“Retirement?” I hear you say. “Aiyah! Plenty of time to worry about that-lah! I’m still young…!”
Yes, one does not want to think about retirement planning now. Why should we bother, when there are so many more years, decades even, until we reach retirement age. Surely it’s something only “old” people need to worry about? Meanwhile, we have so many other things to worry about, so we would really rather just leave that for later.
But it’s worth re-thinking that approach. Contrary to popular opinion, retirement planning is not something that you can afford to leave to later.
It is not like the old days
“Why not?” one may ask. After all, our parents did not make that many arrangements for their retirement when they were our age, and things more or less worked out for them. Right?
Well, yes, that may well be the case – for our parents’ generation. Most of them did not really plan for retirement or at least not consciously. In those days people were not so financially savvy. There also weren’t as many “financial planners” and “wealth consultants” around, I would guess! Most of our parents just accumulated whatever wealth they could before they retired, and survived on whatever they had.
But things are different now. We can’t assume that our lives will follow the pattern of our parents.
There are a couple of key differences when comparing the realities faced by our generation, against those faced by our parents’ generation. We need to understand these differences and analyse their impact on our lives.
Family size is getting smaller
Firstly, in our parents’ time, it was normal for women to get married as young as possible and to start families as soon as possible. This resulted in families of three to five or even more children, being commonplace. It was quite normal to have large families, in those days. The net effect of this, is that invariably, at least one child would end up being able to care for the parents in their old age, if not all the siblings in turn.
Are you a government servant?
Also, many of our parents may have been civil servants, teachers, clerks working in the government sector, etc. Such persons would receive a monthly pension from the government, without fail and non-deductable, for as long as they live. Should the former government servant pass on, the spouse is entitled to receive the benefit. The retired government servants are also entitled to free medical care at any government hospital in the country.
The third factor is today’s easy access to relatively cheap domestic labour. We, the adult working children of today, have maids. When in the past these used to be local maids, the workforce now comprises largely foreign maids. No doubt, there are often very serious difficulties associated with sourcing for and managing foreign maids. It is usually a huge hassle for the family concerned, and sometimes the maid promised by the agent never arrives.
Notwithstanding the individual difficulties faced by some families though, the fact remains that many Malaysians are relying on foreign maids to care for their old folks at home, while they carry on with their full-time jobs at the same time. This has translated to a reduced reliance on old folks’ homes or retirement villages. In fact, old folks’ homes are a last resort. Retirement villages do not even yet exist.
To an extent, the above does explain why things “seem” to have worked out thus far.
How does the above contrast with what our generation faces?
Firstly, a large number of women are choosing not to get married or if they do, are opting not to have children. So in 30 years’ time, there will be many aging individuals and couples who will not be able to rely on their children to take care of them.
Secondly, many 30-to-40 something year olds are employed in private sector jobs. Such jobs do not provide any benefits after retirement. There is no pension and no free medical care.
Maids/domestic workers may soon become a thing of the past as education becomes more accessible and the world becomes increasingly globalized. Foreign labour migration patterns may change. Malaysia may no longer be able to avail itself of a ready supply of foreign maids. As we approach developed nation status, fewer and fewer Malaysian citizens will put up with blue-collar jobs. We may not be able to get maids to take care of us in our old age.
Clearly, things are and will be, different for us. It’s best for us to think about this, and to ask the tough questions now rather than later.
For example – who will care for you in old age? Where will you live? How will you pay for your expenses such as food and clothing? How will you pay for medical care? What happens if you fall ill and require professional nursing or other supportive care?
Unpleasant questions to ponder on but, we must be practical. Let’s start with some basic steps.
Start Saving NOW
First, start saving a small sum every month towards your retirement. This can be in the form of cash, or investment in a private retirement scheme, unit trust or insurance. See a financial planner to work out what best suits your needs and risk appetite as well as investment objective.
Get your own property
Second, think carefully about purchasing a property (if you do not already own one). While the price of property is soaring and we may feel we cannot afford to purchase, we can have no guarantee that we would be able to afford to purchase a property further down the road. The time to purchase a property is now when you are still working and can qualify for and service, a bank loan – and not when you are older and nearing or past retirement age. You may not have the means by then, to ensure that you can get a roof over your head.
EPF alone is not sufficient
Yes, most of us will receive a lump sum when we retire, in the form of our EPF withdrawal. But how long will that amount last you? Most of the time, relying on that amount alone will be insufficient. A simple mathematical calculation, factoring in the increased cost of living, projected medical needs, and the cost of care as you grow older and more reliant on others for assistance, will alert you to the fact that we should not rely on our EPF.
As the saying goes, do not put all your eggs in 1 basket. The best advice we could ever take is to start planning now. It is never too early, even if you are still in your twenties. It is also never too late to start, even if you are already nearing retirement age.
It may be a long journey, but at least we can improve the outlook by taking the 1st step now.