After working hard throughout your life, an elegant retirement plan can lead to a perfect ending to your professional career. There is no fixed age for starting to make your retirement plan, but whenever you plan to do it, it’s always great to think over it thoroughly and put it down in black and white.
Retiring is a part of life, which everyone looks forward to – after a certain time, usually in the 40s or 50s. Once you’ve dedicated a good number of years to your work, taking care of your family and contributing to the nation and the country, a retirement is the much needed break you need to take. According to a survey report by Nielson, majority of Malaysians look forward to a happy retirement.
The retirement age in Malaysia is 60 years for employees in the public sector. This is a compulsory retirement policy and there is no way to work beyond this age. After serving the government for a minimum of 10 years, one can go for early retirement, which is at the age of 40.
The employees in the public sector are offered two types of retirement plans, which include the pension scheme. The pension scheme comes with a fixed monthly income along with service gratuity and medical treatment fees. The EPF (Employees Provident Fund) offers a retirement plan where the money comes from a compulsory savings account.
Throughout their jobs, the employees and employers contribute to this account on a monthly basis.
Besides, the government also has retirement savings schemes for people who are working in the private sectors. Just like that of the public sector, the retirement age for employees of private organizations is also 60 years.
HSBC carried out a survey in 2013 and found that around 75% population of Malaysia have sufficient funds for retirement, although more than half of these people did not realize that they are not prepared for retiring until they finally retired!
In many other countries, the amount of retirement income from pension schemes is higher than that for Malaysians. Combining the pensions from the public or private sectors, it sums up to a maximum of 30% of the total retirement income.
Nowadays, we’ve come to an era when retirement can be defined in so many ways. Let’s examine the various ways to approach the understanding about retirement.
Types of Retirement You Should Seriously Consider
1. Traditional Retirement
This is the most common type of retirement taken by people all around the world. To these people, retirement means reaching an old age, when working becomes difficult and then enjoying the saved money for the rest of the life.
The source of this money varies from country to country and mostly includes personal savings, pension schemes from the company where they’ve worked and benefits from the government. From that point of view, retiring is a time to relax and travel and do everything that you wanted to do in your life, but never had the time to do them before.
Although this is how most people prefer to retire, there are some other types of retirements as well.
2. Early Retirement
There is practically no difference between the conventional retirement and the early retirement except for the age. Early retirement does not come at a very old age. It can be taken at 50 or 40. Some even go for it in the 30s if the savings are good enough.
The key to early retirement is to save a higher amount of money than average people. In fact, you need to save a lot more than the average people for retiring early. Many people think that early retirement is nothing but a dream. That’s not entirely true. If your savings can be boosted to around 50% (which is definitely difficult, but possible), you can practically retire within 15 years.
Another type of retirement is the semi-retirement. Under this retirement plan, you can continue to work, but not under any private or public organization. In this plan, you’ll have sufficient savings in your fund, which might be good enough to meet your needs in case you go for a full retirement. And yet, you choose to earn a small amount of income to make sure that your savings are not drawn down so quickly.
This is a smart way to retire as people can quit whenever they want, but prefer to spend their lives by doing some meaningful work.
This is a rather interesting concept for retirement. Tim Ferriss, the author of The 4-Hour-Workweek states that instead of going for decades of retirement at the end of our lives, people will live happier, fuller and become more productive if this retirement type is evenly distributed as mini-retirements throughout our lives.
That way, you will get to explore and travel as much as you want, in your youngest and healthiest states. You will also have time to change your life course once handed a fresh opportunity. This method of retirement focuses on frequent retirements. Alternative periods of hard work and absolute rest make up the system.
Planning Your Retirement in Malaysia
For planning your mode of retirement, at first you need to know by heart how exactly you want to spend that latter part of your life. If travelling is your passion, a sufficient amount of resources should be available to make sure that you can go out for a holiday on some time of the year. If you’re more of a philanthropist person, make a plan on how you can help other people and do something good for the society.
In the end, there is this single universal purpose of life that we all have in common. It’s called happiness.
Which Retirement Plan Suits You?
According to a very reliable survey report, nearly 50% of Malaysians plan to retire or have retired before they reach the age of 60. Even though the concept of early retirement is gradually becoming very popular with time, it’s difficult to be financially prepared for an early retirement. Most of the Malaysians think that early retirement is something to be dreamed of and never to come true.
How to Retire Early and not just Daydreaming
Here are some of the tricks and tips for retiring early!
Reducing Expenses – Financial experts recommend replacing 80% income before going for retirement. As a general opinion, this sounds like a good advice, but it’s extremely difficult to make it work in reality. The best option is to cut down your monthly expenses and accordingly redistribute your monthly earnings. If you can live with half of your income at the moment, there is no reason why you cannot do the same during retirement. So instead of replacing 80% of your income, you have to replace only 50%.
Early Pension Scheme – Early pensions are not common these days, and yet there are some good jobs offering early pensions such as police officers, military or firefighters. In most of these jobs, you can ask for a partial pension based on 20 years of service. However, these are high risk jobs and impose age barrier on entry. So this is not an option for everyone.
Income Investing – If you’re interested to go for early retirement, retirement account investment will not help you reach your goal. Along with retirement accounts, the investments need to be expanded for expanding the income. You can invest in dividend stocks, bonds, rental properties etc. and generate a good volume of revenue that can be used before reaching the retirement age.
Part Time Jobs – Instead of transitioning suddenly from a full-time service to a full-time retirement, shift to a part time job. When you’re sure that you have sufficient amount to fund your retirement, you can leave that field and have a peaceful retirement without injuring your finances.
A Good Marriage – Ha ha, don’t laugh! When you marry someone who is willing to support the family by earning an income, it’s a great way to help you escape from the workforce. It’s recommended that both members of the family should work and save and invest at an early age so that one or both spouses can choose to retire early later on.
Early retirement sounds like a lot of work and most people prefer to go for conventional retirement methods only because they do not want to go through the pain of saving such a huge amount of money. Planning for your retirement should never be considered as a burden on your shoulder. It’s like putting the finishing touch on a beautiful painting, which is your life.
These are just a couple of ways that can help you retire at an earlier age than average. All you have to do is live below your means for saving and investing for an early retirement. Young Malaysians prefer not to think or plan about retirements. In fact, that is a huge mistake. The earlier your start to plan, the better chance you have for choosing a peaceful and happy retirement at an early age!
There are many benefits of retirement, but the financial burden attached to the process is not one. If you want to avoid that burden, you need to find a way to supplement your income, and a reverse mortgage is an ideal option. A standard home mortgage will allow you to access part of your home equity, but you have to pay it back in installments starting almost right away. A reverse mortgage from Wells Fargo or a similar lending bank provides money to you on an ongoing basis, instead. A reverse-loan calculator tool helps to establish the total you can borrow. Once the money is in your possession, you can use it for any purpose desired. The only stipulations are you have to retain home ownership and continue living in the home, you must be at least 62 years of age, and if you already have a standard mortgage you must use reverse mortgage funds to pay it back right away.