How to Start Retirement Planning in Your 20s and 30s in Malaysia. Avoid This Mistake When Planning Your Retirement
Retirement planning in Malaysia, particularly for individuals in their 20s and 30s, is a crucial step toward achieving financial security. With rising living costs and inflation, starting early ensures a comfortable retirement in Malaysia. Shockingly, only about 3% of Malaysians achieve a comfortable retirement, making it essential to act now. By leveraging tools like the Employees Provident Fund (EPF) and setting clear goals for your retirement plan, this guide will answer the question, “How Should You Start Retirement Planning in Your 20s and 30s in Malaysia?”
Understand Your Retirement Planning Savings Targets
To retire in Malaysia, you need a clear savings goal. EPF guidelines suggest aiming for RM900,000 to RM1 million for a comfortable retirement in 20 to 30 years, particularly in urban areas like Kuala Lumpur, where RM600,000 may cover basic comfort. In less expensive areas like Alor Setar, RM480,000 might suffice. These figures account for inflation and medical costs, which are critical for long-term retirement planning.
Here are salary-based milestones to guide your retirement planning in Malaysia:
| Age | Savings Milestone (Multiple of Annual Salary) |
| 30 | 1x |
| 40 | 3x |
| 50 | 5-6x |
| 60 | 8-10x |
For those in their 20s and 30s, EPF’s Retirement Income Adequacy (RIA) Framework provides specific targets by age 30:
- Basic: RM38,000 (aiming for RM390,000 by 60).
- Adequate: RM47,500 (targeting RM650,000 by 60).
- Enhanced: RM85,400 (on track for RM1.3 million by 60).
Exceeding the enhanced benchmark ensures higher monthly withdrawals, starting at RM5,417 and growing to RM14,779 by year 20. These targets, updated every three years by EPF, are valid until 2029.
Overall retirement needs vary by lifestyle:
- Minimum: RM250,000 (RM1,500 monthly for 20 years).
- Dignified: RM600,000 (RM3,800 monthly).
- Comfortable: RM1,000,000 (RM6,300 monthly).
These amounts depend on your location and cost of living, answering how much to retire in Malaysia for different goals.
Calculate Your Monthly Savings Needed For Retirement
To achieve these targets, calculate your monthly contributions. For a 30-year-old starting from zero and aiming for RM900,000 by 60, you’ll need about RM1,400 monthly, assuming EPF’s average 5% annual returns. With 5% returns over 30 years, RM1,254 monthly can grow to RM1 million, requiring a gross salary of at least RM5,225 to cover EPF contributions (13% employer, 11% employee). Starting in your 20s leverages compound interest, reducing the monthly burden and making retirement planning in Malaysia more achievable.
Use EPF’s i-Akaun app or online calculators to personalize your plan, factoring in 3% annual inflation and expected returns.
5 Pro Tips to Kickstart Retirement Planning in Your 20s and 30s
Here are actionable steps to begin your journey to retire in Malaysia:
- Use a Time Value of Money (TVM) Calculator: Free online tools help project savings growth. Input your target (e.g., RM1 million), timeline, and returns to estimate monthly savings.
- Secure a Competitive Salary: Aim for at least RM5,000, adjusting for inflation (e.g., RM1,800 decades ago is now RM5,000 for similar roles). Negotiate based on industry standards.
- Target Annual Raises: Seek 5% yearly increments to outpace 3% inflation, boosting your savings capacity for retirement.
- Maximize EPF Contributions: Leverage employer matches and consider voluntary top-ups for tax benefits and compound growth.
- Consult a Licensed Financial Planner: Work with professionals to tailor your retirement plan, ensuring financial independence.
Track progress with EPF’s i-Akaun app to stay aligned with your goals.
Avoid This Mistake: Withdrawing EPF Funds Early
A critical mistake in retirement planning in Malaysia is withdrawing EPF funds prematurely. Early withdrawals for housing or emergencies can drastically reduce your retirement nest egg due to lost compound interest. For example, withdrawing RM10,000 in your 20s could cost RM50,000 or more by retirement. Only 4% of Malaysians reach RM600,000, often because of such habits. Instead, build a separate emergency fund and treat EPF as untouchable to ensure you retire in Malaysia with adequate savings.
