financial independence

Calculating the Amount I Need to Reach Financial Independence in Malaysia

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You might have seen the acronym FIRE – it stands for Financial Independence, Retire Early. To me, the FI part is more important – I want to reach financial independence in Malaysia.

Imagine waking up in the morning, thinking, eh, I don’t feel like working today, so you just… don’t. And still be okay financially, with no consequences.

That’s the dream, isn’t it? I want that. I want that so bad.

The topic of financial independence and early retirement has been on my mind for the longest time, but I admit I’m afraid. I’m afraid to find out the amount I need to get there. I’m afraid the number will be too big that it’ll discourage me, instead of motivating me. I’m afraid to think of the sacrifices I have to make.

Which is why I’m forcing myself to write this article. Let’s force out all those jumbled thoughts and put them in a linear, clear format.

How to reach financial independence in Malaysia

Based on the articles and resources I’ve read about the topic, here’s how one can reach financial independence in Malaysia:

  • Do all you can to earn money, until you reach the amount you need
  • Chuck it all in investments, allowing it to earn interest
  • Make withdrawals that’s enough to fund your lifestyle, forever

The key is to have a big enough amount so the money doesn’t run out before you die, because that would suck.

There are two ways to calculate how much money you need to reach financial independence in Malaysia:

First way: 25x your annual expense

One of Mr Money Moustache’s most popular post is called The 4% Rule: The Easy Answer to “How Much Do I Need for Retirement?”. A popular FIRE advocate and OG personal finance blogger, he argued that one needs roughly 25x their annual expenses for early retirement.

Now, the maths is based on (1) US-centric figures and assumptions, which is not the same for Malaysia, and (2) oversimplification of 7% annual return rate and 3% inflation rate (the numbers are not that predictable).

Regardless, 25x your annual expense is a simple enough calculation to use to guesstimate your FIRE number. For example:

  • If your annual expense is RM40k per year, your FIRE number is RM1m
  • If your annual expense is RM60k per year, your FIRE number is RM1.5m
  • If your annual expense is RM120k per year, your FIRE number is RM3m

And so on. You could, in theory, aim to hit the number then hire a financial planner who can do a personalised calculation for you – maybe its enough, maybe its not, it all depends on your envisioned retirement lifestyle.

But I know some of you are hardcore DIY-ers, and want to calculate your own FIRE numbers and/or want better accuracy, so here’s the second way:

Second way: Calculate your FIRE number from your variables:

The ‘variables’ are:

  • What is your ‘post-retirement’ lifestyle and how much it is expected to cost
  • Your life expectancy (the average life expectancy for Malaysian women is 77.6 years old. Let’s just round that up to… 85… just in case)
  • The inflation rate
  • Your average return on investment (5-8% is a good benchmark)

The calculation is easy in theory, but figuring out the variables are hard. How would I know how much I need after retirement? Even my year-to-year expenses varied a lot – I spent an average of RM8600 per month in 2017 and an average of RM4900 per month in 2016.

And what kind of post-retirement lifestyle do I even want? I haven’t decided. How much would that cost? Will I be healthy or need medical assistance then?

Oh well. Let’s just do the calculations first. I found a couple of calculators online.

Calculation #1 – Annuity calculator

To calculate the amount I need, I tried’s annuity calculator first. After playing around with the numbers, I found out that I can withdraw RM5,000 per month for 53.6 years if I have RM810,000 in investments now.

financial independence malaysia

I thought I solved the ‘how much I need’ part, but on closer inspection, no I don’t. The scary part is the inflation.

You don’t really notice it on a year-to-year basis, but it’s clear as day in the example above. I don’t want 83-year-old me to live on an equivalent of RM677 only per month! I want comfort in my old age!

Calculation #2 – Post-retirement calculator

So obviously I need to find a calculator that takes inflation into account. No wonder they call it ‘the silent killer’.

I found this Rich, Broke or Dead calculator which answers the question: If I start out with $X dollars at the beginning of my retirement, will I run out of money before I die?

The calculator is not the most suitable for my case (for example, they use US inflation rates), but it’s still nice to be able to play around with the numbers.

According to the results, RM1,950,000 invested at age 30 will give me 99% probability to withdraw RM60,000 annually (inflation-adjusted!) until I’m 85 years old!

 financial independence malaysia

RM1.95 million…

Holy shit that’s a big number. I am nowhere near there. I am nowhere near reaching financial independence in Malaysia.


There it is. The emotion I was trying to avoid, too scared to confront. I’m overwhelmed by this amount. I doubt my ability to earn this much in my lifetime.

Then, immediately after that thought: the crushing realisation that I lack self-confidence in my own earning potential.

Quick, an inspirational quote to stop all this worrying and anxiety:

… that subsided it somewhat, but still.

I know I can only do the best I can, and dammit I am trying to be good with this saving and earning money thing.

I know I could be in a worse financial position.

I know I am lucky to actually enjoy the work I am doing now.

I know that worrying now is worrying twice.

So… no rush, Suraya. Reach financial independance at your own pace, don’t worry too much about retiring early – as they say, it’s the journey, not the destination.

