052 She's 21, and she's already worried about her retirement savings. Are you?

Just came back from a three-days roadshow in a shopping complexe. It was a very good experience. It was our first time there.

We met a few youngsters working there. Two of them, ladies, are in their mid and early twenties. They are interested in investing using their EPF savings but, obviously, they can't because of their amount.

One them, I get to chat, is only 21. She's just started her work there for about a year. She's young but she has started to wonder how much her retirement funds would be. She wanted me to calculate for her.

Her salary is RM1,500 per month, meaning 23% of EPF subscriptions would come up to RM345 per months. She wanted to assume her salary to stay flat. By using a financial calculator:-

Payment = -345

Periods = 468 months (assume contribution to age 60)

Annual Rates = 6%

Future Value = 643,141

The amount RM643,141 may seem high but I also highlighted we need to factor in inflation. So, if inflation is running at 6%, the RM643k is equivalent to RM66k today. Wow, it only worths 10% today's value.

Since she's contemplating going to work in Singapore. My suggestions is to save in unit trust to yield more returns. So, assuming the returns is 8% p.a. The future value would becomes RM1,108,128. Again, if the inflation is 6%, she would be left with RM114k today's value.

By increasing another 2% annually, the difference is double of original. The present value may seem, still, too little but it is based on an assumption of no increasing of monthly savings amount. Actually, she should progressively increase her savings as she gets, example, annual increment. Or she should does some ad hoc top up whenever she gets bonus, special allowances etc.

I am impressed with this lady. Young but is already planning for her retirement. If she really starts her savings today, I believe she will be more well prepared than many youngsters today.