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AVERAGE RETIREMENT COST

Mr A is 35 years old, and he plans to retire at age 55. The following are his current basic expenditure.

Question1 : What is the total retirement cost to sustain his current lifestyle until he is 75?
Question 2 : How much does he need to save from now?

Answer
Question 1

CURRENT
Value
Age 35 INFLATION FUTURE
value
Age 55 TOTALCOST 
until Age 75
(20 years)
Yearly cost  Yearly cost
Daily Meal 20 7,300 3.6% 40 14,600 292,000
Monthly Utilities
(Electricity, Water, Telephone, Home maintenance & etc)
300 3,600 3.6% 600 7,200 144,000
Wellness & Medical Costs 
(
per month)
with the assumption that he does not suffer any major illness
100 1,200 3.6% 200 2,400 48,000
Other expenses
(per month)
Petrol, Car Maintenance, Roadtax, Insurance etc 
600 7,200 unknown 600
(with the assumption that Mr A  travels less after retirement, as he no longer has to commute to and from work)
7,200 144,000
Lifestyle
(per year)
(Overseas Holiday, Golf, Hobbies & etc)
5,000 3.6% 10,000 200,000
TOTAL 24,300 41,400 828,000
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  MALAYSIA INSURANCE PORTAL
Source : Employee Provident Fund, Malaysia (EPF) as at 18 May 2006.
Average lifespan for a Malaysian Male=75 and Female=78.


Answer
Question 2

His target retirement fund is RM828,000 before reaching age 55.
He only has 20 years to save. Based on an Investment Return of 6% per annum,
he needs to save RM 22,600 per annum or RM 1,883 per month.

Below is an illustration to show that if Mr A started saving when he was 20 years old,
the amount he had to save monthly was only RM625,
which may be much more affordable!



Start Age Target at age 55
(RM)
Monthly Saving
(RM)
 
20 

828,000

625

25

828,000

875

30

828,000

1,258

35

828,000

1,883

40

828,000

2,958

45

828,000

5,241

50

828,000

12,250
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  MALAYSIA INSURANCE PORTAL


The actual fact is that everyone has to retire one day and we need a substantial amount to retire comfortably.
Chances are that only 5% of us will achieve that goal and the rest will suffer because of "Procastination".
2 elements which will have a major impact our retirement fund are the Returns and the Inflation,
which unfortunately is not within our control. But starting early by making regular monthly savings is within our capability.

The secrets are STARTING EARLY and BUILDING A REGULAR SAVING HABIT