Tag Archives: long term care


Paying for Care: Can Malaysians Afford it?

The retirement lifestyle is all the rage these days. Based on The Star’s “Yes to villages, no if it’s expensive” report on 9th July 2017, people are beginning to view the idea of moving into retirement villages and communities that have aged care facilities – such as senior day care centres – as an acceptable lifestyle option, so long as it is affordable.

While choosing either to age in your own home or move into a retirement village is a matter of lifestyle choices – the fact is: receiving care isn’t a lifestyle, it is a need and it becomes greater as we move further along in age.

In the same report, many Malaysians express concern about whether these facilities and services are affordable as not all Malaysians will have enough savings for their old age. The general consensus being to forgo these facilities and services if they are too expensive.

However, the need for care still remains despite the lack of finances. A person with a debilitating condition – either with no family members or ones that aren’t able to care for him/her – would need to check into a nursing home.

Hence, while the retirement lifestyle is nice to have, ensuring you can receive care is a must. So the real question is: how can Malaysians afford to pay for their long-term care when they need it.

In the previous issue on “Paying for Aged Care: The Trends & Challenges”, it was identified that the major hindrance of care delivery is the existing payment options within Malaysia’s infrastructure. In defining that, we now examine the opposite spectrum that looks into the factors that impede Malaysians from being able to pay for long-term care. This is specifically in the context of nursing homes where one’s need for long-term care is at its greatest.

Financial Capability & Long Term-Care
While the infrastructure to pay for long-term care has its challenges, Malaysians also need to be proactive. We need to review our financial capability, learn to save and invest our money for old, and identify the factors that could hinder our ability to pay for long-term care.

In a recent study on “Provision of Long-Term Care and Payment Options for Elderly People Living in Kuala Lumpur and Selangor, Malaysia” (*Yip, 2017), a research on the financial capabilities of Malaysian seniors to pay for long-term care was conducted.

With a sample size of 419 seniors whose age ranged between 65 – 84 years old and living in nursing homes, care centres and at home, the outcome of the study indicated:

• 75.5% were unable to pay for their care needs,
• 10.6% have just enough money to pay for care if their needs are prolonged,
• 7.2% have savings but need financial assistance if care needs are prolonged, whilst
• 6.5% indicated they have more than enough money to last for as long as necessary.

The 75.5% were unable to pay for their care is because they did not have savings in the bank to pay for the required services. Regardless of ethnicity, there are 4 factors that contribute to the inability of this significant percentage of the senior participants to finance their long-term care needs on their own. These factors are namely:

1. The Gender Factor
Gender is one of the variables that may affect one’s ability to save and pay for care. It is possible that women – be it for traditional reasons or otherwise – may be more financially dependent on their spouses and family members. For example, if a woman undertakes motherhood they may stay at home to take care of their children instead of retaining employment. Thus, affecting their future ability to pay for care in their golden years.

Further evidence to substantiate the gender factor was in terms of percentage more senior males seem to have more than enough money to pay for care needs as compared to female elderly. The ratio being 10.14% versus 5.33%.

2. Age Defining Factor that Affects Payment Ability
There is a strong correlation between the senior’s age and their ability to pay for their long-term care needs. The study revealed that as a person ages, their ability to pay for their care decreases. The number of seniors who don’t have savings at all increases significantly to more than 80% after age 75.

Furthermore, the small number of seniors who have more than sufficient funds to pay for care needs decreases as the age group rises. These results affirm the fact that longer life spans does increase financial risks due to age.

3. Previous Occupation
The third factor lies in the senior’s previous occupation – depending on whether they worked in the public sector, private sector, or are self-employed. Where the individual worked or what was his/her previous employment prior to retirement matters as it determines the senior’s ability to save and make money in preparation for their golden years. This will undermine the impact on how long can their funds last to pay for their long-term care needs.

