Retiring POOR or COMFORTABLY - it's your CHOICE!
KUALA LUMPUR - So many of today's young adults live beyond their means.
They are decked in brand names from head to toe, and live in the absurd fear of jeapordising their reputation should they fail to do so.
They feel compelled to own the latest gadgets and drive fancy cars, even if it costs them a lifetime of loan instalments.
This is worrisome in that not only do their "live for the moment" motto blinds them from seeing the importance of retirement planning, it also sends them on a downward spiral where their finances are concerned. Many of them have been declared bankrupt from a very young age due to overspending.
SAVING FOR RETIREMENT NOT A PRIORITY
According to the Department of Insolvency, 23,397 of those declared bankrupt from 2007 to September 2013 were between 24-34 years old. Of the figure, 1,322 were 24 years old.
A study by Prof Dr Jariah Masud, a senior research fellow at the Gerontology Institute of Universiti Putra Malaysia, found today's younger generation focused on day-to-day spending without sparing a thought for future finances.
Retirement planning is put on the back burner as priorities are given towards career advancement, marital commitments, property ownership and similar undertakings.
"Today's generation is a 'consumer society' that is obsessed with lavish lifestyles. The way they value money is also different from the previous generations.
"Those from my generation see the value of money in savings, while today's youths see it in terms of purchasing power," she told Bernama.
The "AXA Retirement Scope 2010", a global retirement study by the AXA Group, found that of the 38 percent of Malaysian workers who planned for their retirement, many of them only started saving as they were nearing 40.
The study, which was conducted in 26 countries across Europe, U.S. and Asia, also found that 46 percent were only ready to save for their retirement as they approached 50 years old.
Failure to build financial reserves from an early age can make the realities of retirement age harder to handle.
The situ
ation is worse for those without a pension. Many are shocked to find how quickly they deplete their Employees Provident Fund (EPF) savings and subsequently find themselves forced to rejoin the workforce.
RELYING ON EPF
It is rather surprising how many workers falsely believe that their EPF savings is enough for retirement.
Some believe it is even enough to cover the expenses of their entire family and thus there is no need to build their financial reserves elsewhere.
The Head of EPF's Retirement Research Section Farizan Kamaluddin said studies found that of the 13 million EPF contributors in Malaysia, only 7.36 percent have an excess of RM150,000 in savings at 55, while 70.89 percent have less than RM50,000.
"Some of them cannot help it (having little savings) because it depends on their contribution. If their salary is low, their contribution is low too," she said.
The age for withdrawal of EPF savings has remained at 55 since its establishment in 1951. This is despite the government extending the retirement age to 60 and the country's life expectancy increasing to 75.
SIMPLY NOT ENOUGH
With the rising cost of living, a longer life expectancy, low salaries and early retirement at 55, many would not be able to make their EPF savings last, said Farizan.
It was found that 50 percent of retirees deplete their EPF savings in the first five years, thereafter having to work again.
"What causes their savings to be drained so quickly is their failure to plan their finances accordingly, and using the money as a means to fulfill their desires and not as a replacement for their income," she explained.
Therefore, there is a need to vary their sources for financial reserves. They also need to be prudent with their withdrawal of EPF savings before retirement, even if it for settling their housing or education loans.
"If they have other forms of savings, they should see their EPF savings as the last resort for making withdrawals," she said.
Farizan said EPF has also set a new quantum for their basic savings at RM196,800 as the minimum amount a contributor needed to have in his EPF account by age 55, effective January this year.
To prevent the fast depletion of EPF savings, EPF has also introduced a more flexible form of withdrawal upon reaching 55 years old where contributors can choose to withdraw completely, monthly, or partially.
MINIMUM WAGE
Although many government servants may feel more at ease under the pension scheme, they could also get into financial trouble if they chose to live a lavish lifestyle and don't prepare for their retirement.
The Director of the Gerontology Institute of UPM, Prof Dr Tengku Aizan Hamid said civil servants needed to be wary of the drop in income upon retirement.
"We cannot carry our present lifestyles into old age. Would you be able to alter your lifestyle when the pension you receive is considerably less than your present income?
"There have been cases where a pensioner failed to settle his credit card debts that ultimately had to be borne by the children, simply because he wanted to maintain his extravagant lifestyle," he said.
The government, in helping increase employee contribution, has implemented the minimum wage effective January this year following the increase in retirement age to 60.
The government has also set up the 1Malaysia Pension Scheme for the self-employed with no fixed income to voluntary contribute in the EPF. It has also encouraged youths to make long-term investments via the Private Retirement Scheme.
It is easier to make money while we are young and our health is at its peak. To rely on our health at an old age can be quite a gamble, so planning wisely and early for our retirement years can help ensure we are comfortable in our old age.
