Work out your retirement needs before making voluntary contributions

New graduate Kenneth has just enrolled in an MPF scheme, and HR asked whether he wants to make MPF voluntary contributions. He wasn’t sure. The smart move is to assess your retirement needs first, then decide whether extra savings are needed — not to follow the crowd.

What are voluntary contributions?

Voluntary contributions are extra payments made on top of the mandatory 5% contributions, by the member or the employer. They are invested in the scheme’s funds and the accrued benefits belong to the member — one way to build a bigger retirement reserve.

How do you assess your retirement needs?

Start with the MPFA’s “MPF calculator”: enter the years to retirement, expected monthly expenses after retirement, life expectancy, expected return on savings and average inflation to estimate the total amount you’ll need.

Then estimate what you’ll have saved by retirement, including MPF accrued benefits. The gap between the two tells you whether extra savings or investments are needed.

What’s the advantage of voluntary contributions?

MPF pools members’ contributions for investment, which brings cost efficiency; making voluntary contributions by regular fixed amounts also achieves dollar-cost averaging, softening the impact of short-term market swings.

That said, every investment product has its pros and cons — choose a fund mix that fits your goals and risk tolerance.

Even if you don’t contribute now, review regularly

Everyone’s retirement needs differ. Even if no extra savings are needed at this stage, review the situation regularly to prepare for the retirement you want.

Compare MPF funds at MPF fund comparison, or learn more at the MPF education hub.