In my opinion, the amount of retirement fund should be formulated as follows:
= Yearly Expenses / Expected Annual Return Rate (%)
Giving an example by assuming yearly expenses for a family of 3 (parents and a new born kid) to retire comfortably in Kuala Lumpur to be RM100,000 (approximate RM8,300 monthly) which include repayment of housing and car loans, and also the most prudent annual return rate of the fund for the family depends on fixed-deposit rate of 3%, then the family should accumulate a retirement fund of RM3.33 million, which is about 33 times of their yearly expenses (1/3%).
From the formulated I quoted above, should you be able either reducing yearly expenses or increasing expected annual return rate, then you would only need a smaller fund for retirement. Remember, the smaller the retirement fund, then the easier to achieve and retire earlier.
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