Tuesday, May 5, 2009

Planning To Retire!

"If you can't make decisions in life, you're a bloody menace. You'd be better becoming an MP!" Bill Shankly

Young parents Viveka and Ananda have been putting aside a fixed sum every month into their savings accounts as part of their retirement nest egg after deducting their household expenses. The ‘journey’ taken is lauded but perhaps they need to re-examine the mode of ‘vehicle’. The common belief is that keeping our money in the bank is the best way to preserve our capital. However this instrument may not be good enough given that interest rates of bank deposits can hardly outrun inflation.

The rising cost of living and medical expenses could be a major financial burden.
According to Great Eastern Life Assurance, only 34% of Malaysians are putting aside money regularly for their retirement funds. Longer life expectancy, delayed marriage and having children later would leave the retirees in a vulnerable position as they also need to set aside medical funds for themselves and education funds for their children.

Although Employees Provident Fund savings is one of the main channels to provide for retirement, 99.9% of the contributors would withdraw these savings in one lump sum once they reach 55 years of age and 70% would use up all these savings in just three years post-retirement.

Another alarming note is that those who do save do not have a concrete plan on how to build their retirement fund. They just save as much as they can and hope they will have enough to cover their retirement needs. They do not segregate their savings for retirement and lump everything as general savings. To make matters worse, they would use the money should other needs arise.

In addition, 73% do not seek advice from financial professionals – a behaviour that compounds Malaysians’ poor retirement planning ability further.

Instead of relying solely on EPF and personal savings, Malaysians should consider early financial planning, which would save them the stress of dealing with insufficient retirement funds or seeking prolonged employment to ensure financial stability.

There are a variety of choices available when it comes to building your retirement fund.

Depending on your risk appetite, investment horizons and affordability, you can invest in properties, equities, unit trusts and investment-linked insurance to name a few. The key is to have a sound investment strategy that is the ability to balance risks and returns effectively according to the desired investment tenure.

Nevertheless, it is always advisable to contact a professional financial advisor or a wealth planner who can provide advice on how to best go about securing your retirement based on your financial circumstances, priorities and needs.

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