How Prepared Are You For Retirement?

Sustaining a decent post-retirement lifestyle and care requires planning, and truth be told, we are running out of time every day.

A storm of ageing is coming and many a Malaysian is not prepared for the pension crisis fallout that is hurtling our way as Asia ages at a rapid pace. According to Lim Eng Seong, Head of Retail Banking and Wealth of HSBC, the Malaysian population aged 60 years and above will exceed the younger population aged 0-14 in 2049 as Malaysia’s population increases by 31.4% over the next 20 years.

That is an astounding over 37 million by 2030. HSBC cited in their recent ‘Future of Retirement’ survey that the two contributing factors to the under-preparation for retirement in Asia are; Asians saving too late in life and not planning for the unexpected. According to the survey which covered 16, 000 people in 15 countries, two out of every five retirees who had insufficient savings said they weren’t aware of the problem until they retired and many had not built safety margins against unexpected events or expenses such as rising late life medical costs, accidents, illness, unemployment, or other life events.

In Malaysia, the respondents stated that life events such as paying for their children’s education and buying a home and paying the mortgage impacted their ability to save for retirement, resulting in a concern about insufficient funds to last through retirement. Only 15% were confident in maintaining a comfortable standard of living post-retirement.

Private Pension Administrator Malaysia (PPA) has noted that Malaysians had the tendency to assume that their EPF savings will carry them through their retirement, yet the fact of the matter is 72% of EPF members had only accumulated savings at a mere RM50, 000 or less by the age of 54.

72% of EPF members had only accumulated savings at a mere RM50, 000 or less by the age of 54.

Coupled with the fact that readjusting to a post-retirement lifestyle from a pre-retirement one is difficult not only due to continuously rising inflation and medical costs, but also because spending habits developed over a long period of time before retirement is hard to break, 50% of Malaysian retirees end up blowing all of it in five years!

Additionally many Malaysians assume that their children will be able to take care of them during old age when it is more likely that the adult children, likewise impacted by inflation factors as well, will struggle to support them in addition to caring for their own families. The resulting anxiety is aggravated further in the later stages of retirement as quality services for aged and nursing care becomes an increasingly prominent factor.

However, much of the retirement risks stated thus far could be mitigated with proper financial planning. You must pursue financial literacy now through financial literacy programmes such as the National Financial Education Programme, which was suggested in the PEMANDU Economic Transformation Programme or programmes designed and conducted by Bank Negara Malaysia through a joint venture of both public and private sectors.

First Published in Smart Investor | March 2015 | Issue 299

WP-Backgrounds by InoPlugs Web Design and Juwelier Schönmann