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Too Little Too Late to Save for Retirement? Maybe Not

Introduction

You’ve probably heard the phrase “the best time to start saving for retirement is yesterday”. Yes, that is very true, since the earlier you start saving, the more time your investments have to grow, thanks to compounding interests. If you start young, you end up earning so much more from the interest of your investments rather than the investments themselves.


Take for instance, you fork out 10,000 Ringgit to invest at the age of 22, without adding on to that amount and assuming there’s a modest 5 percent interest rate, you’ll have close to 100,000 Ringgit by the time you’re 70.
However, most people generally don’t start saving for retirement that early. Even if you’ve thought of it, you probably put it off and kept pushing it back. Yes, you may have valid reasons like wanting to use the money to raise your kids and provide for them, or maybe to start off a business or something along those lines, that was more important at the time.

Now here you stand, already in your 50s with either no retirement savings of your own or close to none. Sure, you have your pension or EPF, but let’s face it, with the continuously rising cost of living and all, would that be enough to sustain you comfortably after you retire? So, the question is, is it too late to do something about it?
The answer is no. But that’s only if you take action now. No more delaying further. Not next month, not next week, not even tomorrow, start now with these steps.

 
  1. Cut Your Expenses
Try to reduce your expenses, maybe by about 20 percent a month. This can be done simply by eliminating the non-essential products and services that you use. Perhaps you can stop buying junk food, which are not good for your health anyway; cook at home instead of eating out; use self-service launderettes; get a cheaper mobile phone plan; purchase in-house products from hypermarkets and supermarkets instead of branded goods; and the list goes on for all the small little things you can do to cut back on.

You don’t have to sacrifice big parts of your life, just the small things which you know you can live without, and once you manage to cut your monthly expenses, you will have more savings. Think about it this way, you don’t have to cut back drastically in the future after retirement, if you cut back just a little bit now.

 
  1. Increase Your Savings
Now that you’re able to save up more money each month, put all that cash and whatever extra you can afford into your unit trust funds or any other investments that will maximize the growth of your money. Not having 4 whole decades to save up, does not mean you shouldn’t make the best of the time you do have. So just keep saving and investing and managing your finances.

 
  1. Extend Your Working Life
Try to continue working till the maximum age before retirement. Even 5 years can make a whole lot of difference. You’ll give whatever you have saved time to grow even more, while adding on to the savings in those 5 years.

Say for instance, you’re 50-years-old with just about 32,000 Ringgit in your current savings, and you’re putting in 3,000 Ringgit a month from now. Once you hit 60, with a 5 percent rate of return, you would have accumulated more than 520,000 Ringgit. Adding on another 5 years would see that amount grow to over 800,000 Ringgit.

 
  1. Downsize Your House
If you live in a big house at a very lucrative location, consider selling it off and moving to a smaller place in a slightly cheaper neighbourhood. Then use the proceeds to beef up your retirement savings, and in turn significantly boosting your investment returns as well. Ask yourself, do I really need to be living in such a large double-storey house at this age? Do I really need to be living so close to shopping malls and entertainment spots, which can be rather noisy?

You may even consider downsizing on depreciating assets like your car. Sell it and get a cheaper alternative which can also help you save up on fuel consumption. This way not only you get to invest the extra money left over, but you also reduce your monthly expenses.

Thinking ahead helps you to overcome the possible setback in the future. Retirement plan may not sound crucial at younger age but if you really look into it, it will benefit you more than you think during your retirement age.

 
Posted by admin on 20 July 2018