THE NEED TO KEEP RAISING THE RETIREMENT AGE

PM Tun Mahathir, 93, has jokingly said the new retirement age in Malaysia will be 95 in 2020 when he hands over his premiership to Datuk Seri Anwar Ibrahim. He may have said it in jest but at the rate our demographics are changing, Malaysia will reach ageing nation status by 2030, and we will see more people working well into their 70s.

When the Employees Provident Fund (EPF) was established in 1951, life expectancy then, believe it or not, was 55! With the retirement age set at 55, lump sum EPF withdrawals would be more than sufficient to sustain contributors through the short retirement period. We now know those figures were way off the mark. Advances in science, medicine and technology have drastically extended life span. Life expectancy in Malaysia currently stands at 75, and is set to rise further in the years ahead. 60 is the new 40, and living to a ripe old age of 80 and beyond is fast becoming the norm.

This begs the question - do we have enough in our EPF savings to see us through an additional 15 to 20 years? For the majority the answer is No. The M40 (middle income group) is arguably the worst off as they are not eligible for welfare aid unlike the B40 (lower income group). They also have more financial commitments such as these below:

• loans to service (housing loan, car loan)
• their children's higher education 
• their healthcare expenses
• support for their elderly parents

Do check out what these senior citizens from M40 have to say about their financial status, and what we can learn from them at this link. Their profiles are typical of most retirees.

Upon reaching 55, most retirees would opt for lump sum withdrawals. They have worked hard and waited patiently for the day when they would have the means to turn their dreams and plans into reality, whether it is to pay off debts, renovate the house, take a well-deserved holiday abroad or start a business. Unfortunately, going by EPF data, most end up depleting their retirement savings within a few years mainly through mismanagement of their money.

How much should the average retiree have in order to avoid getting into debt? EPF puts it at RM228,000. More than half of their members have way less than this amount (see infographic below). EPF has come up with some good advice on how to live a simple and sensible life in retirement to stretch savings. If a retiree finds himself unable to cope financially, he should pay a visit to AKPK (Agensi Kaunseling dan Pengurusan Kredit) for some free advice on how to manage his limited financial resources. Or refer to AKPK's special presentation for SeniorsAloud members at this link.

Read the full article at this link.

To reduce the risk of retired contributors using up all their EPF savings within a few years, EPF introduced several withdrawal packages (see below). There is also the option of leaving the entire sum with EPF until age 100 and still enjoy dividends. At dividend rates of 6% and above since 2011, it makes sense for retirees to let their savings remain for as long as possible with EPF. The dividend for 2017 was 6.9%.

Read the full article at this link.

Many of my friends who were teaching in public schools back in the 1980s opted for early retirement when they reached their 40s. As long as they had served a minimum of 10 years, they were eligible for a gratuity and pension benefits as stipulated under Section 12A Act 227/239. Today early retirement at 40+ would be unthinkable for most people. Given the rising cost of living and a host of financial commitments, few can afford to enjoy full retirement. The mantra is work, work, work for as long as possible.

Acknowledging the plight of retirees and those nearing retirement age, the Pakatan Harapan government has sought to increase job opportunities by proposing tax incentives for employers hiring older Malaysians. It's a long shot from proposal to implementation. Whether this will make a significant difference remains to be seen.

Source: Budget 2019

One thing is for certain - we can expect the retirement age to continue going up. In developed countries such as Germany and Japan, the retirement age is moving towards 70. Former PM of Singapore, Lee Kuan Yew, famously said that 'retirement means death', and was in favour of doing away with the retirement age.

As the country's biggest employer, the government finds it a challenge to fund pension payouts to a growing pool of retired civil servants and beneficiaries that is expected to reach 836,000 in 2019 and would cost KWAP (Kumpulan Wang Persaraan) a whopping RM26.56 billion. This is one of the main reasons for raising the retirement age - to enable both retirees and pensioners to work longer and accumulate sufficient savings to be self-supporting in old age.

Read the full article at this link.

Older Malaysians too want to work for as long as they are able. The family structure has changed so drastically that parents can no longer expect their adult children to support them in their old age. Family size has shrunk, and with the grown children moving out to work or settle elsewhere, retired couples are often left to fend for themselves.

The falling fertility rate at 1.9 is the lowest on record and below the replacement rate of 2.1. This means a shrinking of the young work force. This shortage of young workers will have to be met by an increase in technology, in the recruitment of foreign workers and in opening jobs to people in the 60 to 65 age group.

So, whichever way we look at the situation, there is definitely a need for older workers to return to the work force, and for the retirement age to be raised. The likelihood of doing away with a retirement age will gain traction in the years ahead. Let's just hope it won't reach a situation where we have to work till we drop dead!

PROTECTING OUR NEST EGG FOR THE GOLDEN YEARS

Retirees come from a myriad of backgrounds. But one thing they have in common - an accumulated pool of financial resources to draw from by the time they turn 60. The size of this pool is determined by how much they have been saving during their working years and how well they have been managing their money.

Most new retirees can't wait to withdraw all their EPF (Employment Provident Fund) savings in one lump sum. They have made plans on what they intend to do with this pile of available funds in their hands. Here's a sampling:

Lavish wedding banquet - only if you can afford it

• renovate the house
• get a new car
• invest in shares
• pay for their son or daughter's wedding
• start their own business, or help their son or daughter start their own business
• put a down payment on a house for their son or daughter
• sign up for a Rm8000 2-day course on how to make money
• spend thousands on expensive holiday trips

The list is endless, and before they know it, these retirees are looking at their rapidly shrinking nest egg. We need to stretch our savings to last us for the next 20-30 years given that our life expectancy has risen to 76.

