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Save for the future

A couple is using tablet in the living room ; image used for HSBC Malaysia save for the future article page.

Research into global attitudes to saving and investing showed that as many as 75% of people are not regularly setting aside money for when they retire.

And only one in four feels that they have sufficient savings [@Consumer attitudes to savings] to cope with the unexpected. 

But there is good news – learning about healthy financial habits and practising your financial skills (like you’re doing now!) can increase your financial confidence and have a positive effect on your financial wellbeing.

We are living longer than we used to, thanks to improved standards of living and better healthcare. Research suggests that by 2050 we might live a decade longer than our retirement funds can currently pay for [@We will live white paper]. It is essential, therefore, to start putting aside money for your retirement as early as you possibly can.

It is hard to estimate how much money you might need for your retirement. A good way to begin planning for life after work is to assume you'll need between half and two-thirds of your salary, after tax is deducted, to maintain your current lifestyle.

Retirement income example

You can estimate your retirement needs very roughly using a few simple steps. Let’s suppose you currently earn INCOME (approximately INCOMEAFTER TAX after tax). You plan to retire aged 65. You are fit and healthy. Several members of your family lived into their nineties, so you might need an income for as many as thirty years. Your retirement goal is:

(INCOME AFTER TAX x 2/3) = (INCOME AFTER TAX x 30 years) = SAVINGS GOAL

[Current salary after tax x 0.66 x Number of years = Savings goal]

(Remember that you can subtract the income from at least one state or government sponsored retirement income over the same period.)

Your state or government sponsored retirement fund is unlikely to cover what you need in your retirement. The earlier you start saving, the larger your retirement goal will be. That’s because the longer you save, the more the interest you earn compounds, which is when you earn interest not only on your savings, but also on the accumulated interest you’ve already earned. This interest on your interest is called compound interest.

With a sustainable monthly income, you'll be able to enjoy a long and happy retirement.

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