NST 12 Mar 2007

Anything from RM1.4 million to RM2.8 million12 Mar 2007

HOW much does one need for a life of comfort in retirement?

Financial planners differ on this, coming up with figures ranging between RM1.4 million and RM2.8 million.Certified financial planner S. Thechinamoorthy, of Monetmatters Corp Sdn Bhd, suggests RM1.4 million as the minimum sum a 35-year-old today should have accumulated at 55."This may seem big by today’s standards but people underestimate the effects of inflation over the next 25 years."RM1.4 million in 2026 is RM639,000 today," says Thechinamoorthy.Malaysian Association of Chartered Financial Consultants president Lim Yan Chang said there was no hard and fast rule about it."But I should say that RM1.5 million would be the sum an average Malaysian would need to live comfortably in retirement," he said.Citibank Berhad vice-president and head of investment business Danny Chang put it at nearly RM1.6 million."A person needs RM1,591,979 when he is 55 to last him the next 20 years," he said.U Chen Hock, HSBC Bank general manager for personal financial services, said a person needed RM2.06 million to achieve a comfortable lifestyle in retirement.He said the 35-year-old earning RM4,000 today would have RM500,000 in EPF savings by 55 but would still need to raise another RM1.6 million."The key for a retirement plan is to analyse when one wants to retire, the kind of lifestyle one wants and how many years are left to retirement," he said.Prudential marketing and communications director Paul Khoo felt that one would need RM2.8 million to receive RM4,000 monthly for 25 years after retirement. "The individual would have accumulated RM726,827 in his Employees’ Provident Fund account and assuming he has not withdrawn it for any reason, he has to accumulate RM2.1 million to meet his retirement goals."Great Vision Advisory Group tax and financial planning head Chua Tia Guan said it was difficult to compute the cost of a comfortable retirement as it depended on one’s desired lifestyle after 55."The first step to attaining your retirement needs is to plan the lifestyle you want at the end of the line, not what you currently have," he said.For instance, a lavish lifestyle before 55 may need to be reviewed to meet the realistic financial capacity after retirement.ABN-Amro vice-president and head of wealth management Michael Hui Hoong Tho concurred with Chua, saying that it was difficult to place a finger on an actual amount."But I can tell you that the amount required to retire comfortably is huge," he said. Hui, who often presents talks at multinational companies, said most people he met often said that he should have come earlier.EPF deputy chief executive officer Rusma Ibrahim said one should start saving for retirement on getting a job."According to our statistics from 2005, the average contributing member has only RM100,000 left in his EPF account at 54. "For many, the remainder could be their only source of retirement funds which evidently is not enough to last their post-retirement years and increasing medical costs." She said 99 per cent of members withdrew their entire savings at 55."There are few who leave money behind in their accounts although the number of those who do so is increasing."What’s interesting is that our recent survey showed that, with hindsight, most said that if they could turn back the clock, they would have made monthly withdrawals instead of taking it all out in one lump sum."