No one said retiring was easy. The Employees Provident Fund (EPF) revealed that more than 60% of its members do not have sufficient savings to call it quits and that 1 in 3 Malaysians do not have a savings account.
That does not mean the future is bleak. With some simple financial manoeuvres, you can save enough to live through retirement.
But while you are at it, you might want to consider these 5 risks that can run your retirement:
In Malaysia, the medical inflation rate, which is the increase of medical costs, is between 10% and 15% every year.
The problem with health matters is that they do not discriminate between age and gender, meaning those with an active lifestyle could also suffer from an unexpected, life-threatening disease.
Top 2 killer diseases in Malaysia*
Est. current charges (RM):
Est. cost in 20 years (RM):
35,000 - 75,000
235,000 - 505,000
10,000 - 30,000
67,000 - 202,000
*Source: World Health Organization, The Star
Worse, post-treatment care is not cheap either. For example, if someone survives a stroke, he or she will need some form of long-term assistance.
Rehabilitation or palliative care inclusive of private room, nurses and in-houses doctors
Cost per year (conservative estimate)
RM5,000 x 12 = RM60,000
Overall cost with an estimated life expectancy of 5 years + 10% inflation p.a.
Medical treatment for stroke + 5-year care
To avoid depleting your retirement fund, your best bet is getting adequate medical insurance coverage early. Include the increasing cost of medical insurance in your financial and retirement planning, as the older you get, the costlier the premium will be.
Scenario: John turned 60 in 2011 and decided to invest in the RHB Equity Fund, a high-risk unit trust. But today, after five years, he wants to sell it.
RM10,000 or 14,457
RM10,000 or 26,560
As John invested in a volatile fund, he lost RM4,557 in just 5 years and this doesn’t include the various investment charges incurred.
Balance in Account 2:
*Price on November 18, 2011. *Price on November 16, 2016.
Your best bet is a low-cost, appropriately risked retirement asset allocation that includes a basket of investments. An example of a moderately conservative portfolio would be something like this:
The most important part of asset allocation is regular tweaking according to your changing risk tolerance. The older we get, the lesser risk we can withhold. This should always be reflected in your investment portfolio.
Asian Institute of Finance (AIF), in a study of 1,000 professionals aged between 20 and 33, found many of them live beyond their means. Majority of its respondents live on credit, with 38% taking personal loans and 47% living on high-interest-rate credit cards. Only 28% claim to know how to manage their finances.
The study went on to find that 75% of respondents have at least one source of long-term debt such as car loan, education loan or mortgage, while 70% own credit cards and tend to pay the minimum monthly payment with 45% failing to pay off debts on time.
Say, John Doe has a credit card debt of RM10,000 and let’s assume the interest rate is 15% per annum, that means his debt costs RM3,158 in interest over 6 years and 11 months, if he only pays the minimum payment every month.
While this sum may seem like nothing if you are young and still pulling a steady pay cheque, but those nearing retirement should consider whether they will be able to make such a debt payment on just their retirement fund.
Without a pay cheque, it’ll get much harder to make lump sum payments to reduce debts so it’s essential that you reduce your interest fees as much as possible before you hit retirement.
Retirees may need to change from living on their own to other forms of housing, such as assisted living, which combines care with housing, and independent living.
Even if a retiree is fit health-wise, it is advised to have the savings for at least one year’s stay at a nursing home. These fees are rarely covered under a medical insurance plan so you’ll need to budget for them on your own.
RM2,500 x 12
RM300 x 12
Medical check-up at a private hospital
Medication & supplements
RM150 x 12 months
Annual premium for medical insurance
Doling out that much for one year is a lot. A conservative estimate for five years, excluding medical expenses and such, would set you back RM202,000.
Children’s tertiary education
For the average middle-income middle-aged parent, this is a ubiquitous problem: just as you are catching your stride in your career and begin to make up lost ground funding your retirement, you get walloped by college costs.
In 2013, a twenty something decides to let her hair down and puts on a black cap. She tilts it sideways to match the cover she is about to belt out to the millions of social media users, random strangers at best.
She is in her room, faces the camera, and she goes. You may think this is just another ordinary YouTuber – a dime a dozen then, a dime dozen now.
But, like any fairy tale, there’s a twist: she covers a famous Malay hip-hop song, the first of its kind, what with the way she did it.
And just like that, Elizabeth Tan created havoc on radio stations, her videos skyrocketed with millions of likes and comments, and is now a popstar in her own right.
So iMoney’s writer, Emmanuel Surendra, caught up with Tan to tap her thoughts on success, fame and, of course, money.
Screengrab of Tan’s cover of Havoc on Youtube.
You broke into the mainstream when you covered Joe Flizzow’s Havoc. What inspired you to attempt that?
Well, I just got back after spending two years in the US and when I returned, I was looking for a new song to do a cover.
My friend suggested that song and when I listened to it, I told him: “Are you kidding me? It’s a full on rap song, and there’s no melody…”
He was like: “I don’t know. Just consider.”