-BERNAMA
KUALA LUMPUR - So many of today's young adults live beyond their means.
They are decked in brand names from head to toe, and live in the absurd fear of jeapordising their reputation should they fail to do so.
They feel compelled to own the latest gadgets and drive fancy cars, even if it costs them a lifetime of loan instalments.
This is worrisome in that not only do their "live for the moment" motto blinds them from seeing the importance of retirement planning, it also sends them on a downward spiral where their finances are concerned. Many of them have been declared bankrupt from a very young age due to overspending.
SAVING FOR RETIREMENT NOT A PRIORITY
According to the Department of Insolvency, 23,397 of those declared bankrupt from 2007 to September 2013 were between 24-34 years old. Of the figure, 1,322 were 24 years old.
A study by Prof Dr Jariah Masud, a senior research fellow at the Gerontology Institute of Universiti Putra Malaysia, found today's younger generation focused on day-to-day spending without sparing a thought for future finances.
Retirement planning is put on the back burner as priorities are given towards career advancement, marital commitments, property ownership and similar undertakings.
"Today's generation is a 'consumer society' that is obsessed with lavish lifestyles. The way they value money is also different from the previous generations.
"Those from my generation see the value of money in savings, while today's youths see it in terms of purchasing power," she told Bernama.
The "AXA Retirement Scope 2010", a global retirement study by the AXA Group, found that of the 38 percent of Malaysian workers who planned for their retirement, many of them only started saving as they were nearing 40.
The study, which was conducted in 26 countries across Europe, U.S. and Asia, also found that 46 percent were only ready to save for their retirement as they approached 50 years old.
Failure to build financial reserves from an early age can make the realities of retirement age harder to handle.
The situ
ation is worse for those without a pension. Many are shocked to find how quickly they deplete their Employees Provident Fund (EPF) savings and subsequently find themselves forced to rejoin the workforce.
RELYING ON EPF
It is rather surprising how many workers falsely believe that their EPF savings is enough for retirement.
Some believe it is even enough to cover the expenses of their entire family and thus there is no need to build their financial reserves elsewhere.
The Head of EPF's Retirement Research Section Farizan Kamaluddin said studies found that of the 13 million EPF contributors in Malaysia, only 7.36 percent have an excess of RM150,000 in savings at 55, while 70.89 percent have less than RM50,000.
"Some of them cannot help it (having little savings) because it depends on their contribution. If their salary is low, their contribution is low too," she said.
The age for withdrawal of EPF savings has remained at 55 since its establishment in 1951. This is despite the government extending the retirement age to 60 and the country's life expectancy increasing to 75.
SIMPLY NOT ENOUGH
With the rising cost of living, a longer life expectancy, low salaries and early retirement at 55, many would not be able to make their EPF savings last, said Farizan.
It was found that 50 percent of retirees deplete their EPF savings in the first five years, thereafter having to work again.
"What causes their savings to be drained so quickly is their failure to plan their finances accordingly, and using the money as a means to fulfill their desires and not as a replacement for their income," she explained.
Therefore, there is a need to vary their sources for financial reserves. They also need to be prudent with their withdrawal of EPF savings before retirement, even if it for settling their housing or education loans.
"If they have other forms of savings, they should see their EPF savings as the last resort for making withdrawals," she said.
Farizan said EPF has also set a new quantum for their basic savings at RM196,800 as the minimum amount a contributor needed to have in his EPF account by age 55, effective January this year.
To prevent the fast depletion of EPF savings, EPF has also introduced a more flexible form of withdrawal upon reaching 55 years old where contributors can choose to withdraw completely, monthly, or partially.
MINIMUM WAGE
Although many government servants may feel more at ease under the pension scheme, they could also get into financial trouble if they chose to live a lavish lifestyle and don't prepare for their retirement.
The Director of the Gerontology Institute of UPM, Prof Dr Tengku Aizan Hamid said civil servants needed to be wary of the drop in income upon retirement.
"We cannot carry our present lifestyles into old age. Would you be able to alter your lifestyle when the pension you receive is considerably less than your present income?
"There have been cases where a pensioner failed to settle his credit card debts that ultimately had to be borne by the children, simply because he wanted to maintain his extravagant lifestyle," he said.
The government, in helping increase employee contribution, has implemented the minimum wage effective January this year following the increase in retirement age to 60.
The government has also set up the 1Malaysia Pension Scheme for the self-employed with no fixed income to voluntary contribute in the EPF. It has also encouraged youths to make long-term investments via the Private Retirement Scheme.
It is easier to make money while we are young and our health is at its peak. To rely on our health at an old age can be quite a gamble, so planning wisely and early for our retirement years can help ensure we are comfortable in our old age.
-BERNAMA
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