How Much To Save Each Month To Get RM1,000,000 by 50

Let’s explore how much you’d need to save and invest to get to RM1,000,000.

For this example, say there is a 28-year old corporate middle manager. She’s earning RM7,000 monthly and has targeted retirement by age-50. Let’s call her Jane.

According to our formula, Jane would need to accumulate a minimum of RM1,000,000 to retire. Naturally both she and I would want her to achieve more than the RM1,000,000, but for simplicity let’s look at getting this 1mil first. We assume that she starts with a negligible amount in her EPF.

On a monthly basis, Jane would be contributing 11% of her own salary to EPF (RM770). Her employer also contributes a minimum of 12% of Jane’s salary to her EPF (RM840). This comes up to a total of RM1,610 without taking into account any discretionary savings.

Next, assume that EPF declares an average dividend of 5% per year until age-50, that Jane does not have any salary increments, and that she does not spend any of her EPF prior to age-50. We have the following calculation:

Monthly EPF Savings = RM1,610

Rate of Return (EPF Div.) = 5% per year

Number of Years Invested = Age 50 – Age 28 = 22 Years

Value @ Age-50 = RM760,819

Using the standard time value of money (TVM) calculation, we can expect that Jane would have approximately RM760,000 just from EPF. To top this up to 1mil, Jane would need to ensure she saves up another approx. RM240,000.

Again using the standard time value of money, an assumed return of 5% per year (to match EPF), and working backwards, we get the following:

Target Value @ Age-50 = RM240,000

Number of Years Invested = 22 Years

Rate of Return = 5% per year

Required Monthly Savings = RM508

So this means that all Jane has to do is save an additional RM508 monthly on top of her EPF, from now until age 50 to achieve her RM1million. Doesn’t this look quite feasible?

At age-50, Jane would have accumulated RM240,000 in her own investment accounts. On top of this, EPF Account 2 will be eligible for withdrawal at age-50, which means she can withdraw that Account 2 if needed, which amounts to 30% of her total EPF (approx. RM228,000). The balance of her EPF will mature at age-55, providing her a nice ‘cascade’ of retirement funds once she retires.

With this information, Jane can focus on the present knowing that as long as she saves a minimum of RM508 additional monthly, she will be on track for RM1,000,000.

If you want to find out exactly how much you would need to set aside to get to your RM1,000,000, get in touch with us.