StarSpecialTHE STAR Sunday 7 December 2014

Earn while you save > 2 Capstone to your financial journey > 4

RETIREMENTPLANNING

Planning for the golden yearsBY RACHEL PUNITHA

IT is anticipated that in 10 to 20 years, Malaysia will be facing a retirement crisis; those who will need retirement care and benefits will grow in number and those who are income earners will either stagnate or shrink.

The Employees Provident Fund (EPF) affirms that insufficient retirement savings is to blame

along with other equally critical issues an ageing nation, demo-graphic changes and the genera-tional gap in workplace.

These issues need to be addressed sooner rather than later. Roughly 30 years from now, Malay-sia will have a population of 38.6 million people and it is expected to be an ageing populace.

Generation Y

Although retirement usually starts at a later age, it is at the younger years that planning and actual efforts need to happen.

A Financial Finnese generational research report conducted says the tech-savvy millennials continue to be stronger than the genera-tion before them in many areas of day-to-day money management. (Financial Finesse is a financial lit-eracy and wellness service provider with more than 600 corporate clients).

A large contributing factor to this is social media and the con-stant accessibility of the Internet. But that same report explains that millennials suffer from a relative lack of investment knowledge making long-term financial goals

and retirement planning their big-gest challenge.

Paul Desmond Savuriar, a savvy Malaysian millennial who has been investing regularly since he was 16 says, We spend too much on over-priced coffee, online shopping and holidays all for short-term satisfac-tion. I started investing because my parents encouraged me to do it. This has definitely contributed to

Statistics

According to the Malaysian National Statistics Departments Population Projections 2010-2040, the majority of the population in the year 2040 will be aged 36 and above and the number of those aged 65 and above is projected to increase to more than three times that of the 2010 population. This will lead Malaysia to become an ageing population by 2021. Those of working age will have to bear the weight of the increasing older population.

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Malaysias Debt Management Counselling Agency, known by its Bahasa Malaysia acronym AKPK, reports that more than 200,000 people sought assistance from the agency between 2007 and May last year. Out of the amount, a total of 20,886 blame their grim situations to poor financial planning.

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Data from a biannual health and retirement study conducted by a prominent university in the United States posits that more than 70% of retirees who planned for their retirement rated their retirement years as better or about the same as their working years. The study also hypothesised that poor planning might be a primary result of financial illiteracy.

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The Malaysian governmen, says that Malaysia is on track to achieve its high-income target of US$15,000 (RM47,414) by 2020. If these targets are achieved, perhaps this will contribute to solving the retirement crisis that the country is heading towards.

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since you do not want to spend your retirement years scrambling to earn a living.

You must never take your finan-cial status during your retirement years for granted. Here, a two-pronged approach can be assumed: investing as a solution to the pos-sibility of financial struggle and as a weapon to combat inevitable financial predicaments during those golden years. l Here are some important

things to keep in mind:l The only way to ensure your

investment snowballs and grows healthily is to start early. l There will still be bills to pay

- certainly education, lifestyle and medical bills, and you will not be clocking in a healthy income then.

Do not assume these things will

not surface or that you are finan-cially indestructible. Most of what you earn is usually spent on depre-ciating things: cars, bills, clothes, perishables. Two of the very few things that appreciate are proper-ties and investmentsv.

Johan Gorecki, an entrepreneur who worked with the founding team of Skype, says that a person should learn the market first and then treat their first property or investment like their bank.

Invest in your living. The best thing to probably get is an apart-ment. So even if you keep the apartment for 30 years, the value will still have appreciated.

And if purchasing a property seems financially extravagant at present, then simple investments will be a good start.

Ballooning factors

Planning for retirement early will also mean a lot of serious fac-tors are kept at a low level and is uncomplicated. The most obvious factor is risk. Risk usually grows incredibly greater and you will have a lot more to lose as you age.

A few other factors that may not be so mountainous but are still important to consider are debts, bills, commitments, compounds and even insurance fees.

As you age, these things will balloon to encompass your family, health and living.

Even if income capacity is not as great as you hope for it to be, the capacity will be small as well when you have all these influencing fac-tors looming over you.

Setting up and building a com-fortable nest egg takes a long time to master, so you should start now. It will be quite an uphill task to undertake during retirement years, which should be spent relaxing and doing what you have put off earlier in life.

Retirement is not an end; rather it is a beginning of a new chapter in life. It does not matter if you earn less than RM1,000 per month or more than RM10,000, everyone should plan for their retirement. Housewives, volunteers or those without a fixed income must also have a comprehensive retirement financial plan in place.

If a specific, measurable finan-cial objective has not been set, now is the time to do so as there is no second chance once you hit retire-ment.

To move forward as a whole to become high-income soci-ety, financial paradigm must be shifted so that we think wealthily. Wealthy thinking moves beyond short-term goals. Even if 10 (RM40) per month is set aside, it gets you into the right thinking, advises Gorecki.

This is vital, especially since the workforce is headed towards the caretaker generation: the gen-eration where bread winners are wedged between the increasing numbers of elderly people that need to be taken care of and the rising cost of living with young children in the alarming equation.

