5 min read    I     Date: 21 September 2023
(In partnership with The Edge Malaysia)

How to safeguard your retirement

A retirement crisis is looming in Malaysia. Here’s how Principal Malaysia can help you prepare a nest egg that will last you throughout this chapter of your life.

It's easy to dream of finally escaping the rat race for good. Previously, the work philosophy was to get a job, climb the corporate ladder, work and save really hard, and call it a day at age 60. Today, it's about job-hopping, side hustles and entrepreneurship, all done with the intense "rise-and-grind" type of zeal in hopes of accumulating a large enough nest egg to ensure a secure retirement - a life of freedom, leisure and hard-earned rest. 

However, the reality is many people are either saving too little or raiding their retirement savings too often due to stagnating salaries, debts and the increasing cost of living. This puts them at risk of outliving their savings. According to Employees Provident Fund (EPF) Chief Strategy Officer Nurhisham Hussein, only 3% of Malaysians can afford to retire based on their EPF savings. This was also due to the EPF early withdrawals amid the COVID-19 pandemic.

Mitigate the risk of retirement poverty

Being unable to pay for even basic necessities in one's golden years is a terrifying thought. You certainly do not want to go into retirement blindsided by the difference between your expectations and reality. After all, it's easy to overlook some expenses such as rising health costs, long-term care, inflation, entertainment, travel and a longer life expectancy. 

If you're hoping for financial security before you reach your career finish line, it's time to get serious because the clock is ticking. And remember, it's not just about saving, it's also about spending. Munirah Khairuddin, CEO and country head of Principal Malaysia (Principal), explains, "While you do need an accumulation plan to ensure you have sufficient savings and efficient investments, it's just as important to have a decumulation strategy to help you shift from saving to spending while maintaining quality of life during your retirement." 

Create your financial cushion

To enjoy a potentially comfortable and happy retirement with ease of mind, take advantage of Principal Private Retirement Schemes (PRS) end-to-end retirement solution and let their experts help you manage your investment strategy as you transition from climbing the ladder of success to living out the post-retirement stage of your investment life cycle. 

So, how does it work? There are two stages in Principal PRS end-to-end retirement solution - accumulation and decumulation. The former involves a savings and investment option in the form of a target date fund (TDF), named so because all you need to know is when you're targeting to retire. TDF aims to produce the ideal investment mix that auto-balances throughout the lifespan of the fund. With this, you may enjoy peace of mind without having to worry about rebalancing the investment mix yourselves as you age towards retirement.

Say you're planning to retire at 60 years old, which is in year 2050 - You may invest in a TDF that will mature in year 2050, and the glide path in the TDF will determine the investment mix that is suitable for this particular time horizon. As you age, the TDF portfolio will rebalance automatically, by shifting from riskier investment mix during your prime working years to a more conservative mix as year 2050 approaches. This is to reflect your changing risk tolerance over the years. 

It's a convenient strategy that removes the headache of constantly having to keep your investment portfolio up to date with the latest economic and market developments. All you have to do on your end is keep those contributions consistent. TDF also helps you avoid making snap decisions that can affect your investment, such as buying when the markets are rising and vice versa.

Retire easy with Principal

Now, fast forward to 2050. What happens is that the TDF matures and your investment is switched automatically into the conventional Principal RetireEasy Income fund or the Principal Islamic RetireEasy Income fund (Income Funds) to begin the decumulation journey. Designed with retirees in mind, the Income Funds aim to have a better risk-return profile than a normal money market fund which enables you to continue growing your investments to sustain your retirement life.

The Income Funds will invest in a diversified portfolio of income-generating assets, ranging from equities, fixed income and collective investment schemes including real estate investment trust (REITS) and exchange-traded funds (ETF). The Income Funds are not expected to pay dividend. Instead, once you've reached 55 years old, you may enrol in the Regular Withdrawal Plan (RWP) to customise how much and how often you want to withdraw from the Income Funds based on your financial needs and goals. 

You can opt to withdraw a fixed amount on a monthly, quarterly, semi-annually or annually basis until proceeds are depleted. Alternatively, you can decide on a fixed number of payments until the funds are depleted, and RWP will calculate how much you can withdraw on a regular basis. The withdrawal proceeds will be transferred automatically to your bank account on schedule. Meanwhile, the remaining balances in the Income Funds will continue to be invested, and that means you can potentially continue to grow your nest egg even while you draw down from it. 

What to do next?

  • For more information on Principal PRS end-to-end retirement solution, please click here.
  • If you need any investment assistance, please get in touch with your financial consultant. (We can help you find one). They can assist you with your investment goals and advice you on your risk tolerance.
  • If you need further assistance, please leave your details here, and we will connect with you. 


Disclaimer: Investing involves risk and cost. You should read the relevant Prospectus, and/or Disclosure Document including any supplemental thereof and the Product Highlight Sheet (if any) before Investing. You should understand the risks involved, compare and consider the fees, charges and costs involved, make your own risk assessment and seek professional advice, where necessary. Securities Commission Malaysia does not review advertisements produced by Principal. For full disclaimer, please visit bit.ly/Principal-PRS-Disclaimer.