Managing finances in your retirement

Managing finances in your retirement

While the oft-repeated advice to young people is to start saving for their retirement as early as possible, what does one do when you’re already into your retirement years? Priya Kulasagaran speaks to several retirees about what works for them

It is not new that there has been a growing concern about the state of retirement in Malaysia. As of last year, only 22% of those aged 54 and above had enough savings in the Employees Provident Fund (EPF), around RM196,800 or more, to fund themselves in their retirement years.

EPF’s Strategy Management Department head Balqais Yusoff reportedly said 65% of EPF contributors had less than RM50,000 in their savings.

According to a report by HSBC in 2015, 63% of retirees surveyed said they were worried about not being able to support their families. The report, part of HSBC’s The Future of Retirement series, further revealed that some 86% of retirees still provided regular financial support to at least one of their family members, including grown-up children.

Never too old to start saving

The same HSBC report quoted above stated that over half (56%) of fully retired people are still saving in retirement. In other words, the notion of saving is now a lifelong endeavour.

“I still try and put aside money from my pension!” says S. Savithri, 67. “I do realise that it’s a privilege to do so, but you’d be surprised how many people just seem to give up completely. My thinking is that instead of just dipping into my savings, why not set aside something for a rainy day instead of just banking on my EPF? I keep these savings in a fixed deposit account, which I renew every six months.”

For those who are not quite retired yet, the Private Retirement Schemes (PRS) may be another way of saving. The PRS is a voluntary scheme that allows individuals to contribute to a long-term investment scheme towards their retirement. Individuals may choose to invest based on their own retirement needs, goals and risk appetite, for long-term returns. The plan categorises contributors by age, and those aged 50 and above may opt for the ‘conservative fund’ to help plan for their older years.

Economising and planning

Former lecturer Miriam Lee said that retirees should be mindful about living within their means. “When me and my batch of friends retired, I found that a number of them went on a spending spree with their ‘new’ wealth – meaning their retirement savings. After some time of extravagant shopping and travelling, they then realised that they had to cut down their day-to-day expenses significantly because their savings had depleted so much,” she said.

In Miriam’s case, she decided to ‘downsize’ by moving from her previous double storey house in Petaling Jaya, to a quieter suburb in Seremban, Negeri Sembilan. “At first, some of our relatives and friends gave us funny looks, because they felt like we were being too frugal,” said the 65-year-old. “But it was the right move for us; we don’t need a high-flying lifestyle to have fun, and I quite enjoy the town we live in. Instead of having two cars, we now only need one, because we mostly walk to wherever we want to go. We don’t need to ‘show’ others that we’re living it up just to live well – and I don’t have to worry about needing money should a real emergency crop up.”

Safe investments

If you are lucky enough to have some money to spare, investing may be the route to grow your savings further. A retired financial analyst, Rajedran Anand, says that buying and renting out properties may be an option for those seeking to invest surplus EPF savings. “Of course, you should not withdraw the whole lot from your EPF just to buy property,” warns the 56-year-old. “However, if you carefully manage it, and based on how the market is looking, buying properties is the most stable option if you’re thinking about investing your savings.”

Rajendran said that with careful planning, renting out properties can not only pay off mortgage payments, but also offer retirees an active source of income. “Plus, the value of such property will be protected against inflation, if you buy in the right area. This will be greatly beneficial in the long-run,” he added.

While some may be tempted to invest in shares, Rajendran said that this requires some skill and knowledge of the stock market. “Usually, a fund manager will help you choose the right shares to buy or sell. But you need to monitor for yourself as well, and it’s not something you can just pour your money into and then forget about it. But with the right, government-approved agents who are professionals, you do stand a good chance to getting a good return on investment.

He added however, that unit trusts involved high risks, and followed the general trends of the market. The key, he said, is to find a fund manager whose experience and skills you can trust. “Nevertheless, the onus is still on you to be clear about what kinds of funds you want to invest in and why. You should also still monitor the fund’s performance yourself, to see if you have made the right choice for your needs,” he said.

Generating income

Rajendran further stressed that as long as one is healthy and able to, they should consider making use of their personal or previous professional skills to generate income even when they have ‘officially’ retired. Currently working as a freelance consultant, he shared that his wife bakes cakes to make some extra pocket money.

“For her, it started out as just a hobby, and we soon found out that people were willing to pay for her cakes!” he said. “It may seem like a small thing, but it’s nice to have a little extra spending money – it gives her enjoyment as well. As for me, what I realised after a year of retiring is that I actually missed meeting and talking to people. So now I’m fortunate enough to have a small list of clients, and I have flexible working hours. As long as we’re both able to, we might as well make some income out of what we are good at.”

Look after your health

As with keeping aside savings, it’s never too late to stay active and healthy.

While conventional advice says that medical insurance is more readily available for those who are younger and in good health, more companies have now expanded their maximum age to obtain an insurance plan. It may cost more as you get older, but it is better to stay protected should a medical emergency arise.

That said, you can mitigate expensive medical bills by going for regular check-ups; not only will that help detect possible major illnesses early, you will also not be shocked by sudden expenses. Besides that, keeping active and maintaining a healthy lifestyle can help lower your chances of having to deal with serious illness, and stretch your savings further.

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