Niki, a consultant with more than 20 years experience, said retirees had to accumulate a lot of savings to ensure a strong principal sum so they could reap good dividends and bonuses. She said the savings and asset gathering phase fell within the accumulation period, which was prior to retirement. After that is the consumption period, which will deplete the savings.
“People need to estimate their monthly expenses based on the expected salary before retirement. “They also have to prepare for major life events that need huge expenses, like the time when their children pursue tertiary studies or get married.
“They have to start saving early in their work life so they will not have to pay so much a month. “Only by doing this that they will have a lifetime stream of income to support their living based on the compounding interest.” Niki said those new to financial planning could start off with buying insurance, takaful and unit trust, or join a private retirement scheme because the younger they were, the smaller the amount they would need to pay. She said to select a savings plan for retirement, the expected returns per annum needed to be bigger than the inflation rate.
According to her, 50 per cent of a person’s monthly income should be allocated for expanding wealth (savings, asset accumulation) and protection (insurance). “The retirees need to ensure that they have peace of mind after retirement. They have to cover all expenses that enable them to enjoy a lifestyle they have before. They also have to settle their outstanding loans.
“Apart from planning for their medical needs, they need to provide for social engagements like going out with friends, eating out and leisure activities like travelling and golfing.” She said there was a growing trend among retirees to use their savings to travel the world too often, thus finishing their money very quickly without managing it well. Therefore, she said, even those who were old, and had decided to stop working and enjoy life, must be made aware of financial planning to optimise their nest eggs.
Wealth management consultant Rohani Mohd Shahir said the increasing life expectancy and high lifestyle preferences required individuals to have reliable strategies in managing finances. Rohani said having dependencies, including children and parents, might result in a setback to one’s savings when family emergencies occur.
She said people could diversify their income by choosing different categories of unit trusts and other investment instruments. Besides that, in order to ensure financial discipline, deductions should be made through auto debit so that the monthly allocations would not be missed. “The less money one has in his account, the lesser the amount that he is going to spend on.”
She said lifestyle changes were required as one aged and children needed to be taught how to be prudent at a young age. For married couples, Rohani said they could set up a joint-account for emergencies. “An individual needs to have at least six months’ salary for emergency money. For families who often eat out, try to cut down to once or twice a month.
She said EPF had established Retirement Advisory Services (RAS) Centres to help people plan for their retirement needs. RAS was meant to help EPF contributors achieve a sustainable retirement plan, including those who were going to retire or those who had just retired.
RAS also conducts awareness and education programmes on basic financial and retirement planning. The service is available at the centres in Kuala Lumpur, Petaling Jaya, Johor Baru, Penang, Kota Kinabalu, Ipoh and Kuantan.
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