Monday, December 14, 2009

What’s your Number? (Mine is RM3,411,333)


Here’s how I think life is like.

When we were all young and students, we didn’t have to worry so much about money. We got some allowances every now and then which paid for whatever little things we needed to buy and we work part-time jobs during our holidays to earn a little bit of extra money if we want to spend a little more on something.

For big ticket items, some of us lucky ones get to beg and pester our parents to buy them for us. Like a new XBOX, a new mobile phone or the likes.

You don’t really know in detail where the money comes from and how much of it is there but it often seems enough so that’s all that matters.

After graduation though, things start changing. Once you get a job and start earning like RM1,800 a month we begin to really understand what our parents meant when they tell us that money is indeed hard to earn. Still though, we get by. We do a bit of financial planning in the sense that if there is something we want to buy, like the new Blackberry Curve, we just have to save up a few months’ salary and we’re good to go.
Sooner or later though, things start to change.

You start to need a car and a place of your own. So you take on a car and housing loan to buy them, slapping on some monthly commitments on yourself and before you know it, a huge chunk of our monthly salary goes out to pay these commitments.

That’s just somehow the way modern society is like. Most of us can’t possibly afford to buy a house or even a car in cash. Think about how much we earn and think about how much a decent apartment costs. That’s like RM300,000-RM400,000.

How many years do you have to work and save before you have that much money in cash. For many of us it’s tens and tens of years… so we all borrow and we live the rest of our lives working off the debt we accumulate. That’s why banks do so well because they sell products that society needs: Financing. Without financing most of us won’t be able to buy the cars or the houses we live in for most of our lives.

Plus your commitments get even more because sooner or later you get married. I’m 25 and this year alone I know at least 5 of my friends have gotten married.

Then you’ll have to think about how much it costs to raise a family, pay for your kids education and then sooner or later it’ll probably dawn on you that…. While you’re spending so much time and money already trying to survive while you have a job. What happens when you retire?

Well the answer to that is…. Pray that you have enough personal and EPF savings to maintain your lifestyle. Or…. have a retirement plan.

I’ve actually seen quite a number of my friends already sign up for some of these plans where they pay a small amount each month for some peace of mind. So that they know they have some money saved for them when they retire. The question of course is… how much money do you really need?

I mean… you don’t want to be saving every single cent your whole life. You want to be able to indulge every once in a while right?

So the answer to that I guess is a tool Prudential has on their website called the Prudential Retirement Calculator.

This is how it works.

First you put in your current age and when you plan to retire.

Then you put in a scale of how comfortably a lifestyle you want to live when you retire.

For me I put it all the way to the end at “INDULGENT”. Simply because… hey… if I’ve come to the end of my life after spending the past 40 years working, I’d really like to indulge in whatever money I earned in the past 4 decades.

Then they kind of break it down for you where you would be likely to spend your money based on the Malaysian Report of Household Expenditures. Kind of like a study that aggregates where Malaysian Households spend their money.

You can choose to modify some of the categories.

Like for me I decided that by the time I was 65, I would probably own my own home free of my mortgage. So I won’t have to pay rent or a mortgage. So housing would be 0.

Travel & Entertainment is fairly low for me because I don’t think I’d like to be travelling much at 65. Probably would like to stay put at one place.

But one thing I’d really spend a lot on though is… FOOD!!!!

So I put some RM2,000 a month just on food for the household.

Now after you’re done putting in how much money you’ll probably be spending after retirement. The next step is for you to add in how much money you have now, how much you earn and whatever other assets you have.

Then you add in some things like the inflation rate you want to take into account and it finally lands you in this last page where it tells you what your number is. As in how much money you need at retirement.

And whether your earnings right now will give you enough money to get there or not.
This screenshot is just for illustration purposes because…. I shy to show people how much I earn and all. I’ll avoid that.

But based on the variables I put in for my lifestyle in the slide bright before this. My number actually is….

I’m so screwed.

