{"id":41695,"date":"2020-01-14T10:11:10","date_gmt":"2020-01-14T02:11:10","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=41695"},"modified":"2021-02-09T18:34:14","modified_gmt":"2021-02-09T10:34:14","slug":"self-employed-epf-isaraan","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/self-employed-epf-isaraan","title":{"rendered":"How Can Gig Economy Workers Prepare For Retirement?"},"content":{"rendered":"

Do you deliver meals or drive for e-hailing apps for a living? Perhaps you\u2019re a freelance programmer, or you run a one-person consulting business.<\/p>\n

If so, you are among the growing population of Malaysians who are self-employed or work in the gig economy. About 26% of the Malaysian workforce<\/a> are freelancers, and that figure is growing.<\/p>\n

Being your own boss means being in charge of your own hours, your own style of working and the types of tasks you take on. But this also means having to take sole responsibility in other areas \u2013 namely, your retirement planning.<\/p>\n

<\/span>Why you need to prioritise retirement planning<\/strong><\/span><\/h2>\n

As a freelancer or self-employed worker, you may not have a predictable income. If work is running dry, it can be hard to think about something as far away as retirement when you\u2019re worried about how to get through the month.<\/p>\n

Nonetheless, remember that retirement planning is crucial, especially if you are not formally employed. Here\u2019s why:<\/p>\n

a) You don\u2019t have an employer who contributes to your EPF savings<\/strong><\/p>\n

In traditional employment, your employer would typically help you set up an Employees’ Provident Fund (EPF) account. Every month, part of your salary automatically goes to your EPF savings, while your employer also contributes a fixed amount.<\/p>\n

But as a non-salaried employee, nobody sets up your EPF account, makes you save or contributes to your savings. Your retirement planning lies entirely in your own hands.<\/p>\n

b) You risk having to work later in life<\/strong><\/p>\n

According to EPF, Malaysians should have at least RM240,000<\/a> saved upon retirement. This is meant to support your basic needs for 20 years. It\u2019s no small sum, and it may not even be enough if you want a comfortable <\/em>retirement \u2013 that is, one that allows you to enjoy luxuries like travel and nice dinners.<\/p>\n

If you don\u2019t start planning now, you could end up with inadequate savings for retirement. You may be forced to delay your retirement, or not retire at all.<\/p>\n

Even if you do want to continue working, you\u2019ll need to have some savings set aside for your golden years. Medical inflation is on the rise<\/a> in Malaysia \u2013 your savings will help you afford increasing medical expenses when you are older. Eventually, you may also need to fork out for long-term care if you can\u2019t carry out daily living activities on your own.<\/p>\n

c) It\u2019s easier to start earlier<\/strong><\/p>\n

Here\u2019s why you should plan for retirement, even if it\u2019s decades away: it\u2019s easier to start when you\u2019re younger. The earlier you start, the more time there is to allow your savings to grow.<\/p>\n

For example, here\u2019s how much you\u2019ll need to save a month to reach RM1 million at 60 years old:\u00a0<\/strong><\/p>\n

\n\n\n\n\t\n\t
Age you start saving<\/td>
20<\/td>
30<\/td>
40<\/td>\n<\/tr>\n
Savings per month<\/td>
RM502<\/td>
RM996<\/td>
RM2,164<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n*Assuming savings are invested with a 6% annual return<\/span><\/p>\n

If you start saving for retirement when you\u2019re 20, you\u2019d need to put aside RM502 a month. But if you delay just ten years later, this amount doubles to RM996.<\/p>\n

<\/span>What can you do to prepare for retirement?<\/strong><\/span><\/h2>\n

First off, you\u2019ll need to set up an emergency fund<\/strong>. This is a stash of money that you should set aside so you can cover unexpected expenses. Every month, put a portion of your income into a savings account<\/a> until you have at least six months\u2019 worth of expenses saved up.<\/p>\n

This ensures that you won\u2019t have to take out debt or dip into your retirement savings when a financial emergency (e.g. a family member falls ill, your car needs an expensive replacement part, etc.) comes up. If your income fluctuates every month, an emergency fund can also help you cover living costs during low-income periods.<\/p>\n

Then, you can start thinking long-term.<\/p>\n

One of the easiest ways to grow your retirement fund is to contribute to your EPF account <\/strong>via i-Saraan<\/a>. Under this scheme, those who are self-employed or do not earn a regular income can make voluntary contributions to their EPF accounts.<\/p>\n

Here\u2019s why you should consider contributing to your EPF account with i-Saraan:<\/p>\n