18 Quick Tips to improve retirement planning in Malaysia

Retirement planning is serious matter that requires diligence and patience. But if you are short of time, a quick tip can sometimes be helpful too. Here are 18 observations from my years of advising clients in pre  and post retirement stage.

retirement planning tips malaysia

1. If you feel you are not accumulating enough for to achieve your retirement goals, chances are you are right. Trust your gut feeling. Solution: Seek a fee-based retirement planning adviser to get a second opinion. Trust me – you will get a better peace of mind at the end of the day. If your gut feel is wrong, then congratulations! If you gut feel is right, then at least you can do something about it before you are off track too far from your retirement roadmap.

2. Here is a super easy way not to outlive your retirement nest egg: Plan to kick the bucket early. Not your cup of tea? Then get to work on mapping up your retirement finances. Face the music. Most people would agree that coming up with a realistic and flexible retirement income plan is a more reasonable way to go than to die early.

3. I agree with what you think – anything but fixed/cash deposits is volatile. But if they weren’t volatile, they wouldn’t be able to generate the high long-term returns that can help you build a sizeable retirement nest egg in the first place. Very little in modern life is guaranteed, and what’s guaranteed is normally not sufficient. Learning how to manage volatility and mitigate the downside risk associated with that volatility is more productive than cowering in the corner avoiding volatility.

4. Just because private equity investments can potentially generate 18% annual return, it should not be a reason to be invested heavily into it. Investment is non-conventional asset is like the tip of the iceberg, the details lie in the below 80% which you probably can’t see. Get independent advice from a retirement planning adviser; even if you want to DIY, allocate no more than 10% of your retirement portfolio into non-conventional asset classes. When it comes to retirement income, boring can be beautiful.

5. What do rebalancing your retirement portfolio and exercising have in common? We know we ought to make both part of our normal routine, but many people don’t get around to either as often as they should.

6. Lots of people yearn for that monthly pension income guaranteed by governments or corporations instead of self -managed retirement fund. But that’s not gonna happen. So focus your efforts on self-sufficient retirement nest egg instead of relying on any public or private institutions.

7. Conventional portfolio of stock-bond allocations can’t match your risk tolerance exactly. Try REITs – real estate investment trusts. This lesser known asset class brings the best of both worlds. Read about it here – REITMethod.com

8. A really smart fund manager can beat an index fund. Problem is, there’s no way to tell in advance whether a manager is one of the handful who’s truly smart or one of the many who look smart but are just lucky or having a few good years. That’s why you’re better off going with diversified funds in your retirement portfolio.

9. No rule of thumb can be a substitute for detailed retirement planning (such as retirement scenarios modelling in RetireMethod.com). But some rules of thumb are better than no planning at all.  It is like doing something is better than sitting idly because in the process, you discover the light at the end of the tunnel in the process of ‘doing’ itself. Going with a rule of thumb may at least help you get on track toward a more secure retirement until you decide to get more serious about your retirement planning.

10. Many people are taught and told about investing in bonds only during retirement back in the days because they are capital-protected.. But guess what? Capital protection without capital and/or income growth is like going against 300 Spartans naked, where the Spartans here refer to the ever-resilient inflation. The solution? Tip#7 because the underlying assets is a natural hedge against inflation. Now you stand a chance against inflation.

11. Insurance agents peddling high-cost endowment aka savings plan know that people who invest for retirement love the word “guaranteed.” Which is why as soon as you hear that enticing word, you should ask what, exactly, is being guaranteed and who is doing the guaranteeing? Then ask how much you’re paying for that guarantee and what you’re giving up for it? The answers may surprise and enlighten you.

12.  No retirement calculator can truly tell you whether you’re on track for a secure retirement because no tool can fully reflect the uncertainty and complexity of real life. Of course, the same goes for the most sophisticated software and human advisers too. Instead, the more feasible way is to use a retirement scenario modelling tool, which isn’t designed come away with a projection that’s 100% accurate. It is to give you a sense of whether you’re on the right course and see how different combination of moves might improve/deteriorate your retirement landscape accordingly.

13. Getting fleeced by an unscrupulous financial adviser or ravaged by a severe bear market can certainly jeorpardize your retirement planning. The impact is severe, yes but the odds of that happening is not as high as lack of discipline in sticking to your retirement plans. Examples are being complacent in retirement investing and being distracted in adhering to the retirement plan.

14. They say the 4% withdrawal rule in retirement no longer works in today’s low-return world. Fact is, the 4% rule was never all it was cracked up to be. To prevent running out of money before running out of life, plug your spending, income and investing info into a retirement scenario modelling capable of assessing the probability that your money will last—then repeat the process every year or so to see if you need to adjust your spending.

15. Diversifying your portfolio can increase your risk-adjusted returns. But if you try to get too ambitious and stuff your portfolio with speculative instruments with little to no fundamentals to back them up, such as commodity, options and dual currency,  you may end up di-worse-ifying rather than diversifying.

16. Many retirees view retirement planning as a pure “income investments”, and end up putting their nest egg into bonds. But such a focus can be folly because no portfolio growth in the next 20 years of retirement just does not make sense. A better way to go: create a diversified portfolio that generates both income and growth, whereby the growth of the income is at least in tandem with nominal inflation rate. Tip#7 is relevant here.

17. The next time wild swings in the market make you feeling nervous, don’t panic and bail out of stocks completely. That’s how Mr Market works – it got its own mood swings. Trying to time the market timing is futile, it won’t be worth your time, moreover so during retirement when you should be enjoying your life to the fullest. The solution? See Tip#12 and Tip#15.

18. The financial aspect of things in retirement is definitely important, but retirement fulfillment isn’t just a question of money. The emotional aspect matters too. Among the factors that make for a happier post-career life: maintaining your health, staying active and engaged through occasional work or volunteering, cultivating a circle of friends.

Also read – Retire in Malaysia – 7 Proven ways to stretch your retirement nest egg

11 Insider Tricks Nobody Told You about Retirement Withdrawal Calculator

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