{"id":12527,"date":"2014-12-09T11:20:16","date_gmt":"2014-12-09T03:20:16","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=12527"},"modified":"2018-06-05T11:00:58","modified_gmt":"2018-06-05T03:00:58","slug":"one-third-savings-for-two-third-retirement-income","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/one-third-savings-for-two-third-retirement-income","title":{"rendered":"One-third Savings For Two-third Retirement Income"},"content":{"rendered":"

\"retirement\"<\/a><\/p>\n

It is important for us to ensure that we have the recommended two-third replacement income of last drawn salary as monthly retirement income to continue to enjoy the lifestyle we have become accustomed to. For most of us who are employed in the private sector, the Employees Provident Fund (EPF) is the main source of our retirement funds, but the mandatory contributions may not be adequate to replace two-third of your last drawn income. This has also been reported in numerous articles highlighting the need to save more for retirement beyond the contributions made to the EPF.<\/p>\n

At the national level, Malaysia\u2019s current replacement income ratio stands at 30%, compared to the 57% average for Organisation of Economic Corporation and Development (OECD) countries. With Malaysia moving towards an ageing society by 2020, with 11.3% of the population in retirement age, we need to address this issue both nationally and individually before it become a socio-economic problem for the average Malaysian who may not be able to achieve the replacement income of two-third of their last drawn income.<\/p>\n

So, how can Malaysians achieve that? According to Private Pension Administrator\u2019s (PPA) research, the average Malaysian will have to set aside a third of your monthly income to achieve that. While this may seem to be a \u201ctall order\u201d with the current income levels and cost of living concerns, it is not impossible. As Malaysians, we are fortunate to have the mandatory minimum EPF contributions of 23% (namely 11% from employee and minimum 12% from the employer), you will possibly need to contribute an additional 10% or more, to make up the one-third or 33% savings for our retirement fund.<\/p>\n

With the launch of the Private Retirement Schemes (PRS) in July 2012, it\u2019s become even easier to address the current 30% replacement income ratio, Malaysians now have the voluntary third pension pillar to help them with making the additional 10% savings to supplement their EPF. In time to come, Malaysians will have two pillars for their retirement savings, with the bulk of their funds coming from EPF and the additional savings from the PRS.<\/p>\n

Given that we will have to replace our earned income in our retirement years, we will have to build our retirement funds to generate income, within the time frame left before hitting the retirement age at 60. The objective then is to build up our retirement funds to the desired level which can then generate a passive retirement income stream to replace two-third of our last drawn income.<\/p>\n

<\/span>Building up our future retirement funds requires us to pay attention to the following:<\/span><\/h2>\n