Malaysians are expected to live longer but that also means we will need more money to support ourselves through our golden years. Some experts say having investments is no longer an option but a must!
THE popular saying “health is wealth” is something everybody should keep in mind.
But with Malaysians having longer life expectancy, there is now a need for more wealth to support our health.
A newborn baby girl in Malaysia today is expected to live up to 77 years – over 10 years longer compared to 1970.
Malaysian boys, though having shorter life expectancy, are also said to be able to enjoy a longer life span of up to 72 years, as opposed to 61 in 1970.
Such vast improvements, recently revealed in the State of Households II (SOH II) report by the Khazanah Research Institute (KRI), are heartening to note.
But the longer life spans also spell the need for more savings among Malaysians so that they will have enough to go around, especially after retirement.
Unfortunately, this has become a steeper, uphill climb due to the spiralling cost of living and inflation.
The SOH II report may have indicated that households are earning more in 2014 compared to 2012 but whether such wages are enough to sustain a longer life remains to be seen.
Last year, Sunday Star ran a series of stories highlighting the socio-economic challenges facing our ageing nation.
In July 2015, we front-paged how poor retirement savings and low financial literacy faced by a soaring population of seniors are among the reasons why Malaysia is not prepared to become an ageing nation.
A month later, Women, Family and Community Development Minister Datuk Seri Rohani Abdul Karim shared how one in five Malaysians, aged 60 and above, work – for most, because they have to. Then surprisingly, we found in September, the living standard of an elderly Malaysian household is lower than in most East Asian countries, yet Malaysians still dream of retiring early.
While one can build up savings for retirement, some experts are saying that it is no longer enough and people must invest to make their money grow faster.
With the current scenario in Malaysia, having investments is now a must, and not a choice.
The weakening ringgit also causes the end result to amount to almost nothing and thus, the need to learn to invest, adding that Malaysians should aim to get at least 8% of annualised returns for the money they use to invest.
For those who do not have much cash left after their necessary expenditure, Yap says they should start investing in small amounts like buying shares or investing in unit trust.
For those who are a bit more well-off, go for properties.
Some are afraid of investing because they do not have enough knowledge on the subject and are fearful that they may lose their capital. The only way to cross this barrier is to educate yourself and consult a financial adviser.
Good discipline is also important as those with high incomes. You must aim to save 30% of your gross income every month, inclusive of your EPF (Employees Provident Fund) deductions. That is the benchmark.
If you don’t have an EPF account, you should also aim to save 30% of your salary to get yourself on track.
Another rule of thumb is to buy insurance to cover critical illnesses so that medical costs can be transferred to insurance companies when one gets old and ill.
The report also revealed that those aged from 51 to 55 have an average of RM159,952 in their EPF accounts.
But with the current interest and inflation rates, this average amount will only last an individual 15.6 years if they live on the current poverty line income of RM930 per month for urban Peninsular Malaysia.
“This illustrates the concern that the population may not be well prepared to financially support themselves as they continue to live longer,” the report says.
On whether Malaysians should take up side businesses to increase their income, Yap says it is fine for those who can afford to do so but generally discourages such a move.
Malaysians are expected to face greater difficulties as they age as a result of living longer and the rising cost of living.
The need for medical assistance, long-term care and services to assist us with daily living becomes very real.
If the proper infrastructure for an aged care ecosystem isn’t set in place to help us pay for these things, we will find ourselves stuck between a rock and a hard place, adding that 10% of the population is projected to be aged 60 and above in 2020 and 15% in 2030.
Now is the time for financial institutions to come together and work on an integrated financial system, whereby Malaysians with investments, including properties, EPF savings and pension income, can consolidate to pay for their healthcare and aged care needs.
As we live longer, the possibility of requiring some form of care is inevitable.
While we are becoming an ageing population, we are not necessarily ageing healthily.
About 40% of Malaysians above the age of 35 have high cholesterol while 35% of them have hypertension.
Some 17% of this age group were also found to have diabetes.
That is why the ageing population phenomenon is not only about addressing the welfare of senior citizens, but also urging the young to start caring for their health now to enjoy a better quality of life as they age.