With all financial commitments that citizens have to bear, invest-ments and retirement planning are probably one of the very few solu-tions to the equation.

It was recently revealed by the Prime Ministers Department that bankruptcy among youths below 25 had been increasing at an alarming rate a total of 1,940 from 2007 until June this year and of that, 579 youths were declared bankrupt in the first half of this year alone.

my financial stability. The Financial Finesse report

also says that the availability of parental support from baby boom-ers (those aged between 45 and 65 now) has risen over the years. Baby boomers probably had to be cau-tious with their financial planning because of the lifestyles and econ-omy of their time, and there was probably not much support or easy investment schemes back then.

These days, there are many ways to invest. We are not only responsible for the well-being of those closest to us, we are also responsible for our own well-being, be it now or very much later.

It is only right to put some effort into being financially stable, says Savuriar.

It can be seen that globally, the market and elders in the market are motivating millenials to start pondering on their retirement.

Double-edged sword

The old adage, prevention is better than cure might sound incredibly clichd.

However, when it comes to retirement planning, you should take the saying to heart especially

2 RETIREMENT PLANNING StarSpecial, Sunday 7 December 2014

Earn while you saveWHEN comparing fixed deposit accounts to savings accounts, both will surely yield unique advantages and differences.

However, when sizing up the former, one can be sure of a guaranteed return within selected savings tenure with low or almost negligible risk.

For Bank Simpanan Nasional (BSN) Sdn Bhd, its Term Deposit (fixed deposits) or specifically BSN Commodity Murabahah Deposit-i (CMD-i) is the Islamic equivalent of the conventional fixed deposit, customised especially for those whose preference lean towards a syariah-compliant instrument.

It offers high returns of up to 3.35% per annum for a 12-month tenure in the BSN Board rates plan and up to 3.95% per annum for 12-month tenure in the special rates plan, says Winston E. Jeyaprakash, deputy chief executive (retail banking).

Approaching 40 years of serving the communitys financial needs, BSN has pioneered and forged the mandate from Bank Negara Malaysia, which is to cultivate the lifestyle of savings and financial inclusion among Malaysians from all walks of life.

Apart from inculcating savings, BSN is the primary bank that exists in most rural areas where communities have no access to banking and are under-served.

BSN opens and operates its social branches at rural and no-banking areas where other banks and financial institutions have no presence such as Tioman Island, Pahang and Song, Sarawak.

This is possible via its innovative banking access system, which is known as Registered Banking Agents or Ejen Bank Berdaftar (EBB).

This unique way of banking has recorded 27.38 million transactions with a value of RM2.27bil transacted.

As of October this year, BSN has more than 2.12 million Sijil Simpanan Premium (SSP) customers nationwide, which is a value of RM2,614mil savings, says Winston.

Being true to its name, encouraging the public to save is not enough for the bank.

To further push the nature of savings among Malaysians, BSN regularly runs campaigns and offers special rates to encourage

the public to save while winning great prizes and attractive rates or returns.

In its Cuti-Cuti BSN campaign, the bank is offering holiday packages along with savings packages, raising the earnings savers could potentially earn from their fixed or term deposits.

The holiday packages include an all-expense paid trip for one to Korea, including a tour of KBS Studio as well as to Singapore, including a trip to Universal

Studios (terms and conditions apply).

The number of entries will be calculated on a monthly basis and winners are selected based on a lucky draw system witnessed by a dedicated panel consisting of members from BSN, Winston adds.

Market dwellers aged 30 to 49 are usually more sensitive to financial high rates of returns, which is why BSN targets these young millennials in the Cuti-Cuti BSN campaign.

It is also targeting a deposit growth of RM450mil within the campaign period to reach this years target in incremental savings of RM1bil.

As of October this year, BSN has almost 200,000 fixed deposit account holders and more than 17,000 card conversions from its BSN Giro to BSN Visa payWave Debit Card, says Winston.

In addition to new or potential savers, this campaign is also open to all types of existing BSN accounts. The campaign ends on December 31.

As it prepares to celebrate four decades of thriving presence and transformations as well as dynamic products and services innovation, BSN has been and is ever ready to compete and excel in the financial arena.

Savings (RM) Eligible entry

Savings Growth (Conventional/Islamic) category:

RM100 deposit growth 1 entry

New account opening with initial deposit of RM200+ New BSN Visa Debit Card

1 entry

ATM card conversion to the New BSN Visa Debit Crad 1 entry

Example:Customer A opens a new account with an initial deposit of RM200 with a new BSN Visa Debit Card and receives one entry. At the end of the month, Customer A has a deposit growth of RM100 in the account. Therefore, Customer A will get two entries that month.