So, I heard it again and took my ukulele and it took me like 10 minutes to figure out whatever melody I wanted to sing, but it took me an hour to record as I had to do it again and again.
When I uploaded it, I actually didn’t expect anything. I didn’t know that he was actually having a tour for that entire album. So, when they searched for videos of his tour, my video came up.
And that played a big part as to how it became viral. I mean, I wasn’t really expecting anything.
I heard you grew up in a family of singers. In fact, your brother, Andrew, made it to the top 4 of Malaysian Idol. Was being a full-time performer a natural choice for you?
No, I never grew up thinking I’d be a singer. Until now, it’s not my passion or my dream, honestly.
It wasn’t my brother’s either. That’s why on live TV, he said stop voting for me. He was top 4 and he wanted people to stop voting for him as it was not his dream.
My eldest sister loves singing; she was a freelance wedding singer.
But for me, it’s rezeki, who am I to reject it, you know? People would die for this platform that I have. So, I try to make the best out of it.
A lot of musicians wax lyrical about passion. In your opinion, can you just survive on that?
Definitely, not. It’s like saying love cannot pay the bills or the rent. A lot of musicians in Malaysia especially in the English market – they might get offended if I say this – they would say like, “Make a difference in the English industry.”
But, the fact is, the majority are Malays and they want to listen to Malay music.
Even though in the urban market, yes, they will support your music on radio but they are not the kind who will buy your music on iTunes… they are just not that kind of crowd.
Well, singers and musicians, to make the most money as a career or to survive by singing, you have to do a lot of corporate dinner shows and, unfortunately, a lot of corporate events have staff who are mostly Malay.
So, unless you are singing Malay songs and targeting the Malay market, it is very hard to survive.
Is that why you are focusing on the Malay market?
Definitely. I wouldn’t say that I am chasing the money or the fame or anything like that.
If I could, I rather walk around and not have people recognize me at all. But to be 23 and to be earning this kind of money? That is very rare. I realized that to reject it is ridiculous.
I am doing it because it is sensible to do it. To be honest, I don’t enjoy it. I am very introverted so performing to me is very, very hard.
Going to events, meeting people, socializing and things like that is very draining. It’s very draining. But I can’t complaint. There are tougher jobs out there in the world.
Speaking of business and money, what’s your philosophy on money?
Money, to me, is not the most important thing, but it does matter. It’s a piece of paper, a number… but it is a necessity. You don’t need too much of it; too much money is not going to buy happiness.
So you just need enough. As long as you are happy, then I think it’s okay.
Her ability to sing in English and Malay has made Tan a sought-after singer.
That’s great advice. Are you a spender or saver?
Definitely a saver. I am very weird when it comes to money. When it comes to spending on myself, I am not to say cheapskate, but frugal; when it comes to buying gifts for others, I go all out. I don’t even think about it.
And, once a year, I’ll buy myself something that I actually want and I set aside a certain of money just for that. Like, say, this bag which is RM6,000. But I only do it once a year. On my birthday.
The rest of my money goes into my savings, my fixed deposits, to my parents, about 10% goes to church. I only allow myself to spend nothing more than RM3,000 to 4,000 a month.
Cash or credit card?
Normally, card. Because if I use cash, I’ll withdraw and use it to the point of not keeping track of what I spend.
But with a card, I know what I have used it for and I can keep track of what I have spent on. It is easier to control myself with a card.
So, you use your card to control your spending?
Yeah, because with cash I don’t think. If I have cash, I just pay, pay, and pay. But with a card, it’s like, “How much is it?” and then I pay. That’s how I work.
Oh, but when I first started out, when I first started getting money, which that time was personally a lot of money, my friend taught me the jar system.
So I had five jars. Basically 10%, church; 20%, necessities such as food and allowances for transport; 20%, play money for shopping and such; 40%, savings; 10% for charity and also to my parents.
That’s how I first started out. But now it is different because my money goes to the company and that company pays me a salary.
Your biggest indulgence after receiving your first pay cheque is…
My very first Prada bag. I remember it was RM8,000 and I was like, oh my gosh…
When I was 15 I think, some of my mum’s wealthy friends offered to give a Prada bag to me, but I told my mum, “No, no, no, no… If I am going to get my very first Prada, I want to buy it with my own money.”
So that was the day when I finally got my first Prada with my own money and that was a big achievement for me. But then I decided only once a year.
Speaking of family, how did your upbringing influence the way you use money?
My mother is very good with money. She is the one teaching me about fixed deposits, teaching me that you should have money in Amanah Saham and some in shares and stocks.
She taught me how to not just keep cash there, and with the currency dropping, if I were to collect so much cash, so much ringgit – all of which I worked so hard for – it will amount to nothing. So, she taught me to invest in assets, instead of just putting cash in savings.
What’s your next investment goal?
I haven’t gotten a property under my name but my friends advised me to not buy anything for the next two years.
So, I am saving for another one or two years then I’ll buy one. For now I am waiting and I am saving the money to buy that property and it wouldn’t be lump-sum cash.
