Many regard their 30s as their prime. At this age, careers often stabilize while relationships are solidified. It demonstrates that investing in your 30s is a good idea; even those in their 30s have a longer investment horizon. So, what are the best investment strategies for retirement, that you can employ in your 30s?
Strategy 1: Taking advantage of retirement planning-related tax breaks
The Malaysian government introduced tax deductions for your Employer’s Provident Fund (EPF) and tax relief on Private Retirement Scheme (PRS) contributions to encourage retirement planning. EPF – RM4,000 per annum; PRS – RM3,000 per annum. Try to make additional contributions to EPF on top of salary deductions.
The money can then be diverted for investment. You can choose low-risk instruments risks such as fixed deposits. Assume you invest RM3,000 every month for a year in a fixed deposit account. The interest rate is 4% p.a. When your deposit matures; you can earn RM3,080. It’s small but is the right step to cultivating healthy investment habits.
Strategy 2: Setting up and reviewing insurance policies
Examine the adequacy of your medical and life insurance coverage vis-a-vis your commitments and liabilities. Review if it is sufficient should you have a spouse and other dependents.
Also, pay attention to the date the insurance was issued. This is because most insurance only covers a specific period of time. Your coverage may end, or you may need to renew it from time to time. Updates may occur automatically if you have a bank account linked to your payments. You should know when to expect the cost in this scenario.
Strategy 3: Setting up your will
Will writing is a crucial part of both financial planning and estate planning. It is essential to have a will to ensure your loved ones are taken care of and spared the tedious and potentially lengthy probate process. Without the will, your assets will be distributed according to the Distribution Act 1958 and Inheritance (Family Provision) Act 1971 for non-Muslims; Muslims will have their assets distributed by way of faraid. This may exclude beneficiaries and gifts not listed in the statutes
Strategy 4: Have periodic conversations with Financial Planners
In Malaysia, you will find two designations: Certified Financial Planners (CFPs) and Registered Financial Planners (RFP). CFP is a qualification trademarked by the US-based Certified Financial Planner Board of Standards, Inc. RFP is a designation approved by Bank Negara Malaysia and the Securities Commission and awarded by the Malaysian Financial Planning Council (MFPC).
Financial planners are professionals who underwent modules to advise their clients on investment, risk management and planning, zakat and tax planning, estate planning, and retirement planning. Financial planners may guide and educate you in navigating the dynamic field of personal finance planning. Financial planners also help develop a plan for you (and your spouse) to work towards based on your financial goals. Financial planners may charge fees for their service. It is best that you have a conversation about this before engaging them.
Strategy 5: Building your investments and consider diversifying asset allocation
Educate yourself on investment vehicles like unit trusts, debt financing, and equity/stock market investment. Avoid investing according to emotions. Try to make informed decisions by weighing against one’s budget and financial goals. One might consider allocating more investments towards volatile assets like stocks.
You can try asset allocation scenarios: 30% bonds and 70% stocks. When you are better prepared, the number of your stock investment can be increased. There is nothing wrong with trying conventional assets like gold. It’s because gold can be used as a hedge against the inflation threat that keeps increasing yearly.
Your 30s will witness many significant milestones. This period is also an excellent time to start investing in retirement planning. Especially for those in a relationship, retirement planning and financial planning are conversations that should happen regularly with one’s partner. You can try to learn about different forms of investing. Select one or two instruments that suit your risk profile.
One thing to remember is never invest based on emotion. Investment requires not only cold money but also a cool head. Consider all the options. Good luck