Saturday, November 29, 2014


Cover article in The Malay Mail 27 Nov 2014

Yet again we read about retirees who have depleted their EPF savings within a few years after withdrawing the entire sum upon reaching retirement age.

The reasons they give run the gamut of expenses from their children's wedding to house renovation. Many use the money to pay off debts, including those of their relatives who come knocking on the door for financial assistance.

Others lose large sums in risky investments or worse, in get-rich-quick scams. Some set up their own business hoping to generate income, but end up having to close their business after a couple of years when funds dry up.

EPF contributors must bear in mind that their savings are meant to see them through their retirement years, which could be anything from 10 to 20 years. Malaysia's EPF was set up in 1951. Back then the average life expectancy was 54, and the retirement age was 55. So there wasn't much need to save up a tidy pot of gold for the golden years.

Today the average Malaysian is expected to live to a ripe old age of 77 and this figure is set to rise even further. It may be too late to save when we have already retired, but we can learn to manage our savings and stretch the money so it will last till our final days. We need to live sensibly as befitting our new financial status.

For retirees who cannot trust themselves to control their spending, it might be a wise decision to opt for monthly payouts (as in pension payment) than a one lump sum withdrawal. This will compel them to live within their means, and ensure their savings see them through their old age.

It's easy to get into debt once we start borrowing money.

Money management, including budgeting, should be made a compulsory subject in school. Children should be taught the habit of saving so that it becomes a way of life when they enter adulthood. Once the habit is instilled, it can be extended to saving water, electricity and so on, all of which ultimately helps to stretch our retirement savings.

After paying off 90% of debts, what's there left
to retire on for the next 15-20 years?

The temptation to spend is great when we suddenly find our bank account fatter by a six-figure sum. Now we can enjoy that luxury cruise to exotic islands. Now we can buy that Lexus Hybrid. Now we can finally get new furniture and extend the kitchen.

We become instant potential clients for real estate agents, remisiers, multi-level marketing companies and direct selling sales recruiters. Scammers flock to us like bees to honey as they know how naive and easy-to-con retirees are, especially retirees who are eager to make more money quickly.

Rule of thumb for pre-retirees

And let's not forget long-lost relatives and friends who appear out of the blue to seek a loan. It is not easy to turn down someone with a hard-luck story, especially if we have been through the same experience at some point in our lives. We know what it is like.

BUT we need to be selfish and learn how to say 'No'. No to extravagance, No to non-essentials, and most of all, No to borrowers. BUT yes to small donations to charities and the less fortunate who truly need help. That's giving back to society.

Kudos to the EPF for providing complimentary Retirement Advisory Services. The next generation of retirees will have no excuse for making the same mistakes that many of the curent crop of retirees have made. Awareness of the pitfalls of having insufficient retirement savings should scare them into saving early, spending sensibly and living simply.

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