Although Malaysian investors rank saving for retirement a top financial priority, the research showed a lack of financial planning. This may jeopardise long-term financial security, particularly when compounded by high debt levels.
The research showed that 68% of Malaysians currently have debt, the highest proportion of all eight markets surveyed in Asia – more than double the regional average of 33%. Average debt is RM56,000, nearly 10 times average Monthly Personal Income.
This debt is mostly due to daily living expenses (60%), with rental payments (44%) and children’s education (37%) the other main causes.
Point to note is that a majority of the debt is long-term, with a quarter of those in debt not expecting to be able to pay it off for three years or more.
The survey reflects poor financial management, with investors failing to manage their cash flows effectively.
A majority of Malaysian investors (89%) track their expenses regularly, but 44% of investors spend 70% or more of their monthly income every month, suggesting they are not acting on their tracking by curbing expenses.
However, the survey indicated that at least investors are aware of their high debt levels, ranking paying off debt and credit cards as the second most important financial priority overall, with 16% of investors ranking this as their top priority.
Manulife Holdings Bhd group CEO Mark O' Dell said: “The survey has revealed worryingly high levels of debt. Against the backdrop of more volatile financial markets and slowing economic growth, investors need to better manage their finances and track expenses to prevent them from incurring too much debt.
“Without effective debt management, Malaysians are less likely to achieve their long term savings goals, which could jeopardize their future financial security.”
The survey also showed that saving for retirement is now the number one financial priority for investors, with 21% of investors ranking this as their top priority. In spite of this, investors fail to efficiently save for their retirement.
Many investors do not have a target savings goal (41%), including those aged 35-49 (43%) who should be most active in retirement planning. Of those who do have a target savings goal, the average amount is RM378,000, more than 62 times average Monthly Personal Income.
While almost half of savers (48%) have set medium term time frames (5-10 years) to achieve their goal, these high savings targets may be unrealistic to achieve, which could explain why the majority (67%) have only been able to save less than 40% of their target.
Related to this lack of effective savings management, 74% of investors surveyed wished they had done better investment planning. More than a third (38%) wished they had done more research; while 28% wished they had been more active in reviewing their portfolio and 27% regretted holding too much cash.
This may be explained by the fact that most investors rely on themselves for financial advice (79%) while investment experts ranked fifth (24%), after friends and family.
Jason Chong, Chief Investment Officer of Manulife Asset Management Services Bhd, added: “It’s encouraging that investors are prioritising their retirement planning, but many seem to lack a clear financial plan. Investors should set realistic monthly savings targets and seek professional advice to ensure they are wisely investing to meet their long-term financial goals.
“Investors also need to think about supplementary options for retirement planning such as Private Retirement Schemes (PRS) and regular savings plans that provide steady long-term returns, to help ensure they meet their financial goals upon retirement. Investors should start saving when they are young to enjoy the benefits of compounded returns”.