M'sians not financially resilient enough for retirement

  • Nation
  • Monday, 10 Aug 2020

KUALA LUMPUR: The World Bank recently estimated that up to 49 million people could be pushed into poverty due to the Covid-19 pandemic. But for many Malaysians, that was already a very real risk even before the world turned upside down.

A 2018 survey by the Credit Counselling and Debt Management Agency (AKPK) had found that 53% of Malaysians are ill-prepared for financial setbacks, and are just one personal disaster away from being plunged into a cycle of poverty.

That’s exactly what happened to Mah Kwan Ying six years ago.

She was 56 at the time, and her husband had a carpentry business. Finances were tight, but her family still got by.

That was until her husband fell gravely ill and was unable to keep his business going and Mah’s mother - whom she was taking care of at the time - also fell ill, adding a further strain on their finances.

WATCH: The story of Aunty Mah, a Malaysian living in old-age poverty

When her husband eventually died within the year, she was left almost destitute.

“I didn’t know what to do. I was the only one left. I had no money. I ate rice with soy sauce and oil every day, ” she said, teary-eyed.

Luckily for her, her husband had used his Employees’ Provident Fund (EPF) to pay off the house before he passed away - so she still had a roof over her head. But she had no savings left for rainy days.

Muhammad Anif Jamil, 19, had a similar experience with his family. After his father started suffering from a nerve condition around 10 years ago, they could no longer afford Anif’s school expenses, so he dropped out.

Today, Anif works as a mini mart store keeper six days a week, and barely has any money left to save after contributing to his family’s household expenses, which he splits with his sister.

WATCH: How one medical bill plunged a family into poverty

“From Anif’s story, we see a common trend among B40 households: with insufficient basic savings and left out of government-sponsored social security, they tend to count on their able-bodied children as breadwinners instead, ” said EPF Chief Strategy Officer Nurhisham Hussein.

“Not able to afford tertiary education, they in turn find themselves stuck in a vicious cycle of insufficient pay spread thin across many mouths to feed, leaving little if not none to save and accumulate. Some, like Aunty Mah’s son, have gone overseas in search of better opportunities, breaking the traditional family structure as we know it. Any emergency would be enough to push them off the edge into poverty.”

The AKPK survey found that about half of Malaysian working adults are not financially resilient, which AKPK defines as being able to afford RM1,000 for emergency expenses, RM2,500 for medical expenses, and being able to cover 3 months’ expenses if retrenched.

Mah’s lack of savings is also common among many Malaysians at a similar age. EPF’s 2018 report showed that 68% of working Malaysians aged 54 do not achieve basic savings, or RM50,000, by retirement. For many, RM50,000 will only sustain them for less than five years.

Old-age best practices still hold water, according to Nurhisham Hussein. “Spending only on necessary items and budgeting expenditures against active income still stands”.

He noted that “when one is trapped in low income, it is hard to save, although many do so in small amounts, and when savings returns are risky, low financially literate people may opt out of the market, depriving themselves the benefits of compounding returns.”

For many like Anif’s family, that lack of savings has created a vicious cycle. Having quit school to work, Anif’s prospects for career progression are hampered by his lack of an SPM certificate.

Nevertheless, he is working hard to break that cycle, and still dreams of the day when he can be in control of his financial future, and send his parents for the Hajj.

“It has been hard getting by, but I hope to be able to start saving up someday, ” said Anif. “I want to take care of my parents and younger siblings. If I can’t make it, I’ll at least do my best to make sure they can.”

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