I guess this is where retirement plans come in.

Like the PRUretirement accumulator where you get a guaranteed monthly income after retirement and you won’t have to worry about losing any of the money you put into the plan because they have capital protection and they’re all guaranteed (terms and conditions apply, of course). Plus if you kick the bucket within the duration of the plan, they’ll compensate your loved ones with a lump sum of money.

The cost of the plan can be as low as RM100 a month which my insurance agent will like to say “That’s only RM3.33 a day! That’s parking money… and it’s for your future!!!”

And most of us will then say…
“Well if you put it that way…”

Check out the Prudential Retirement Calculator here anyway to find out what your number is and if you’ll meet it. Feel free to share your number in the comments. See if your expected retirement lifestyle is more posh than mine or not … hahaha.

If you’re free there’s also the “What’s Adam’s Number” challenge going on where you figure out Adam’s retirement number and if you guess it right you’ll stand a chance to win a share of RM200,000 worth of prizes. The challenge will run for 4 weeks from 2nd December 2009 and they’ll release new clues each week to help the players get closer to guessing Adam’s number.
So it’s like in Week 1 you get some clues, then you adjust the values into the calculator and you get a bit closer to his number.

Then you wait for Week 2 clues to come out and then you get to put in the additional clues you get.

And eventually you’ll get his actual number.

Adam is a fictional character though. It’s not “code” for “Timothy” ok? You guys already know my number.


Unknown said...

My retirement number is 0....because it says "You exceeded your retirement number"!!!!!!!!!

Did it a few more times revising the figure and still got ZERO. When i finally did it randomly, i got a number very similar to yours.

KY said...

yesss, get the curve and retire now!

Huai Bin said...

INDULGENT is the only way to go! =D

coolcoolbird said...

My number is close to yours

Boss Stewie said...

lydia: huh? how can u exceed your retirement number?

ky: haha u mean the BB? HAH!

huai bin: hahaha yes yes.. esp when u're old

cool: oooh.l.. same lifestyle we have then :)

How Jun said...

Hahaha...I prefer to grown my own retirement plan rather than depend on others to grow for me. Who knows we might escalate our retirement funds faster than them? Learn to be pro is always better than leave it to the pros.

Boss Stewie said...

how jun: i think being able to grow your own retirement fund is something we should all do as well. this plan i would imagine would be a very good backup. we automatically set aside some money for this each month

critical flip said...

I have just been spammed on my email along with 30 more other people. Is this s nuffnang campaign? The following email was what I received. Whichever agency is doing it, please do not spam.

"On Tue, Dec 15, 2009 at 3:59 PM, Jacqueline Che wrote:
Hey guys!

Have you seen these billboards around town?

Seems it’s a contest where the first prize is RM100,000 (well actually, they give you some retirement policy which you cash out or just leave it in there to grow!). Got 8 other prizes of RM12.5k EACH!!!!! The best part is don’t need to buy anything or write slogans. All you need to do is calculate the bradder’s (they call him Adam) "retirement number". 3mins and can kow teem the answer!

The site is . Need to slide some rulers based on their tips and wahlau, can win!!!!! They oso give clues each week so you have a few chances to work out the number. The one who gets it correct or the closest/fastest can win. Quite cool. If you win, don’t forget to share share ya?????

Btw, they just released the first number on their website... 2"

Vy said...

I somehow think that the retirement number will get higher and higher over the years. Yeah...having a retirement plan is always good but the numbers really scares me...

Money no enough... *sigh*

Nikel Khor said... nid invest from young

Matjoe said...

having kids also a form of investment. when they grow up, they're going to take care of you when you get old.
Sometime we plan to much at the 40 years is was to long of planning. so many thing could happen, inflation is just one of them.
anyway, dont spend all your money away, start to save at the your age.
Agree with how jun "Learn to be pro is always better than leave it to the pros".

i personally think we need to have diversified portfolia. so sad on what happen to this story: