Retirement Planning Tips for Young Adults

If you are a young adult in Malaysia, retirement may feel like a distant worry. However, starting the process early allows you to leverage the benefits of compound interest and increase your chances of achieving your desired outcomes. Here is how you can approach retirement planning while balancing it with your current lifestyle.

Set Realistic Financial Goals

Before you can save up for your retirement, you need to envision your ideal retirement – at what age do you plan to retire, what lifestyle do you want during retirement, and how much inflation will affect your retirement savings? These factors determine your retirement plan and having a clear vision helps you set realistic financial goals.

Build a Buffer

Before you start investing, ensure you have an emergency fund of at least 3-6 months’ worth of living expenses. This helps you handle unexpected expenses without dipping into your retirement savings. Keep your emergency fund in a high-interest savings account and your retirement savings invested for growth.

Save, Invest & Diversify

Saving and investing is generally your main methods to reach your retirement goals. EPF contributions are automatic if you are a salaried employee, with 11% from you and an additional 12-13% from your employer. You can further boost your savings by making voluntary contributions.

As a young adult, you can generally take more risks, so focus on growth assets like stocks or mutual funds to maximize returns over the long term. However as you grow older, you can start shifting your portfolio towards low-risk investments to protect your wealth as you move closer to retirement.

Minimize Debt and Manage Expenses

Paying off credit card debt and personal loans should be a priority, as they can eat into your long-term savings if left unpaid. Avoid high interest debts whenever possible. Stick to a budget that covers your current needs while saving for the future. Keep track of your spending and avoid excessive purchases.

Review and Adjust as Life Changes

Every year or so, take some time to review your financial health and retirement plan. Adjust your savings rate, investment strategy, and goals as needed. Major life events such as marriage, buying a home, or a job change will require you to reassess your financial plan and retirement contributions.

Starting now with small, consistent efforts can make retirement less daunting and more rewarding. Remember, the key is to stay flexible, adjust as your life and income evolve, and be patient as your retirement nest egg grows over time. Looking to build your wealth further? Click here to explore Public Bank’s range of investment products and services.