Why Most Malaysians Won’t Retire with Enough Money

By Terence Teoh on 24th August 2018 in News
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In a recent news by New Straits Times,

‘According to a recent study by Khazanah Research Institute, “people are borrowing too much and not saving enough”. The risk of “pensioner poverty” is frighteningly real.’

This sad reality is further confirmed by a report in The Star.

The article states:

“EPF raised the minimum savings target by age 55 from RM197,000 to RM228,000. But only 18% of members have this much, far short of its target of getting at least half its members to meet the minimum level by 2021.”

In other words…an incredible 82% of Malaysians are NOT expected to have enough savings for retirement.

So how exactly did it become this bad?

Money, time and energy – are the 3 most important things life but only 9 out 10 people can afford to have all 3. Most of the time, people could only afford 2 out of the 3.

They say when you’re retired; after years spent working and earning money – all you have left at the end of the day are time and money – but no energy.

That’s because, by the time you’re retired, you’re not as young as you used to be. Your body is weaker and your energy is fading.

But what if you have no time, no energy and no money altogether?

Without proper financial planning – this nightmare is possible. Again, this is the case for the majority of Malaysian retirees.

Terence Teoh, CEO of Beyond Insights further supports this point of view, “In our past 10 years – we have probably met more than 50,000 people from various countries in our seminars. In the seminars when we do a survey on how many people actually have a financial plan, the number is usually a dauntingly low 5 to 10 percent of the room.”

Let’s explore why this is happening to us…

1) The ‘My EPF is enough’ mentality

No. It’s not enough. Many are too reliable on their Employees Provident Fund (EPF) savings thinking that it should be enough for when they are retired.

The aforementioned study by EPF in 2017 showed that 90% of respondent’s household savings in big cities like Kuala Lumpur and rural areas are not enough for them to retire comfortably.

How they spend or what they spend on with their EPF savings is also a contributing factor.

Here’s a question – what do you plan to do with your EPF savings?

In most cases, many retirees choose to spend them on things they have always wanted to have.

This makes a lot of sense because they have spent the majority of their lifetime working and now that they are free, they want to make up for it by enjoying things that they’ve never had before.

Travel, material items, houses, cars – you name it.

It’s not wrong to want these things and to spend your money on them – but when you have no backup savings, then this could become a nightmare real quick.

The next thing you know, you have no savings left, no extra money and no source of income.

Then you’ll start borrowing money, piling up debts and adding more frustrations in your life.

Not an ideal way to live the rest of your remaining years…particularly if you want to leave something for your children.

2) No Savings/Financial Plan

This is pretty obvious.

The mentality of ‘I will save later’ is exactly the kind of mentality that you will regret ever having.

Many are thinking that just because they’re young, they still have a lot of time ahead of them and will only start saving when they think they are ready.

If you’re 23 years old and you have not started saving yet, then you might be too late.

Unless, if you’re willing to save at least 50% of your income every month… but that also depends on how much you are earning.

There are a lot of factors to consider – the ‘what-ifs.’

Let’s say you don’t have a savings plan. What if an emergency happens? What if you lose your job? What if you get robbed? What if you get into an accident?

We can’t predict what will happen but it’s a good idea to prepare yourself for it. If you have money set aside, at least the burden would be lighter because you have saved enough.

They say it’s necessary to have at least 6 months living expenses set aside.

But saving just enough is not going to cut it and you probably know this too. You need to save as much as you can…a percentage of your income is ideal.

So by the time you’re retired, you’ll have some extra money saved up to have peace of mind.

If anything were to happen, at least you know, you have it covered.

It’s probably also prudent to have the necessary insurances in place…such as health and life insurance.

You’ll just never know when life decides to throw you a curveball…be prepared for it.

3) Not investing

Earning money from your job is good, but earning more money from your saved money is so much better.

That’s how investing works.

If you only have one source of income, and that is your job. You’re comfortable with the fact that you’re getting money every month and saving a percentage of it in your savings account.

As mentioned above, it’s a great idea to have savings. But now ask yourself, will your savings be enough? When you lose your job or once you’re retired, those savings will only keep getting less and less because you no longer have a source of income.

Money goes out, none comes in.

Yes, it’s scary when you think about it.

This is exactly why you should start investing your money. Let your money grow more money for you.

If you’ve only thought about investing now, then you should start doing it. It is better to start investing earlier when you’re younger as opposed to later in life. But even so, you can never be too old to start investing.

According to a news article by The Star Online,

“Retirement does not mean refraining totally from investing. Some people believe that they should not take any financial risks once they retire and as such, they liquidate all their investments in shares, unit trusts and properties and convert them into cash.
What they probably do not realise is that by doing so, they are exposing themselves to even bigger risk – the risk of inflation.”
Indeed, inflation is the greatest robber of wealth…

…and we need to combat it…

…with investing.

A time-tested vehicle to invest in is the stock market.

Like most investments, investing in the stock market can be risky but with the right strategy and risk management in place…it can give you a very positive result consistently.

That’s why professional investors like Warren Buffett and George Soros feel that money in the stock market is safer than money in the bank.

The important thing is having the right strategies and mindset.

Stock investing is not something you can easily learn from a book or the internet.

Yes, you can read up on the topic and gain some understanding from it.

But to actually start investing, the fastest way is to learn from a mentor with a proven track record.

It’s much more effective and you’d be able to get more in-depth knowledge about stock investing when you’re learning from someone who has actually tested their strategies and succeed from it.

We’ll like to extend you an invite to our free public education seminar…simply click on the button below.

At the end of the day, it is up to you on how you wish to live your life in the future.

Would you rather have a comfortable life without having to think about financial issues or live the rest of your life with a ‘I’ll deal with it later’ attitude…

…and potentially invite stressful financial issues into your life?

Make a smart decision and start planning on your financial journey…

…join us at our next education seminar…you’ll be glad you did.

 

 

Source: https://www.nst.com.my/opinion/columnists/2018/01/323937/self-funding-your-retirement