Whatever it is, remember you’re planning for 85-year-old you, but don’t forget there’s no guarantee you’ll even reach that age. So save money, yes, but remember to live like each day is your last, too.

Adjusting expectations

Even though I don’t want to worry too much, I sure as heck will try my best to increase my likelihood to reach financial independence in Malaysia.

Two things make financial independence in Malaysia easier:

  • Low post-retirement expenses, and
  • High income AND savings rate to reach the number needed

Let’s look into both:

Low post-retirement expenses

I’ve been using RM5,000 per month to guesstimate the amount I need for my post-FI life. In my head, the amount is just enough to cover the essentials (rent, insurance, food, transportation, etc), cover the expenses of my passion projects.

I can live on less, definitely, if I try. For example, I could move to a cheap country, which saves money on the essentials and satisfies the wanderlust element.

Thankfully, I’m in no rush to decide on a post-retirement lifestyle. I’m still young, and can take the time to try out different ways of living.

So that brings us to the second part of FIRE:

Getting the amount needed

After doing the calculations, it’s clear that I need around RM2, maybe RM3 million to safely call myself financially independent. The number might change as I grow older or if situations change, but it’ll do as a benchmark for now.

A lot of people in the FIRE community make sacrifices to get the amount they need, faster. I’ve seen people:

  • Adjust their accommodation arrangement to lower their cost of living – move to rural areas, move with the parents, live with housemates
  • Choose to not have children
  • Live extremely frugal lifestyles
  • Bust their asses off to earn extra income
  • Stick with high-paying, but high-stress jobs

The more sacrifices they make, the faster they FIRE. Therefore FIRE communities also act as a support group of sorts, full of encouragements.

It’s a nice community, however I can’t say that I like all of its aspects. It can be a bit too money-obsessed, even for me. I’m okay with slowly getting there, as long as I enjoy my life.

Do you plan to FIRE?

In Malaysia, I know a few people who are consciously working towards FIRE. I’ve gotten emails from readers who shared their journeys. Some shared the lack of support from family and friends, who didn’t understand the rush.

How about you? Have you ever calculated the amount you need? Which calculator did you use? Also, what do you plan to do after you retire early?

Let me know. Share your thoughts in the comments section.

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  1. Hey Suraya,

    I haven’t really looked too far into the future, I prefer to break it down to baby step milestones instead of looking at the finish line.

    The first step is to get RM360,000 in investment value to support my necessity expenses currently (RM18,000).

    Then, RM720,000 of investments to support my current lifestyle.

    This is under the assumption that my investment growth beats inflation and returns 5% per annum. I’ll assume I reach FI/RE when I can support my current lifestyle but will continue to grow the portfolio because my expenses will very likely increase with more commitments in the future. For now is to keep commitments low and keep saving and investing rate high.

    When I reach FI/RE, I want to work on my PASSION income. Gonna setup a workshop at my home and make my own furniture.

    1. Hey Stockmonger,

      Which calculator did you use to get your number?

      Also, interesting passion you have there! Hope you have time/resources to work on it a little bit, even before FI/RE-ing

  2. Quite difficult to FI/RE when you have kids. And yes, I agree that the community is very money-minded. Not that it’s bad, I just prefer to not count every single sen I spend.

    Right now, I’m just focusing on my financial goals:

    Paying off my loans (only 1 car left)
    Saving enough for kids’ education (total will depend on what they want to do – hopefully not medicine!)
    Saving for kids’ house if possible
    And finally only think about my own retirement fund.

    1. Hi David 😀

      Bless. Your kids are so lucky. Also, that’s the first time I heard an Asian parent wishing their kids *don’t* pursue medicine lmao!

  3. My opinion is: just like how running your own business works, it also depends on individual. I think the common problem is that ‘most’ people think Retirement is the ultimate goal, without realizing that retiring early also has its own problem.

    I don’t know that at first until i did some reading on personal finance recently, and here are 2 great article from 2 re-known finance sites:

    I think it is worth considering both sides of the FIRE before someone dives deep in and assume that’s their new ultimate goal in life.

    1. Hi Failguy,

      Thanks for sharing the links, both contain great points. I’ve also read posts from individuals who decide to re-join the workforce, because they felt they lack purpose in life after FI/REd. They also found that they have too much time and don’t know what to do with them.

      However, oh the flipside, there are also folks who get tremendous fulfilment after they FI/REd. I think the difference is having something meaningful to do vs not having something meaningful to do. Some get so fixated on the retirement part and work and work until they have no passion projects or hobbies to enjoy.

      But… I still think that too much time + enough money is a nice problem to have, rather than the other way around :/

  4. Hi Suraya, it is really great that someone young like you already have plans for FI/RE.

    From my personal experience, the figure varies at different stages of life.

    Since the arrival of my baby two years ago, a lot of priorities has changed including my FI/RE.

    Having a baby can be very expensive but the rewards are worth it.

    And, YES! it is the journey, not the destination. So, enjoy the view along the journey.

    Finally, by having the right financial preparation, it will definitely make the journey more enjoyable.