According to the findings, seniors who used to be employees (73.87%), self-employed (80.95%) and housewives (80.19%) are found to have the greatest risk of not having any savings at all to pay for their care needs. Meanwhile, those who owned a business (10.71%) and worked for the government as civil servants (11.76%) have a relatively better ability to pay for their care needs.

4. Children
Within a typical traditional family setting, having many children is a blessing. As such, parents need to have a high financial capability to accumulate and grow their wealth in order to provide for their children during their developmental years.

The study’s results showed that more than 90% of seniors in need of care depend on family members for financial support. Filial piety is a deeply rooted value in Malaysian culture, so some would expect children to eventually take care of their parents in old age. However, there is no guarantee that they would or could do so – financially or otherwise – for various reasons.

Out of the group of seniors without children, 91.30% still needed financial support from family members. Only 34.78% of this grouping has their own savings to pay for care, while 32.61% possess other income sources to pay it. Hence, the assumption that people without children are more financially well-off to pay for their long-term care doesn’t appear to be true either.

Regardless if you have children or none, it is imperative for you to plan and accumulate enough wealth for your long-term care.

Whilst there are reports and research findings which are complementary to the idea and development of retirement villages, the income security of seniors needs to be addressed given the higher cost of living coupled with the increased number of seniors left to fend for themselves due to an ageing demographic.

Hence, industry players must be pragmatic and proactive in their approach when undertaking the task to develop a financially affordable aged care ecosystem in Malaysia. Meanwhile, Malaysians must reflect on the factors that hinder their financial capability to pay for long-term care and then arm themselves with the necessary financial knowledge and money management skills to save money and invest in assets that generate income for their long-term care.



Source: Smart Investor, August 2017

Written By: Aged Care Group

*Quotation Source:
Yip, C. (2017). Provision of Long-Term Care and Payment Options for Elderly People Living in Kuala Lumpur and Selangor, Malaysia (Doctoral dissertation). Retrieved from Figshare Database. (MD5: 27fe2fa9e373fd58476ef48896a524c1)

What Does Akaun Emas Mean For Your Long-Term Care

Early November 2016, news of the Employees Provident Fund (EPF) officially initiating Akaun Emas was announced in newspapers and is set to be effective on January 2017. The specifics of how the Akaun Emas works is clear. When you reach the age of 55, an Akaun Emas will be opened if you continue to be employed. From age 55 onwards, your EPF contributions will be entered into the account and locked. You may only withdraw the accumulated money from the account upon turning 60 years old.

Your previous contributions – prior to turning 55 – will be consolidated from your Account 1 and 2 into one account called the Akaun 55. Money within your Akaun 55 can be withdrawn as a lump sum, monthly, partial, monthly and partial or annual dividends withdrawals.

At age 60, money from both your Akaun 55 and Akaun Emas will be combined to one account for withdrawals.

According to the EPF’s chief executive, Datuk Shahril Ridza Ridzuan, the purpose of the newly launched Akaun Emas is to be a second retirement nest egg for their members to further help serve their needs when they retire.

Whatever the concerns, the real question still remain; do you have enough money for your aged care and have you planned for it?

The Gold in Akaun Emas

To better understand if you would have saved enough for your aged care, let’s take a look at a case study. Mr Tan, 54 years old, is the sole breadwinner of his family with one wife and two children who are currently entering university. He is a full-time employee at Company X earning RM6000 a month. As soon as Mr Tan turns 55 years old in January 2017, his EPF account 1 and account 2 are consolidated into his Akaun 55, he proceeds to make a full withdrawal to pay for his children’s tertiary education. Still healthy and able, Mr Tan continues his employment with Company X and an Akaun Emas is opened for him.

He continues working when at the age of 60 he is stricken with 4th stage liver cancer. Throughout his employment, both Mr Tan and his employer’s contribution to his Akaun Emas remain at 11% and 12% respectively. With an average of 6% dividends from EPF, Mr Tan had accumulated RM 101, 675.79 in his Akaun Emas. Note that calculations are made based on the formula below from iMoney’s article “What Does The 6.40% EPF Dividend Mean To Your Savings?”


