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It worries me reading about Malaysian workers who are retiring compulsorily this year, according to Employee Provident Fund (EPF)- Kumpulan Wang Simpanan Pekerja (KWSP) , 152,000 of them have less than RM50,000 in their retirement fund. This is apparently a lot less than the minimum level of saving of RM120,000 targeted by the government. Those with such saving constitute 73% of non-active contributors. Only 17% in this group has savings more than RM100,000 when they reach retirement age.

According to EPF Chief Executive Officer, Tan Sri Azlan Zainol,many retirees tend to deplete their retirement saving through fast spending making them live under the poverty level in a short period. From their studies in 2003, 14%,50% and 70% of the retired contributors have depleted their saving within three,five and 10 years respectively after their retirement.

As the life span of Malaysian has gone up to about 75, it is imperative that workers, retiring at 55 to 58, have about 20 years worth of retirement fund to live in the style that they are used to, having calculated the annual inflationary rates.

Perhaps it was not very critical 30-40 years ago as things were a lot simpler with respect to culture of an extended family, food prices, possessions, transportation and education. Under this current socio-economic environment and the trend more towards nuclear families and materialism, cost of living could be really burdensome for the unprepared retiree.

The problem lies in the most part on the retiree himself/herself. Many of them do not save enough on top of the compulsory saving with the EPF. Even if you saved 30% of your monthly income in say a Unit trust giving a consistent annual dividend of more than 5%, you would still not have enough to sustain the life style you are accustomed to, after retirement.

For a start I believe the civil servant’s pension will be less than 50% of their last take-home pay,having deducted all the allowances. Definitely their life after retirement cannot be like that while they are in service. I have come across civil servants still paying off the loan for their cars after they retire let alone paying off their house loan which is automatically deducted by the pension department.

Culture of Saving

There is a poor culture of saving especially among the low income groups of various ethnicities. Other factors contributing to low savings are living beyond one’s means and debt accumulation through high interest rates.The virtue of delayed gratification seems to be disappearing.

For the middle income, there would still be a life-style gap if you just save at very low interest rate. You obviously have to start your retirement planning from the moment you start work and place a portion of your monthly income in various PNB unit trusts for higher income dividend and let the compounding principle work for you.

For the savvy, the only way to earn more money is to go into the stock market and know how to conduct yourself. One important advice is not to borrow to buy those stocks!

Business is another way of making money to top up your salary. All these need to be learnt and no one will teach you unless you make efforts to teach yourself and stop having the subsidy mentality.

The buzz word is early “financial planning” and ignore it at your own peril. If you retire poor, it’s all your fault.


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