Financial planning key to addressing retirement fund inadequacy

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MOST Malaysian employees with modest financial means are not particularly looking forward to retirement as they fear they will not be able to sustain themselves through their golden years.

So instead of relaxing during retirement by fulfilling dreams and spending more quality time with families, they have to stress over surviving.

According to the Employees Provident Fund (EPF), workers will need to reach at least RM240,000 savings by the age of 55 to support their retirement years.

This translates to a minimum stipend of RM1,000 a month for 20 years (55 to 75 years) in line with the county’s life expectancy.

However, alarmingly, as of December 2022, only 30% of EPF contributors have savings of more than RM240,000 at 55 years of age.

The remaining failed to reach the amount because of early withdrawals to cover cash flow needs and low wages.

The Covid-19 pandemic has further exacerbated this problem.

Securities Commission Malaysia (SC) in its 2022 annual report noted that this problem happened despite the many private and public avenues available for Malaysians to save and invest for their retirement.

The formal mandatory savings retirement system covers only about 60% of the workforce, of whom most are already facing insufficient retirement savings.

So the remaining 40% of the workforce are not covered, a situation that may worsen as more workers embrace self-employment and enter the gig economy.

Financial planners have pointed out that rising inflation rates, higher healthcare costs and longer lifespans have impacted the ability to retire well.

This means that the majority of Malaysians may have to work past the retirement age in order to save more money or make their money work harder.

So how does one stay ahead of the curve? The key is early financial planning, a vital aspect for a sustainable future.

An ideal retirement plan should provide a shelter over your head, good healthcare coverage and savings in the bank.

Financial experts have identified two main methods towards good financial health; reducing expenses and increasing wealth or income.

The latter in particular is one of the sure-fire ways to replenish savings for a secure future but with the surge in financial scams, it is not as easy as it sounds.

With the aim to help Malaysians plan for a secure future, the SC is holding its “Bersama InvestSmart @Penang 2023” at Queensbay Mall from May 26 to 28 to help raise awareness of financial scams and the importance of financial planning.

Under the flagship investor empowerment programme InvestSmart, the fair aims to provide retail investors more confidence and skills to make informed decisions when investing in the capital market.

The event brings together capital market institutions, associations, industry players and other relevant agencies.

Visitors should take advantage of the wealth of information to better equip themselves in meeting their immediate and long-term financial goals.

Free one-on-one financial planning consultations with certified financial planners under the #FinPlan4U initiative are also available (no pre-registration required).

Talks and panel discussions will be held by industry experts and there will also be displays by over 30 exhibitors, aside from lucky draws.

Capital market products and services such as stocks, bonds, unit trusts, private retirement schemes (PRS), exchange-traded funds (ETF) and equity crowdfunding (ECF) are available.

For details, visit InvestSmart social media pages or