Formula for Annual Dividend Calculation

Opening Balance x Dividend Rate (6%) x 365 ÷ 365 (for full Year)
Formula for Monthly Dividend Calculation

Total contribution for Account x Dividend Rate (6%) x (Total number of days in the year – Number of accumulated days for the month + 1) ÷ Total number of days in the year


Mr Tan undergoes surgery and is hospitalised for 90 days before being discharged with the cost being covered by his insurance plan. Now in need of care, Mr Tan utilises money from his Akaun Emas to pay for care services and various supplies for daily living. However, Mr Tan knows his recovery from liver cancer remains unpredictable and worries for his family’s financial situation as his savings (and money from his Akaun Emas) can only last for so long.


The Cost of Care

In terms of the cost of care, how much is Mr Tan looking at? You may not necessarily identify with Mr Tan’s position if you have a fair bit more than Mr Tan from your savings and other investments. You might even be in your 60s and still healthy. Perhaps your children will pay for your healthcare costs. As evident by the recent increase in rates for first and second class wards in government hospitals, healthcare costs are rising and with the risks of living longer, you should still consider the cost for care as shown below:



If your cost of basic care for 5 years is RM 240 000 – excluding inflation, longevity risks, and unforeseen healthcare problems – does your savings sufficiently account for these costs? Despite the great boost in EPF savings the Akaun Emas provides for retirement, it can only cover for your care costs for 2 years (plus a little more if you include your savings) if you have similar circumstances as Mr Tan.

The Akaun Emas is a safe investment as the EPF – which guarantees a minimum dividend rate of 2.5% – has been performing well, as evident in the dividend rates given out being 4.25% – 6.4% over the last 15 years.

However, statistically many who reach the retirement age of 55 (68% of EPF members) have savings less than RM 50,000 and many retirees spend their all of their EPF savings within 5 years.

Furthermore, Malaysians are living longer lives with males and females at age 65 living up to 14.9 and 16.9 years longer respectively in 2015 than previously in 2010. That means the possibility of needing some form of care is inevitable hence planning for such is crucial and also to avoid placing unnecessary burdens on our children.


What Other Options Do I Have?

An option to ensure your savings and retirement plans are appropriately prepared for your aged care needs to put some of your savings into a CareTRUSTTM account. CareTRUSTTM is a living trust that gives:

  • Safety – Your money will be invested in a cash management solution offered by KenWealth by Kenanga Investment Bank. While the default fund has low risk, though you have the absolute discretion to switch and choose from the range of investment products offered by KenWealth.
  • Integrity – Rockwills Trustee Bhd (as the trustee) will safeguard your interests and only act on instructions to pay for your care needs.
  • Care Administration – You will have access to Care Administration to provide you with the right care and the right service at the right place and right time. Managedcare Sdn Bhd will assign you a Care Manager who will ensure the quality of care you receive is in sync with the appropriate healthcare and long-term care plan; based on care needs and financial affordability.
  • Coverage for loved ones – Your nominated Lifetime Beneficiaries can also benefit from CareTRUST™ account. can have 2 beneficiaries
  • Consolidated Assignments – You can assign your insurance policy to the CareTRUST™, allocating more of your money for your care.
  • Unclaimed Money Protection – Any remaining balance not spent in CareTRUST™ will be given to your nominated beneficiaries.

It pays to carefully consider what are your options for retirement and how your financial decisions influence your aged care. Though the Akaun Emas lock-in period is compulsory, you can still take proactive steps to plan for your retirement and aged care with your Akaun 55 savings to ensure your long-term care concerns are accounted for.

The Akaun Emas is focused on your retirement, but the accumulated money will not be enough to cover the cost of long-term care that we will inevitably encounter. There is also the risk of not being able to make our own decisions due to circumstances like dementia and etc. It is good to have another option which is safe, specifically focused on care, and will assist your decision-making to mitigate difficult situations arising from being of unsound mind.

First Published in Smart Investor, December 2016, Issue 320

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