Sep 19, 2009

My retirement plan

Posted by coolcoolbird at Saturday, September 19, 2009
Retirement is a point in life that all of us have to go through whether we like it or not. However, is either to have an enjoyable and worry-free life or a miserable life after retired is strongly depend on how you plan now. Normally human will not plan to fail but always failed to plan.

I'm not going to explain what the retirement plan is as you can easily get tons of related info from Internet, but I would rather to show you what is my retirement plan now.

First of all, I need to set an ideal lifestyle that I wish to have during my retirement, let's say, I wish to have monthly expenses at RM5,000, means yearly expenses at RM60,000. Not bad, right, enjoying RM5,000 per month without working, I think that must be a pretty enjoyable lifestyle during retirement, especially started at the age of 45 and die at the age of 80.

When setting a retirement plan, you have to fully aware about the inflation, because it has a strong impact to your retirement saving. let's set the yearly inflation rate at 5% and assume that I can't afford to invest my retirement saving in a roller coaster market after retired and all the saving will park at a very conservative zone like Bond, hopefully it will help me to generate 5% in yearly return.

After taken all the impacts of the inflation into the calculation, future annual expenses during retirement will be at RM113,138 and I need to have a total saving of RM3,959,799 in order to maintain my ideal retirement lifestyle in future. OMG! A huge amount of money!

Let's check what am I having now.

First, current EPF saving at RM55,000, assumed 5% in yearly return and ensure to keep on contributing the 11% from my monthly salary and 12% from the employer to the EPF saving account. Eventually (Hopefully), the EPF account will be able to contribute RM124,618 to my retirement saving.

Second, current lump sum investment at RM12,206 and monthly investment at RM700, assumed 8% in yearly return, I'll have another RM225,513 for my retirement saving.

Total RM350,138.

It seems still having a big gap to my retirement saving target...

After all calculations, the shortfall of my retirement saving is RM3,609,667. Terrible!
In order to ease my pain, the computer has suggested 3 options to me

1. If possible, please invest a lump sum amount at RM1,425,959!
2. If the lump sum amount is too much for you, you can invest RM13,747 monthly.
3. Or you can choose to invest annually at RM125,257.

I think those options suggested by computer are too heavy for me, that's why I plan to choose the option 4...

Die earlier...


ibdragon said...

Having been retired for 41 months and 16 days (but who's counting) I strongly recommend it. For you young dudes, sock it away and watch it grow, max out whatever you can and if your employer has matching contributions take advantage of them. Retirement is sweet but retired with no money would be somewhat less sweet.

coolcoolbird said...

Hi ibdragon, thanks for your visiting & advice.
Wishing you enjoy your sweet retirement.

Jimmy Lim said...

Hi coolcoolbird,
I also have a plan to accumulate my wealth to achieve my goal (financial freedom). Base on I set on year 2001, initial start from 100K, n= 30 years, FV=target wealth is 10 million. So the compound rate is 17% a year increasing my wealth. I am glad until this year 2009, my plan still keep going on. Every year I and my wife hit the target, and also slightly over what we setting by that year. Even though we lost 23% wealth on last year, it already recovers back to normal trend and over a bit. Maintenance your investment plan, discipline, action and strategic is very important. It will help you pass through the difficult time.
过程中,我也清还所有债务,无债一生轻!I not business man, I just a employee. Yearly income about 35 to 45K a year. Just share what I doing with you.

Cara Larose said...

A strong plan is what it takes to have a blissful retirement. Communities in Pennsylvania encourage their people to plan ahead of time for a sweet living in a senior housing (Pennsylvania). We’ll never know where life would take us, so it would be better to build a wall to lean on in advance.

Frank Damon said...

Save what you can while working. When all is done, you can retire comfortably. Maybe not as flashy as a millionaire's retirement, but still very much enjoyable.

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