Retirement plan at 26 years old? Hmmm...

Today I met up with a friend who talked me to about retirement plans. Yea, I know, I'm only 26 and retirement is 30 years away so why would I care right now? Futuremore, using a EPF calculator, with my current salary and a yearly increment of 5% every year for 30 years, I'll have more than a million in my account. So I was thinking, wow, that's more than enough for me to happily retire in comfort.

After talking to my friend, I realized that I'm so wrong. First of all, i would be really lucky if i can secure a job with a yearly increment of 5% for 30 years. With lots of news about companies laying off people, there's no guarantee that my job is secured for the next 30 years.

The second eye opener for me was i totally forgot about inflation. The average inflation is 4% yearly. Using an inflation calculator, I calculated that RM1 million 30 years later, would only be worth RM350k. The average lifespan of a woman is 80 year old. Means after retiring at 55, RM350k/25 years would be RM1k to spend every month. RM1k after deducting fuel, bills, etc. is not much to spend. After another 20 years after retirement (i'd be 75 years old by then), the RM1k after 20 years of inflation would have a value of only RM442. I haven't even taken into account money needed on health care.

In conclusion, our EPF retirement fund is not enough. My friend did a calculation and I need another RM1 million on top on my EPF retirement fund to retire with just enough money to live moderately. To do that, I would have to save at least RM750 per month into something that will give me a compound return of 8%. And this is if i start from age 26 onwards. I'm not a person keen on investing, so I tried to calculated how much I need to save monthly without investing in anything. It come out to RM2.2k every month for 30 years in an FD returning 3%. So my husband and I would need to have RM4.4k per month. Currently, that's not possible.

So I guess I do have to start thinking about investing. But not now, since I've got so many commitments and a really agressive housing loan plan. Since I started working, I've been saving non-stop. I bought my first property when I was 22 years old, saved for the 20% downpayment then for renovation. When I started saving up again, I had to spend it on my wedding (which i do not regret because it was a very memorable wedding worth everything i paid for) . So basically, i've been saving ever since i first started working. Sometimes it's really tiring, but at the end of the day, i'm happy.

However, when I'm more financial comfortable, i have to do some serious financial planning. I know that the longer i delay this, the more I have to save in the future. My husband says he may not even live for so long but what if we do? Is RM442 per month enough? I don't think so.