No time to splurge, savings come first

PETALING JAYA: Despite the temptation to live life to the fullest after retirement, pensioners should rethink lavish expenditures that could drain their savings faster.

Expenses such as luxury items, expensive consumables, fancy cars and holidays should be avoided, says Sunway University professor of economics Dr Yeah Kim Leng.

“These can drain savings faster, making it harder to maintain the lifestyle planned for retirement years,” he said.

He added that although EPF members were allowed to withdraw their funds once they turned 55, they should consider keeping all or retaining a portion in their savings account to grow it at a rate above inflation until full retirement at 60.

“Taking into account longer life expectancy, EPF members may consider converting some or all of their savings into an annuity, allowing them to receive a monthly income in line with their spending needs.

“Those without adequate savings should plan on working for several more years,” he said, adding that this would avert overdependence on children or falling into old-age poverty.

He said the golden rule for money-growing options was: The higher the returns, the higher the risk.

“Retirees may consider fixed income funds that are relatively safer,” he said.

This advice, however, is not just for retirees.

The younger generation, too, should spend within their means and develop strong savings habits.

“The savings pool must be complemented with medical and life insurance to be used for emergencies, retirement or capital for business or investment opportunities.

“With this economic security in place, an individual can pursue high-income growth through continuous upskilling and knowledge accumulation to achieve financial independence and early retirement,” Yeah said.

Malaysia University of Science and Technology Research and Innovation provost Prof Geoffrey Williams said the times when retirees spent large amounts on holidays might be gone.

“For most people, the funds are needed for day-to-day expenses,” he explained.

Williams also said those in their 20s and 30s should avoid relying on a single income source.

“Be it the gig economy or freelance work, do not rely on one employer.

“If the employer is stringent when it comes to salaries, increments and bonuses, you should think about getting a better job,” he said.

Prof Williams said young people could also consider making additional voluntary contributions to their pension funds.

“Younger EPF members can just about reach a basic pension fund through regular savings.

“Importantly, you must not withdraw these funds. It could impair your future pension,” he added.