and careful spending, it is possible. While many may think retiring early means retiring around their 50s, there is a growing trend of those aiming to retire in their 30s. All of those who aim to do so say that all it takes is a lot of careful planning with your expenses and expanding your portfolio to provide an additional passive income.

Retiring earlier does not mean that you don't have to earn any money. In fact, an early retirement may give you the freedom to pursue your own interest and work, allowing you to earn money at your own pace rather than the pace of the working world.

For those who wish to retire in their 30s, based on research, it was shown that they will need to earn 25 times their annual expenses. It's a hefty amount, especially for an average Malaysian. An average account executive in Petaling Jaya earns about RM35,145 a year. That means if they want to retire around their 30s, they will need to have a retirement fund amounting to RM878,625 and even then, that may not be enough with the rising cost of living and hospital expenses.

But just because it looks like an uphill climb, that doesn't mean it's completely impossible. If you really want to retire, doing your saving and planning now is crucial.

Steps to early retirement

The key to retirement is how to raise the funds that you need to support yourself when you decide to leave the workforce. It's still important to contribute to your EPF, but depending only on your EPF is not a great idea, as this can only fund a part of your retirement. An active EPF member now needs to have a minimum of RM196,800 in their account by the age of 55. This, according to EPF’s calculations will last you 20 years if you frugally live within RM820 per month. Whilst this may be feasible if you have no rent or car payments to make (nor any other loan for that matter), it seems a highly conservative number. It’s also important to factor inflation and what costs of living may be even 5 years from now.

This is why it's important for Malaysians to diversify their portfolio and look into different ways of investment. This can come in bonds, cash, unit trusts and property. As long as you aim for a steady return and you understand the tax implications, doing these different investments can help in raising enough money for your retirement.

Starting your investment early is also key to building your retirement fund. You get more not just in terms of amount but interest rate as well when you start around your 20s, compared to your 30s. This will help, especially for those who wish to retire much earlier.

Rather than save as much as possible, it's also best to have a budget in place. You will need to know your recurring expenses and savings so that you know where your money is going and how you intend to use it, especially during your retirement. This will make your goal of how much you need to earn easier. As more people are able to live beyond their 70s, it's crucial to know your life expectancy. While life can be unpredictable, it's better to have enough than struggle later on.

While it's an uphill task to ensure you have enough for your retirement, it doesn't have to be impossible. It does require some sacrifice on your part today, but if you really want to live a lot easier later on, then doing what you can now will help you get the retirement you've always wanted.

This was brought you by MICHELLE BROHIER from RinggitPlus.com. RinggitPlus compares credit cards, personal loans and home loans to help Malaysians get more for their money.