What type of property, though?
Definitely not a high-end one. I am going for a mid-range condo, hopefully new.
My brother’s condo, he bought it at RM360,000, I think. But after three to four years, it was worth more than RM500,000 to RM600,000?
Figures like that… it’s not a 100% secure, good investment but it’s more stable.
You define your money or your money defines you.
My money does not define me at all. But at the same time, I don’t want to be a person that is too lazy.
But, at the same time, I really hate performing and don’t enjoy it. So, next year, I am planning to start something else, a different business, to sell products. I haven’t decided on what though.
Did fame reach you quicker than you expected?
Oh, definitely. I am really blessed because it is a rare chance that my name rose so fast in three years. Suddenly my face was everywhere, CIMB, AirAsia, McDonalds, like everywhere.
A lot of people have tried to replicate what I’ve done on YouTube and so far, some of them got some traction, but not as fast as mine.
I don’t even understand why. Why me? To me, when I see them, they are so much better than me, so why me?
And how did you handle the stress?
It was very stressful. I was depressed for a long time without people knowing, behind the scenes.
I was very anxious but I am slowly getting better. Even now I am trying to get my feet back together.
I was just thrown into it. Fame wasn’t something I grew up with. I didn’t come back expecting to be, like, a superstar.
So, I had to learn very, very fast. I knew nothing about the Malay industry. I knew nobody. I could barely speak Malay and I am not a pop singer, I love singing jazz but that’s not a genre accepted in the Malay market.
That’s a steep learning curve, there. What do you think young Malaysians can do without these days?
I think they can do without a lot of things but it’s very subjective. I think we can do without a mindset that is needing something luxurious or even needing something.
Let’s say you are going to buy a car but you know you cannot afford a Civic, it’s okay to drive a Myvi.
It’s the mind-set. People tend to use social media to highlight their new car, new thing, new bag… in the end when you die, no one gives a s*** about what you bought.
If you are going to base your happiness on people’s approval… It’s all in the mind-set, it’s not something material or physical they can live without, it’s really the mind-set of “I need to be this” or “I need to have that”.
It’s that mind-set we don’t need.
Despite achieving much in the music industry, Tan is already looking towards other business ventures.
On that note, what advice would you give Malaysians about financing and pursuing their dreams.
Always save. I know so many people who don’t have any savings. It’s ridiculous. What if you have a medical emergency and you have no insurance or anything, who is going to cover?
Always have savings planned ahead, plan for the future, don’t just think about the here and now.
By the way, congrats on your recent collaboration with Disney. Any subsequent projects?
For now, nothing yet. But hopefully we would continue to work with them, as it was just a one-off thing. I am hoping they were impressed enough to continue engaging me in the future.
Let’s wrap up with a random question. If I were to open your purse right now, what will I find?
I can actually show you. It’s like almost nothing, but I just put in some cash… I don’t even have a proper purse… just two credit cards, insurance card, house key-card and some cash.
Here's everything you need to know about both MyMotor and their new service:
1. Who exactly is MyMotor?
An online platform that helps to facilitate hassle-free buying and selling of cars by bringing both parties together. They serve as sort of a concierge service by assisting customers every step of the way with their expertise, helping to ease the otherwise complicated transaction process. They are backed by Malaysia's leading e-Government Service Provider, My E.G Services Berhad.
2. How will MyMotor SmartLease help you?
Normally, buying a car would involve you committing to two contracts that are equally lengthy: (1) a vehicle ownership contract and (2) a loan repayment scheme. This means that you are bound to the same ever-depreciating in value car and are also stuck paying off a loan for far longer than necessary.
MyMotor SmartLease offers you an alternative to this situation by essentially allowing you to claim a car for yourself via a short-term rental system.
3. How does it work?
Through MyEG Credit, MyMotor SmartLease offers a flexible short-term lease period of 3 or 5 years. With just a 3 months security deposit* and a low fixed monthly payment, you will be able to own (for the duration of the lease) your chosen car from MyMotor's selection of brand new and used vehicles.
*Note: This is a one-time only payment so if you choose to use the service again after the end of your lease, you won't have to pay this again.
4. How much money will this save you?
How much you'll save will depend on a few criteria, such as which car you choose for example. But on average, your grand total payment (down payment + monthly payment) will be less than half of what you would normally pay for a car loan.
5. What car models are available?
Here's the selection of cars that are currently available under this service (more coming soon):
You will have the following options at the end of your lease period:
- Return the car (no need to worry about depreciating car value).
- Renew the lease with the same car.
- Opt for a new car and new lease.
- Change the lease agreement into a purchase agreement and own the car for good.
7. What exactly are you paying for? Is it just the car?
Nope! Whatever price you end up paying is inclusive of road tax, insurance and maintenance fees (all of which MyMotor will help to settle for you) for the entire lease period.
8. What happens if the car breaks down or has problems?
Just contact MyMotor. They will assist you in the event of any breakdown issues or insurance claims.
9. How do you get everything set up?
It only takes a few simple steps, as per the diagram below: