Can you survive your golden years on EPF?
Today’s The Star featured a very interesting article specifically to make us re-think our belief that EPF will take care of us when we are in our golden years.
Most of us have read about how the retirees take the money out and then waste it away within 3 years. Then the scare of having to live another 20 years or so without any clear sign of where the money is coming from.
Most people I talk to about the importance of investments will usually brush me off saying that they have EPF and they believe it will be sufficient. However, what people usually fail to remember is that they also use EPF to fund their home purchases/ monthly instalments as well as medical and education bills. With all these withdrawals going on, I am always discounting EPF from my financial planning sessions. I also do not believe they will provide me sufficient returns to counter my inflation risks.
No doubt EPF has been giving 5% returns on average in the last 10 years, but ask yourself how much has petrol, basic food stuff, housing, health care etc. risen over the last 10 years? Is it within 5%? 10%? 50%? Then what makes us think that the EPF funds will be sufficient to tide us over?
I believe that we have to start building our own investment portfolio to cater to our golden years’ needs. And that portfolio has to be done TODAY, not tomorrow, not when-I-have-the-money, NOW. We have to start now to be able to reap the rewards of the compounding factor. Whether you choose to invest actively, passively, stocks, real estate, unit trust etc, whatever, the key thing is to start now.
And then there is the question of medical bills and health care. This is where we should have part of our money in insurance. Do you really trust that 30% of your contribution to EPF will be sufficient to take care of this? Do you think that the 5% returns from EPF will enable you to get better medical and health care when we are in our golden years?
Of course there is also the kids’ education funds. I think it is safe to say that we are starting our families much older than our parents did and we would be somewhere around our retirement age when our kids go to college and university. Some of this money from EPF would potentially be used to cater for that.
Isn’t it scary? To be working all your life and then realise that whatever money you have in there may be insufficient to take care of your basic needs? I know I am. Which is why we have to plan and act TODAY!