It's all about smart money management, as Mdm Koid Swee Lian, CEO of AKPK, told retirees at a special talk arranged for Seniorsaloud community last June. AKPK is an agency set up by Bank Negara Malaysia to help individuals take better control of their financial situation. 

Mdm Koid addressing members of Seniorsaloud community at AKPK headquarters.

Unless we have several golden geese that continue to lay golden eggs, we can't afford to help our grown children with huge sums of money. While it's fine to donate small amounts to charity, it's not okay to be paying for our adult children's housing mortage, post-graduate studies, car loans, and credit card debts. They are old enough to fund their own plans and pursuits.

Remember, retirement funds are for our retirement, and not for expensive weddings, luxury holidays, and children's tertiary education. As parents, we love our children, but loving them also means letting them learn self-reliance. We have heard too many stories of irresponsible adult children getting their parents involved in their debts. Some children become so used to parental support that they expect their parents to step in whenever they need an injection of funds. The financial aid has to stop once the children start earning.

It is also not okay for retirees to develop extravagant tastes just because our retirement savings make us feel rich and deserving of a 'better' lifestyle. The key words for retirees are 'Downsize' and 'Economize'. Move to a smaller house if you can't afford to maintain your current one. Switch to a smaller car that isn't a petrol-guzzler. Reduce club membership to just one. Limit your credit cards to one or two. Travel on a budget and trim shopping expenses. We can still live a comfortable life, and have fun and adventure without depleting our retirement savings.

If there is one single item that will swallow up all our hard-earned savings at one go, it has got to be medical expenses. Surgery, post-surgery rehabilitation, prescription drugs, medical treatment and procedures can cause severe haemorrhaging to our retirement piggy bank. We should opt for public hospitals and clinics. They are just as good if not better. Remember, many of us have elderly parents to support as well.

The smartest tip for retirees, in my humble opinion, is to invest in an active and healthy lifestyle. Look after your health. Adopt an exercise regime that is cheap and effective. Brisk walking is free. You don't have to spend a cent on taichi or qigong exercises done at home or in the park. Take up hobbies. Join clubs or groups that promote fun activities. 

Sign up for lifelong learning courses that don't cost a bomb. Look for senior discounts when you sign up for classes or tours. Extend your social network of friends of all ages. Make sure these friends have a positive influence on you. I can't think of anything more depressing than spending our precious time hanging out with friends who talk about nothing but their pains and aches, about growing old or about dying soon!

Let our motto be "Live a simple life without envy or regrets".

To find out more about smart money management tips for retirees, you can click on this link below:

Tips for a financially secure retirement

SMART TIPS FOR A FINANCIALLY SECURE RETIREMENT

Two hours packed with tips and advice on how to stretch our ringgit, reduce our debts and ensure a financially comfortable retirement. That was what Ms Koid Swee Lian, CEO of AKPK (Agensi Kaunseling dan Pengurusan Kredit - fully funded by Bank Negara), shared with our group of seniors this morning (Sat 16 June).

Ms Koid and her team had gone the extra mile  to conduct this special presentation to address the specific financial concerns of those aged 50 and above. Our seniors also shared their personal stories so that others could avoid the costly mistakes they had made. It was a two-way channel of learning and sharing. We gave AKPK an insight into some of the very real financial problems that seniors face.

A captive audience listening to sound advice on money management from Ms Koid.

What should we do if we feel we have been cheated? How do we make a complaint? What does it take to be declared a bankrupt? Is it prudent to pay only the minimum amount of your credit card expenses? Government vs private hospitals - which one should we opt for?

All these questions and more were raised at the session. Having served in senior positions in banking, insurance and law with Bank Negara since 1981, Ms Koid was the right person to offer expert advice to our seniors.

For more details, I highly recommend you get hold of this little gem of a book "Money $ense". Only RM5. Our group received complimentary copies.

Plenty of useful tips in these booklets. 

If you need advice on managing your debts, do drop by at AKPK. They provide free one-to-one personal counselling to help you work out your debt repayment. AKPK is located on Level 8, Maju Junction Mall, Jalan Sultan Ismail, KL. They are open Monday to Friday from 8.30am to 5.30pm. Call toll free 1-800-88-AKPK.

You can also check out AKPK website at http://www.akpk.org.my/. It is content-rich with free downloads of documents e.g. the Self-Help Guide for Debt Relief Plan. It has everything you need to reduce your debts, including a debt relief flow-chart and steps on how to negotiate directly with lenders on debt repayment proposals.

For the benefit of those who did not attend Ms Koid's talk:

How would you know if you need financial counseling? Here are some telltale signs.

One for AKPK album, and for SeniorsAloud blog.

A BIG thank you to the following people who enlightened us on financial prudence and took such good care of us, including feeding us! You made our visit to AKPK such a memorable one.

Koid Swee Lian (CEO), 
Khalil Jamaldin (Manager, Corporate Communication), 
Azman Hasim (GM, Operations), 
Nor Fazleen Zakaria, (GM, Corporate Services)
Noor Hamiza Muswan (Financial Education Dept)


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