Other Common Mistakes to Avoid When it Comes to Retirement Planning
1. Procrastinating Your Savings
Delaying retirement planning is a prevalent mistake. The longer you wait, the less time your money has to grow. Even small, consistent contributions can accumulate significantly over time.
2. Underestimating Retirement Expenses
Many individuals fail to account for the rising costs of living, healthcare, and other expenses during retirement. It’s crucial to realistically estimate your future needs to avoid financial strain.
3. Relying Solely on EPF
While EPF is a vital component of retirement savings, it’s not enough on its own. Diversifying your investments through avenues like the Private Retirement Scheme (PRS), unit trusts, or other investment vehicles can provide additional financial security.
4. Neglecting to Build an Emergency Fund
Unexpected expenses can arise at any time. Having a separate emergency fund ensures that you don’t dip into your retirement savings for unforeseen costs.
5. Withdraw from the EPF Flexible Account Frequently
The Employees Provident Fund (EPF) Flexible Account (Akaun 3) provides liquidity for emergencies, but frequent withdrawals can significantly diminish your overall retirement savings. This is due to the loss of potential dividend returns and the eroding impact of inflation. Therefore, treating this account like a regular savings account could jeopardize your long-term financial security.
6. Not Getting Life insurance in your 20s and 30s
Excluding insurance from your retirement plan significantly elevates financial risk, exposing you to substantial costs from health problems, unforeseen death, or outstanding family debts. Without a specific financial instrument to address these situations, your retirement savings and investments would become your sole protection, potentially exhausting your funds rapidly.
Final Thoughts: Start Your Retirement Planning Early in Your 20s and 30s
Retirement planning in Malaysia for those in their 20s and 30s is about starting early and staying consistent. By hitting EPF milestones, saving steadily, and avoiding premature withdrawals, you can secure a dignified or comfortable retirement. Use EPF tools and consult planners for personalized advice. The sooner you start, the easier it is to answer how much money to retire in Malaysia and achieve financial freedom,
Unlock Your Wealth Management with HWG Asia – Malaysia’s Leading Wealth Management Partner
You can always explore more at HWG!
HWG is a wealth management firm in Malaysia, offering wealth accumulation services tailored to Malaysian needs. From wealth advisory, estate, and retirement planning to investment management (it is delivered by appropriately licensed entities), we provide expert advice and secure, personalized solutions that empower you to achieve wealth and financial security.
Whether you’re a young professional just starting to save and invest or a high-net-worth individual seeking advanced wealth strategies, HWG’s client-first model ensures that your goals are met with integrity and expertise.
Discover How HWG Can Help You Manage Your Wealth:
- Estate & Retirement planning solutions for every life stage.
- Investment management strategies are designed to maximize returns while managing risk. (it is delivered by appropriately licensed entities)
- Ongoing support with regular reviews to ensure your plan evolves with you.
Contact HWG Malaysia Today:
Address: 29, Jalan SS 21/37, Damansara Utama, 47400 Petaling Jaya, Selangor
Email: customerservice@hwg.asia
Phone: 03-7732 6189
Inquiry: Contact Us
Visit HWG Malaysia’s Social Media Profiles:
Website: https://www.hwg.asia/
Facebook: https://www.facebook.com/hwg.asia
LinkedIn: https://www.linkedin.com/company/hwgasia/
Download the HWG Apps (available on the Play Store and App Store)!
HWG Hub: HWG Hub (For Internal Partner Use Only)
HWG Go: Coming soon
Disclaimer:
This article, published on this website, may be written or contributed by subject-matter experts or external writers. They are intended for general information and educational purposes only. HWG does not guarantee the accuracy, completeness, or timeliness of the information provided. Please note that the products, services or solutions in these articles may not be offered or provided by HWG. HWG shall not be held responsible or liable for any loss, damage, or issues arising from the use of, or reliance on such information.
