A later start, a harder retirement

ASK Malaysians in their 30s when they intend to start preparing seriously for retirement and few will give you a specific age, monthly savings amount or written target for retirement income.

More often, their answer is tied to a future milestone.

“After I have reduced the housing loan.”

“Once the children have completed university.”

“When my parents no longer require as much financial support.”

These are not unreasonable priorities. A home, children’s education and the care of ageing parents are real responsibilities.

That is precisely why postponing retirement preparation can feel responsible rather than risky.

Retirement does not seem urgent when it is still 20 or 30 years away. It becomes a responsibility for one’s future self, to be addressed when income is higher and today’s major commitments have eased.

Some take comfort in knowing that the Employees Provident Fund (EPF) contributions are accumulating in the background and assume these savings will provide a solid foundation for retirement.

Others believe their properties or business will eventually provide what they need. Higher-income earners may assume that several strong earning years in their 50s will be enough to close any shortfall.

What these explanations have in common is the expectation that there will eventually be a more convenient time to prepare.

In reality, financial responsibilities rarely ease in the orderly way people expect. As one obligation reduces, another often takes its place. A lighter housing loan may coincide with university fees, greater support for ageing and ill parents, or rising household expenses.

The hoped-for window to begin saving seriously can therefore keep moving further away.

Meanwhile, the retirement target does not stand still. The longer retirement preparation is postponed, the fewer earning years remain and the less time there is for investment growth to do part of the work.

Reaching the same target then requires a much larger monthly commitment.

Cost of catching up

Consider someone who wants to accumulate RM1mil by age 60, with monthly investments earning an illustrative annual return of 6%, compounded monthly.

Starting at 30 would require approximately RM996 a month. Starting at 40 would require about RM2,164.

Starting at 50 would require approximately RM6,102. Starting at 55 would require about RM14,333.

These figures are illustrations, not promises. Actual returns will vary, and proper retirement planning must also account for fees, inflation and changing circumstances.

But the relationship is clear. Starting at 50 requires more than six times the monthly contribution needed at 30, while starting at 55 requires more than 14 times as much.

A person may expect to earn more later in life, but their ability to save is unlikely to increase by the same multiple. By then, they may still be servicing a mortgage, supporting ageing parents, funding university fees or maintaining a more expensive lifestyle.

This is why “I will save more later” is often less realistic than it sounds.

Delaying retirement preparation does not simply shift the same contribution into the future. It places a much larger burden on the income that remains.

When that burden becomes unmanageable, the choices narrow: retire later, sell assets, reduce the expected lifestyle or pursue returns that may be unsuitable so close to retirement.

The advantage of starting early is therefore not only compounding. It is also the time to recover when life or markets do not go according to plan.

An early starter can gradually increase contributions, restructure debt or reconsider an underperforming investment without having to solve everything at once.

A setback at 35 may be recoverable over several years. The same setback at 58 could permanently alter the retirement outcome.

This creates a difficult contradiction for late starters. They may feel pressure to pursue higher returns precisely when they have the least time to recover from a loss.

Starting early allows a reasonable plan to work over time. Starting late can make an unreasonable return appear necessary.

When present success hides future shortfall

Yet, not everyone who postpones retirement preparation feels that they are falling behind. For some, the opposite is true.

A high income, several properties or a successful business can create confidence that retirement is already secure.

I once advised a 45-year-old client who owned RM6.6mil in properties, but carried RM3.2mil in mortgages. Seven of his 12 properties were vacant, while annual rental income covered only about one-third of the mortgage and property-management costs.

Because he was earning a substantial active income, the weakness in his position did not feel urgent. Yet when we projected his retirement trajectory, his available funds would likely be exhausted by age 69.

The position remained repairable because it was identified at 45 rather than at 60. He still had time to dispose of weaker properties, reduce commitments and redirect future savings.

The point is not that property is unsuitable for retirement. It is that asset value and retirement readiness are not the same thing.

EPF can create a different, but equally persuasive sense of security.

For salaried Malaysians, compulsory contributions mean retirement savings accumulate automatically throughout their working lives. This is one of the strongest foundations of retirement preparation.

But that convenience can also create the impression that EPF alone will be enough. The size of an EPF balance only becomes meaningful when translated into the lifestyle it must support.

Under EPF’s Retirement Income Adequacy Framework, RM650,000 at age 60 is classified as Adequate Savings. The benchmark is anchored to an estimated monthly budget of RM2,690 for a single retiree in the Klang Valley and a 20-year retirement horizon.

That puts the figure into perspective. A professional household accustomed to spending substantially more may discover that even an EPF balance that appears impressive would support a far more modest retirement than expected.

Inflation widens the gap further. At an illustrative rate of 5% a year, a lifestyle costing RM10,000 a month today would cost approximately RM33,864 a month in 25 years.

The relevant question therefore is not simply, “How much do I have in EPF?” It is, “Will my EPF savings, together with my other assets and income, support the lifestyle I expect for the full length of retirement?”

EPF provides the foundation. Retirement planning determines whether that foundation is sufficient for the life built upon it.

Preparation is not the same as correction

For people already in their 50s, the message is not that it is too late.

The final five to 10 working years can still be valuable. Income may be near its peak, children may be financially independent and major commitments may be easing.

This is the time to test whether the intended retirement lifestyle is adequately funded, review how existing assets will produce income and decide whether debts should be repaid, restructured or retained to preserve cash flow.

But this period should also be recognised for what it is: a correction window rather than the ideal starting point.

By then, any shortfall must be addressed over fewer working years, leaving less room for gradual saving, recovery from investment setbacks or changes in lifestyle.

The earlier preparation begins, the more these adjustments can be made progressively rather than under pressure.

The belief that retirement can wait is persuasive because it assumes a better time will eventually arrive – when income is higher, obligations are lower and the future is easier to see.

For most people, that perfect moment never arrives.

The earlier you prepare, the less retirement depends on catching up, exceptional market performance or difficult last-minute compromises.

Retirement planning should begin not when retirement feels close, but while time still gives you the power to shape it.