    1. Hi Michelle,

      Yes, it’s all about the journey 🙂 I’d rather not FI/RE if earning the income means losing my health, relationships and all the good things in life!

    1. Hi Yuyu,

      Thanks for the link to calculator! Good find!

      I notice the calculator didn’t take inflation into account. Is the RM3k monthly going to be enough?

      1. no it did not take into account inflation unfortunately. I’m setting my target to RM3k for now and will adjust as I go as I noticed I am more motivated when I have a target in mind.

  5. My advisor told me that I need RM3.5mil to retire by 35 haha (I’m currently 26 y/o).

    Though it’s a big number, I don’t take my FI/RE as a time where I don’t earn any money at all, and simply expecting my dividend to come every month. My plan is to try and build a passive income sustainable enough for me not to work a full time 9-5 job.

    I still wanna work even after 35 y/o, perhaps with an NGO or even, volunteer. But the jobs won’t be weighed based on their pay, unlike now.

    But I do set a goal on when I hope I can achieve this, so I can break things down and try to work on something small that will hopefully accumulate and get me to live life fully once again 😀

    1. Hi Fara,

      Thanks for sharing. RM3.5m to retire by 35? What easy numbers to remember ahahahha

      Tell me a bit more about having a financial advisor. Quite rare for people your age to have one. Why’d you engage in one?

  6. Hi Suraya,

    ive been working towards FIRE in Malaysia for quite sometime. In the US, the benchmark is the Trinity Study which has come up with the 4 percent rule, based on the assumption of 3 percent inflation and all the best and worst case stock market scenarios in the US market for the past 30 years. i honestly dont think its the best way to plan for FIRE in Malaysia. I have my own method, which is trying to beat inflation by 4 percent every year with a combination of real estate rental income, stocks, REITs.

    In Malaysia, a very powerful lever you can pull is local geoarbitrage. Instead of staying in klang valley…think smaller towns like Ipoh, Kuantan or Seremban. thats what ive done.

    Another common theme i see from successful FIREd people from across the globe like Mad Fientist, Mr Money Moustache or FIREcracker is that they do a partial retirement even before reaxhing full FI.They work part time, and constantly work on decreasing expenses before completely stopping work.

    If you would like to discuss FIRE more, please reach put to me privately.

    1. Hi RealFIRE,

      Thanks for your comment, that’s a powerful insight. Learned a new term today – local geoarbitrage – very suitable and applicable here!

      How did you come up with your own method?

    2. Hi RealFIRE, do you have a blog yourself? I’d be interested to find out a little more about your journey – if you don’t that is.

  7. Suraya,

    The biggest problem investing in Malaysia is that inflation here is higher than in mature developed countries. if you can buy assets like stocks, real estate etc that keep pace with inflation, then over time your assets value doesnt erode. hence, if you can get a rental or dividend yield of say anywhere between 2 to 6 percent, you can keep that income for spending.

    I think what prevents a lot of people from living in smaller towns in Malaysia is the lack of high paying jobs here compared to KL. But cost of living is much more manageable in smaller towns, ie food, medical, services etc.

    Also, its really not easy to explain why you want yo pursue FIRE to your Malaysian family members. They often see it as either a crazy idea, or as something very unattainable. Or they see it as something socially inappropriate. Am really keen to get to know more Malaysians who are pursuing FIRE.

    1. Hey RealFIRE,

      Go to personal finance communities on Facebook and post about FIRE. There’s a few people with the same mindset, I think you can find your tribe there.

  8. 7.5% per year? How to get ah?
    FIRE based on trinity study with 4% SWR per year (inflation taken into account) of US market.
    In Mesia we are getting screwed by the banksters in their 5% frontload and 2% management fee, ILPs
    ..Based on your calculation need to earn double digit return to sustain a 7.5% return. Notice how almost all banks are pushing volatile Asia Pac ex Jap instead of S&P 500?

    In US most ppl invest through their 401k to buy low cost index funds/etf (i.e vanguard) , in the long run you will make bank if you stick to your saving rate (young go for 40%) , Mesia wages are stagnant & depressed , house prices at the mercy of the crook developers. A lot of proponent of fire choose to avoid buying houses to not be debt slaves.

    FIRE don’t think of just about retiring as early as possible, it is the concept of obtaining F’U money.

  9. A good read 🙂

    4% is a good rough starting point. More accurately would be to run projections based on life expectancy, investment returns (after retirement), inflation, debt remaining (if any), lifestyle downgrade (or upgrade), etc. Also pretty neat to run another calculation too if you were to live purely on investment returns (dividends/passive income/rental) what would be your Super Fat FI/RE number look like 🙂

  10. Hi Suraya,

    Very well written.

    I would assume that you’re would still be running your blog after you retire else we would all miss you. If that’s the case and you will still have an income after you retire. Hence you might be able to retire with a lot less.😃

  11. The hardest part of FIRE is to get your spouse into the FI mindset. And that’s the 1st step of my FI journey. Because no amount of saving is enough if you’re the only one trying to make it happen.

    1. You’re right, the spouse needs to be on board too. ‘Marry the right person’ is frequently given as financial advice for that reason

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