- When we retire, by definition, we no longer get our income actively. Whatever income we have that time, will be generated passively, i.e. investment return, EPF, bank interest, etc.
- Life expectancy is a wildcard in our retirement. We may think that our lifetime savings are enough, but what if we live a bit too long than we originally planned? (Average life expectancy at birth is currently 76~80 in Malaysia)
- Inflation is another key factor that impact the quality of post-retirement life. High inflation rate will reduce our purchase power in the future.
- Long term health care and medical expenses will increase when we are aging. We should take good care of our health now so that we will not develop serious illnesses that require expensive medical care.
- Unplanned expenses. Most parents today will near/pass their retirement age when their children are ready for tertiary education. If parents does not plan the education funds separately, they have to use a big chunck of their own retirement fund to fund their children education.
Below is an example of calculation for a person with an annual income of $31,200 ($2,600 per month), annual salary increment of 5% per year, current age of 33, assumed life expectancy of 80 years old, plans to retire at the age of 55, and desires 75% of current lifestlye after retirement.
