Keeping aside some money for your retirement

PETALING JAYA: Your ringgit has shrunk. To make matters worse, the onset of the GST has given the RM1,500 in your pockets effectively much less purchasing power.

So, what do you do? Start saving from the get-go.

It’s not about the amount. It’s about the attitude, say financial experts.

Personal financial management coach Yap Ming Hui said saving should be made a habit for financial freedom after retirement, adding that even a monthly saving of RM10 could make a difference.

“Be a saver, not a spender. With the right attitude, saving will come naturally when your income increases, as you get older. It’s psychological,” he added.

Yap said those who did not save would struggle even if they had an annual income of RM500,000.

“A corporate guy told me he did not have savings despite earning so much. Why? Because he is a spender.

“Spenders increase their ex­­penditure when their income goes up,” he said, recommending that workers save at least 19% of their monthly salary in addition to what was remitted into the Employees Provident Fund (EPF).

Yap was commenting on the findings of two recent studies – the Randstad Workmonitor Q1 2015 and HSBC’s Future of Retirement, A Balancing Act global surveys.

Randstad found that 76% of Malaysian employees believed that they would have to work past the age of 60.

HSBC’s Asia survey found that Malaysians’ ability to save for retirement was impacted by debt.

Universiti Malaya’s Social Secu­rity Research Centre director Prof Datuk Dr Norma Mansor said Malaysians should be more financially literate and capable.

“The fear of not having enough for retirement is a good thing because it encourages sound financial planning,” she said.

However, Prof Norma, the former secretary-general of the National Economic Advisory Council, said decent wages were also crucial to encourage saving.

“Some graduates only earn RM1,000. How much can they save?”

The Government, she said, should look into policies for vulnerable groups like the self-employed and unemployed, adding that healthcare was the biggest concern as medical cost formed the bulk of retirement spending.

“People will feel more secure if they don’t have to worry about this,” she said.

Malaysian Employers Fede­ration executive director Datuk Shamsuddin Bardan said a growing number of employees were taking on part-time jobs due to high household debt and commitments while senior citizens were getting back into the workforce because they had bills to pay.

He said retirement funds were usually inadequate, as life expectancy had increased to 72.5 for men and 77.2 for women.

Some still had mortgages and credit card debts to settle even after retirement, he said, noting that about 376,800 employees were aged between 60 and 64 and the ratio of household debt-to-GDP had risen to 86.8%.

“Most EPF members have less than RM50,000 at age 55 due to the many withdrawal schemes allowed,” Shamsuddin said.

“In the private sector, EPF is the most common form of retirement savings and as such, withdrawals before the age of 60 should not be allowed.

“Assuming each individual needs RM800 monthly, which is almost poverty line income upon retirement, RM50,000 can only last for five years,” he said, urging the Government to provide tax incentives for workers over 60.

“If they can contribute to the economy beyond retirement, they should be allowed to enjoy the full yields of their labour.

“Bosses, too, should be given a double tax deduction to encourage the hiring of seniors.”

National Council of Senior Citizens Organisations Malaysia president Datuk Dr Soon Ting Kueh said most people had to continue working past 60 “unless they are very fortunate”.

He said without adequate savings, those without EPF or pension would suffer.

Those with a monthly pension of above RM1,000 “might survive”, but the majority who get less had to return to work.