Friday, April 4, 2014


Retirement planning encompasses much more than just ensuring we have enough set aside to sustain our retirement. For retirees and soon-to-be retirees, it is the bread-and-butter issues that concern us most. Given the longer life span (84 for men, 89 for women),  and our relatively early retirement age of 60 (in Malaysia), our retirement savings will likely run out before we expire!

The past, the present, and the future are all inextricably linked. We should do well to bear this in mind when planning for our retirement. One of the biggest mistakes we can make is to think that now is too soon to plan for our retirement. Another mistake is to live just for the present, as if the future would magically take care of itself.

Depending on where we retire to, and the lifestyle we want to live, we need between one to five million ringgit in order to retire comfortably. It takes time to accumulate such a large sum of money. The earlier we get started, the more likely we can reach the target. This is good advice to share with our adult children who are more concerned about planning for their children's higher education than for their future old age.

Civil servants can count on their lifelong pensions. But with inflation pushing up the cost of living, relying on pensions alone may not be enough. The government has to step in and raise pensions every few years. This may not be sustainable over time as the large civil service (1.4 million and growing by tens of thousands each year) places a huge strain on public funds.

The same goes for salaried workers who may have only their EPF funds to draw from when they retire. As for the self-employed, unless their business is doing well, they have the most cause for concern. The government recently introduced the 1Malaysia Retirement Savings Scheme as a source of funds for the self-employed, but the take-up has been slow.

How can we prepare for our retirement?

1. Decide on your retirement lifestyle
Start by asking yourself what kind of lifestyle you expect to enjoy when you retire. Make adjustments to your lifestyle if necessary. How much would you need to support that lifestyle? If you haven’t a clue, there are financial planners who can draw up a comprehensive retirement plan for you, for a fee, of course.

2. Adopt sensible spending habits
Prioritize your needs. You don't have to live frugally, but be sensible in your spending. If you can't afford to take the family on a vacation abroad every school holiday, opt for a local destination or for a biennial holiday trip. You’ll be surprised how cutting out small expenses here and there can mean more money saved each month. It can add up to a sizable amount in your retirement savings over time.

3. Know what to allocate for
Otherwise you can use retirement calculators that are available online to help you estimate the amount you will need to enjoy a comfortable retirement. Remember to allocate for your parents and grandparents. With longer life expectancy, you may end up having to support them and footing their medical bills. With the trend towards smaller families, you may not have many siblings to split the cost of parental maintenance with you.

4. Identify your sources of income.
Do a check-list on your sources of income. If you are already retired, you will have your pension or EPF to draw from. There’s also your personal savings, dividends from your shares and interests from your fixed deposits. If you start building your retirement egg early, you will have little to worry about when you stop working.

If you want to grow your retirement egg, channel some of your savings into fixed deposits, bonds and mutual funds. Or invest in shares. But do the research before you venture into the stock market. Know the risks you are exposed to. The higher the promised returns, the greater the risk of losing your investment. Learn about all the different types of financial products that you can invest in. Be an informed investor. Also be a long-term investor rather than a short-term speculator. You can’t be too careful when it comes to protecting your assets, monetary or otherwise.

5. Own the title deeds to your home.
Make sure you have a residential property that is in your name. That should be your first real estate investment. You may choose to live in it or rent it out but when you retire, you must have a roof over your head. Don’t assume your adult children will want you to move in with them. Even if they do, you have an option if you have your own property.

6. Pay attention to your health
Financial security isn’t the only key ingredient for a successful retirement. Some people would argue that good health is even more important. You can’t enjoy your retirement if you are constantly in poor health and in pain. Rising healthcare costs can swallow up a huge chunk of your savings and wreck your carefully laid-out plans for retirement. Health supplements are costly, so are prescription drugs. Many of these have to be taken long-term to manage cardiovascular diseases, diabetes, high blood pressure, osteoporosis and dementia – the bane of old age.

Senior citizens doing early morning exercises in the park

7. Make active ageing your mantra
Prevention is anytime cheaper than cure, so lay a strong foundation for good health by adopting clean living and an active lifestyle. Clean living means no addiction of any kind, be it drug-taking, drinking or smoking. An active lifestyle requires that you incorporate exercise into your daily routine. If running is not your cup of tea, brisk walking is an excellent alternative. Get a pedometer to make sure you walk at least 10,000 steps a day.

8. Acquire new knowledge
To stay mentally fit, challenge yourself by learning new skills. If you are 50plus, consider signing up for non-academic courses at the University of the Third Age. (U3A) Malaysia. It is a program under the "Lifelong Learning for Older Malaysians" project initiated by the Institute of Gerontology, Universiti Putra Malaysia, and jointly supported by the government and the United Nations Population Fund. Classes are conducted weekly at UPM.

9. Take up a hobby or two
If you don’t fancy attending classes, take up a hobby or two – one that you can indulge in on your own, like painting, and the other that you can enjoy with friends, like ballroom dancing. It is important to stay connected with friends to ward off loneliness and depression during your retirement.

10. Find your passion
Most importantly, have a purpose for living. If life has no meaning, you will end up with nothing to look forward to when you wake up each morning. Find your passion. It could be volunteering for an NGO, doing your bit for a worthy cause, or just being the best parent, friend or employee that you can be. Add value to your life, and to those around you.

Kechara volunteers helping to pack and distribute food packages and blankets to the homeless 

Some final thoughts: Women face a tougher time than men in preparing for their retirement. Not only do they earn less, they also retire earlier and live longer. If they are single, they have no spouse or adult children to support them through their retirement. For them, it can never be too early to start preparing for their retirement.

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