In the traditional context, the word “retirement” means withdrawing from one’s active working life. However, in today’s modern world, the concept of retirement goes beyond its literal interpretation, with more individuals now viewing retirement as the dawn of a new chapter in their lives. A meaningful retirement should be one that affords you peace of mind without the worries of financial concerns. Only then would you be able to relax and enjoy the fruits of your labour.
However, an ideal retirement does not happen overnight. Just as building strong body muscles requires us to work out in a dedicated and consistent manner over time, the same principle applies to retirement too. When we want to build strong wealth muscles, there needs to be a continuous effort over a long period of time. What is the right long-term strategy for our retirement planning to achieve our desired retirement lifestyle? The answer will form a clear blueprint to lead us towards a successful retirement path.
If it sounds straightforward, why aren’t more people committing towards this?
The biggest mistake one can make in retirement planning is thinking that we do not need to have a plan. Contrary to common belief, financial planning is not exclusively for thewealthy alone. Our financial planning journey is a lifelong marathon to uncover different needs, new opportunities and specific challenges that may arise at different stages of life. A comprehensive financial roadmap will give us more clarity on our current financial situation so that we are able to identify the gaps and address them as we work towards achieving our financial goals.
People have all sorts of reasons for not planning retirement properly, with the most common excuse being – “I am too busy and have no time!”
I am sure all of us are guilty of spending time on unproductive pursuits like social media or watching too much TV. Does it seem like a sorry excuse that we cannot plan for the rest of our lives because we have no time? When we let retirement happen on its own, there is a real risk of running out of money before our time is up! Do we really want to live our golden years tightening our belts and scrimping on every sen daily?
It is time to face reality and not let excuses hold us back any longer. If you are in your mid-20s, this is the best time to start as your young age affords the benefit of the compounding effect. If you are in your 30s, it is all the more critical to commence your retirement planning without further delay. Once you are in your 40s, you will need to work harder to reach your retirement goals which will get increasingly challenging to execute if you wait until your 50s. Financial mistakes may still have a chance to be fixed even at this critical stage.
As a baby step, we can start by tracking our own expenses as we need to know where our money goes before we can have better control of ourfinances. As the saying goes “if we do not manage money, money will end up managing us instead”.
The dilemma faced by many Malaysians nowadays is that parents jeopardise their retirement for the sake of their children’s education, while the younger generation also risk their financial security to fund their parents’ retirement in return. This is an unhealthy financial cycle, leaving parents at an increased risk of a stressful retired life. The younger generation themselves are struggling with the burdens of financial commitments brought about by the escalating cost of living and high levels of debt.
Mindsets need to change so that aging parents do not place excessive financial expectations on their children. At the same time, young adults need to have better financial literacy to plan their money matters better.
If the task at hand gets too overwhelming for us to tackle on our own, it is always a good idea to seek assistance. Many people already have their hands full managing their day- to-day or monthly financial affairs, what more to sit down and seriously plan for their retirement! Help is always readily available in the form of professional advice and proper guidance to achieve your financial goals. Everyone has their own special skills and abilities; focus on your expertise to continue earning your active income while leveraging on a licensed financial planner’s know-how to help you grow your wealth.
In the past, retirement planning was hardly the norm and people went about their lives rarely thinking about it, only to deal with the situation when it happens. We cannot afford to adopt this outlook in this day and age where things around us are changing at a rapid pace, and taking a passive stance on our retirement is a huge gamble. It is never too early to have a solid plan and a clear vision on how to work towards it with the right strategies.
One small step for our retirement, a giant leap for financial independence.
Statistics continue to indicate the lack of financial preparedness by many Malaysians. In an online study carried out by the Department of Statistics Malaysia in March 2021 to assess the impact of Covid-19 on individuals, 71.4% of self-employed individuals who participated in the survey had savings that could last for one month’s expenses. Meanwhile 82.7% of those in the private sector had sufficient financial savings to last two months. It is evident that most Malaysians do not have sufficient emergency funds, indicating a serious lack of proper financial planning knowledge.
A successful financial plan needs a solid foundation which is good cash flow and debt management before we can move to next pillar. We also need to build up at least six to nine months of household expenses as emergency funds. Our current experience with the Covid-19 pandemic is a wakeup call for us to appreciate the importance of emergency funds in helping us weather any financial crisis on a better footing. By having a strong foundation, we can then progressively excel into other financial areas including risk management, investment planning and estate planning.
First published in Smart Investor 05/06, 2021 Issue
Licensed Financial Planner with Finwealth Management Sdn Bhd