Retirement is a destination each one of us will get there sooner or later.

It is quite impossible for me to put a retirement figure because each of us will get there at a different time, therefore a different value of money, and with varying needs of retirement.

But if you want to quantify this topic and put up some numbers so everybody can have a guideline, let me give you two figures to take away, that is easy to remember, and will help you achieve your retirement goals with almost 100% certainty.

The First Magic Number: 30%

It is about how much you can save. That’s 30% of the money you make.

How much you make determine the lifestyle you can have. Regardless of whether you are making RM1k a month, RM5k a month, RM10k a month or RM50 a month, if you can save 30% of your money by spending below your means at all time, you will be able to retire and maintain your lifestyle.

Why 30%?

As you know, if you are under active employment, you already save >20% in EPF by combining both your personal and your employer’s contribution. But unfortunately, according to EPF’s 2016 report, only 22% of the 6.7 million active contributors aged 54 years have sufficient savings of RM196,800 or more to sustain themselves during retirement.

If you are not one of the top 20% high-income earner, you will most likely end up without sufficient retirement nest egg if EPF is your only savings. To do better, you need to save at least 10% more on your own. For those who don’t contribute to EPF, you better strike for at least 30% saving rate.

The essential principle here is not about the amount of savings, but the habits of being able to delay gratification, live frugally and don’t spend your future money. Once you can live for less, and lead a simple lifestyle, you will realise how rich you can be! In my opinion, you have more choices than those who can only accept the best option. For instance, if you are used to living large, during your vacation, you might not enjoy when you stay in a hotel less than 5-star ratings. But if your tolerance is high, you have a vast range of accommodation choices, and it doesn’t affect your level of enjoyment even if you stay at cheaper places.

So the first number, 30% saving rate. Adhering to that, you will have a fine retirement. It is like how my parents made it. My father was the sole breadwinner, and he retired at age 45. He didn’t have millions in the bank, but he is debt-free, owning a small house and a usable car. Now they stay at Sungai Petani, Kedah and spend less than RM1000 a month.  Although my siblings and I continue to pay them allowances each month, they had never asked any money from us right from the beginning. I am pretty sure that they don’t even need our subsidy to survive.

However, if you want to retire comfortably, and live a good lifestyle, you will need the second number.

The Second Magic Number: 10%

It is about the investment return. You need to know how to invest with a double-digit return, 10% or more, whether in properties, stocks, or businesses. The earlier you know how to do this, you will have much better chance to retire early, with a good lifestyle.

For example, if you have RM1 million now, and you only generate 3% return like in the Fixed Deposit, that’s just RM2,500/month. But if you can do 12%, that’s RM10k a month. RM2.5k versus RM10k is a big leap.

The standard advice I hear from financial advisers is to stay conservative with your retirement fund and keep it in stable investments like fixed income funds, bond funds, EPF, Amanah Saham, etc. I think there is a flaw in this common advice because even for retirees, they are investing for the long term too. They might need to spend 3-5% of their net worth in the next 12 months, and that can be kept in stable funds. But how about the rest? Retirees do hope to have their money lasting as long as possible. So the investment horizon is also long term.

It is how one of my wife’s relatives did it. The couple is living in Batu Pahat because they own a few parcel of palm oil plantations there. The lands are generating excellent profit that funds their travel overseas several times each year. If they sell everything and put the millions in Fixed Deposit, I doubt that they would continue to go for exotic vacations and to buy branded handbags.

So there you go, two numbers to remember:

30% saving rate – put aside 30% of the money you make for long-term savings and investment

10% investment return or higher. If you don’t know how to achieve that, better start learning now.


Personal finance author and trainer

    4 replies to "Two Magic Numbers for Comfortable Retirement"

    • Alex Yeap

      Hi KC,
      For the 10% investment return, can I use the example below?
      1) 5% return (average) from EPF
      2) another 5% return as based on my own dividend stocks investing
      As based on above, can I combine both EPF + my own stock investing as 10% in total? Is this assumption correct to meet the second criteria?

      • KCLau

        Hi Alex,
        No, that’s not the way.
        Your EPF and stocks have to separately provide 10% return to make the entire portfolio producing 10% return.

    • BC

      Thanks for a good write-up. The theory/ concept is fine. The problem is how to actually get 10% returns. FDs are safe and can give returns of around 3.5% to 4%. Bonds may give 5% to 6%. Unit trusts is much a hit and miss. Some banks come up with portfolios that targets to give a certain amount of returns. I have found that these are generally not delivering. The standard response given then is that unit trust investments are for the long term. It seems that the marketed rate of returns is akan datang where no one knows. Could you share some tangible ideas on how to get 10% returns. I think this will be very helpful. Thank you.

      • KCLau

        To achieve >10% return per annum, you will need to learn how to invest directly in business, stocks and properties.

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