Malaysia & Retirement

Malaysia & Retirement K. Sasitharan. LL.B(Hons)(Lond), ChFC, CLU, CFP Senior Client Director ReMark Malaysia Pte. Ltd

PULSE CHECK ON RETIREMENT • Is retirement planning all about • Finance & Wealth Management • Health Insurance & Annuity • Estate Planning • You agree it is more than that!!!

WHAT’S ON TODAY… • Actual survey findings on Malaysian’s attitude towards Retirement • Pre & Post retirees attitudinal views • What is “IN & OUT” of our control?

Surveys conducted by the two international organisations. Thanks to HSBC & AXA for their effort – The Future of Retirement Project (www.hsbc.com/retirement) - The Retirement Scope Project (www.retirement-scope.axa.com)

WHAT IS RETIREMENT? • Malaysians are typical of Asians in seeing retirement as a time of rest and relaxation. Yet when asked what they want to spend their time doing in retirement, very few mention slowing down, and many talk of travelling. • In general Malaysian are more likely than other Asians to associate retirement with positive feelings such as freedom and happiness, and less likely to associate it with negative feelings. • As with people elsewhere, Malaysians say family, friends and keeping fit are important for a happy old age. The Future Of Retirement

Malaysians tend to think that they should bear the costs of their own retirement, just as many other people in Asia do. • However, they are more likely than the Asian or global average to believe that they will rely on their children for care in retirement? • Compared with other Asian people, Malaysians are more inclined to think that government should pay for retirement by means of compulsory private savings, and less likely to think that the retirement age should be raised. HOW WILL WE PAY FOR OUR RETIREMENT? The Future Of Retirement

EXPECTATIONS: STATE PROVISION ‘CONFIDENCE GAP’ • The proportions are lower in Malaysia, where the survey shows 21 per cent of working people and 23 per cent of retirees believe the State should support them in later life. • There is also a marked difference between the working and retired population’s confidence in governments living up to this obligation. • Only 10 per cent of the Malaysian working population feel government will bear this burden, while 20 per cent of retirees believe the State will bear the financial costs. The Future Of Retirement

HOW TO PROVIDE FOR THE AGEING POPULATION? • 3% of the working population and 32% of retirees seeing enforced additional savings as their favoured solution – the majority option. • When considering other options: • 24-27% would increase the retirement age, • 11% across the generations would increase taxes , • only 8-10% would opt for reduced state pensions. The Future Of Retirement

WHEN SHOULD WE RETIRE? • Malaysian people believe that both men and women should retire at a relatively young age. • They are slightly less inclined than people elsewhere to think that retirement should come at a fixed age. • Asked what might motivate them to work beyond the traditional retirement age, many more Malaysians than the regional or global average speak of having something meaningful or valuable to do. The Future Of Retirement

AT WHAT AGE DO PEOPLE WISH TO RETIRE? • Retirees stopped working early, on average at age 53 but would have willingly worked until 55. • Income could be the main motivating factor for retirees wanting to retire later as those with higher income have lower ideal retirement age than average. • Working people expect to work later than their elder, on average until 56 but dream retiring earlier at 54 • Female dreams to retiring earlier & actually retire earlier than males. • The ideal & expected retirement age typically increases with age

DID PEOPLE RETIRE BEFORE THE LEGAL RETIREMENT AGE? UNDER WHAT CIRCUMSTANCE? • Nearly 2/3 of retirees retired prior to the legal age. • Among these, a majority of retirement imposed by employer, especially in the South part of Peninsular Malaysia • Females retired less often than males prior to legal age and were in particular less affected by imposed early retirement

DO PEOPLE HOLD, OR PLAN TO HOLD, A PAID JOB DURING RETIREMENT? Grandparenthood is sometimes can be a full time career without any financial rewards!!! Sasi … • Currently 1/3 of retired people hold a paid job after retirement • Half of those from South part of Peninsular Malaysia • The situation will most likely change as more than half of working people plan to hold a paid job during retirement

WHAT DO PEOPLE THINK ABOUT RAISING THE MINIMUM RETIREMENT AGE? • Majority of working & retired people approve of raising the minimum retirement age, at most up to age of 59 • Among retired people, there is a large gap between unskilled workers , who would approve this measure and owners/top managers & other managers more reluctant

HOW DO OLDER WORKERS COMPARE WITH YOUNGER ONES? • Malaysian employers tend to rate older workers less favourably than younger ones. • These employers are also less likely than those elsewhere to offer older workers appropriate opportunities. • These employers are a little inclined to see the loss of older workers as a positive than a negative The Future Of Retirement

DO EMPLOYERS AND EMPLOYEES THINK ALIKE? • In Malaysia 64% of private employers say employees should be able to work for as long as they are capable of doing the job and in tune with this, because 76% of ordinary Malaysian people think the same. • Almost everywhere in the world, the largest proportions of individuals and employers favour enforced private savings over other means by which governments can support ageing populations. But in Malaysia, individuals are very likely to support the enforced private savings, whereas the employers support increase in the retirement age. The Future Of Retirement

SO HOW ARE MALAYSIAN PEOPLE PLANNING, PREPARING AND INVESTING FOR THEIR RETIREMENT? • In Malaysia, each of the four pillars of support for later life (government, employer, family and self) is regarded as contributing to retirement income • Overall, children/family is seen as the most important contributor to retirement income , • self is ranked as second most important, • government and employer share equal ranking as least important • In Malaysia it is interesting that children/family is seen as key by both high income and low income households, but with the latter seeing government support as the second most important option The Future Of Retirement

THE SAVINGS & CONSUMPTIONS LIFE CYCLE* * The Future Of Retirement

Retirement Planning - The Practical Approach

RETIREMENT OBJECTIVES • maintain pre-retirement standard of living • be financially self-sufficient • improving lifestyle • managing wealth • passing on wealth • medical expenses

RETIREMENT PLANNING PROCESS • What are your retirement needs? • What are the available sources of retirement income you have Planned so far… • To Identify other retirement resources available if any... • Find Solutions that are achievable for your retirement needs.

RETIREMENT PLANNING • Sources of retirement income • EPF contribution + rate of return until retirement • Savings • Investment e.g. unit trust, real estate,… etc • Life Insurance/Annuity

RETIREMENT PLANNING Planning Assumptions • Life style • Standard of Living (Income & Expenses) • Monthly savings capabilities • Accumulated financial assets that can be liquidated (Assets & Liabilities) • Investment preference – risk profile • Insurance plans details – Insurance Needs Analysis • Estate planning consideration – Wills & Trust

RETIREMENT PLANNING ...is more than a numbers game, it’s is about your vision, lifestyle, financial attitude & many other emotional factors. • What is within your control? • Your earning capabilities, attitude towards financial planning & discipline in finances (spending vs. savings) • What is outside your control? • Interest rate, politics, government policies, what’s your neighbour or friends planning, etc • What is your life style? • Willing to change, modify or status quo • Idealistic or Pragmatic? • Your choice…

THANK YOU

Malaysia & Retirement