Fixed Deposit (Conventional/Islamic) (RM) Eligible entry

FD Growth (Conventional/Islamic) category:

RM3,000 in Special Rate 1 entry

RM500 in Board Rate 1 entry

Terms and conditions CUTI- CUTI BSN campaign

This campaign is open to all eligible new and existing BSN account holders for Savings Giro & Giro-i (which may consist of individuals, joint account holders, sole proprietorships, partnerships, clubs and associations).The eligibility criteria are as follows:

Individual account holder aged 13 years and above

For joint accounts, the eligible participants will be theprimary account holders. The entries for deposit growthwill be determined based on per customer (CIS) regardlessof the number of joint accounts within the bank

Malaysian citizen

Non-Malaysian with valid working permit and passport

Existing customers who maintain deposits growth of atleast RM100 during the campaign period

Existing customers who convert ATM card to the newBSN Visa Debit Card during the campaign period

Existing customers who spend RM50 using newBSN Visa Debit Card during the campaign period

Existing customers who place RM10,000 in Special RateConventional/Islamic Fixed Deposit

Existing customers who place RM500 in Board RateConventional/Islamic Fixed Deposit The eligible customers who closes his/her account(s)

before the prize draw shall not be entitled to any entry onsuch account(s)

New customers who open an account with initialdeposits of RM200 with application of the new BSN VisaDebit card

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For sole proprietorships, partnerships, clubs andassociations accounts, the eligibility is subject to theconditions that such account is managed by an individual

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Permanent resident of Malaysia 6.

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Winston E. Jeyaprakash, deputy chief executive (retail banking).

Approaching 40 years of serving the communitys financial needs, BSN has pioneered and forged the mandate from Bank Negara Malaysia, which is to cultivate the lifestyle of savings and financial inclusion among Malaysians from all walks of life.

THE benefits of the CMD-i are:l Flexible interest options

Depending on the term and type of accounts selected, you can choose to have the returns paid monthly, quarterly, annually or at maturity. Returns are electronically credited to your account or reinvested into your FD/CMD-i accounts.

l Personalised service BSNs specialist consultants are renowned for their efficieny, friendly service and product knowledge. Their commitment to service means you can speak to a real person every time.

l Competitive interest rates across a range of terms Savers can choose a term from one month to five years. Whichever term is chosen, you can be confident that you will receive a competitive interest rate on your BSN term deposit.

BSNs Fixed Deposit/Commodity Murabahah Deposit-i

Bank Simpanan Nasional has been serving the communitys financial needs for close to 40 years.

l Maturity of fixed deposit There are a number of options when the deposit matures: Reinvest for a shorter or longer term Add additional funds Change interest payment options Withdraw all or part of the balance unless BSN is provided with other maturity instructions, your term deposit will automatically rollover for the same term at the applicable interest rate offered on the maturity date

l Simplified processes Same day set up and the account will begin to accrue interest if applications and all of the required supporting documentation has been correctly completed and received by BSN any given business day at the banks nearest branches.

Sunday 7 December 2014 StarSpecial 3

4 RETIREMENT PLANNING StarSpecial, Sunday 7 December 2014

Capstone to your financial journeyFOR almost half of Malaysias working population, the Employees Provident Fund (EPF) savings is probably the single largest sum they will receive when they retire at the age of 55 or 60.

Naturally, there will be temptation to spend it all at once on expensive vacations and luxury living. Many people will not think that such a lump sum can diminish quickly.

Recent data by the EPF reveals that 69% of its 14 million members retire with less than RM50,000 in their EPF account and those who withdrew their retirement savings in lump sums spent all the money within the first three to five years.

To compound the matter, the increase in life expectancy along with the rising cost of living also does not augur well for retirees, particularly those who have not achieved the recommended basic savings for retirement, says Tunku Alizakri Alias, deputy chief executive officer (strategy) of EPF.

The EPFs basic savings concept is designed so that by the time members reach 55, they should ideally have a minimum retirement savings of RM196,800 in their account.

This amount was derived based on the national poverty line income index of RM800 per month.

But the retirement funds latest data also reveals that only 23% of

people in the 50 to 55 age group have achieved the minimum retirement savings.

Planning ahead

A comprehensive plan that places emphasis on health care should be given precedence above all else.

However, it may be difficult for laymen to understand what is particularly suitable for their position.

For them to set their own retirement goals and fall back on EPF savings may not be enough.

This is where sound advice can be very beneficial. Someone who is conversant in financial

planning can not only help to put all retirement expectations in perspective but also help you to make informed decisions on how to achieve a reasonable level of comfort in your retirement years.

As the largest retirement fund in the country, the EPF has taken the first step to set up the Retirement Advisory Service (RAS) to help members plan for their transition into retirement as well as address the trend of lump sum withdrawals of savings by retirees.

Since its inception in July, more than 2,000 people have sought assistance and advice from the two RAS establishments in its Kuala Lumpur and Petaling Jaya offices.

Much-needed advice

According to the EPFs Strategic Operations Department, the idea to establish RAS was partly driven by the burgeoning need to tackle financial illiteracy among the younger generation of Malaysians.

It says that the issue of inadequacy of retirement savings should not be exclusive to those who have retired or are nearing retirement age, but it should be a matter of concern to the younger generation too.

More often than not, those who have just entered the working world will put retirement planning on the backseat and only

start thinking about it when they near retirement age, says Alizakri.

Against such backdrop, the EPF felt that the setting up of RAS was not only extremely crucial, it was also timely. More than 50% of EPF members comprise the Gen-Ys (ages 14 to 35).

The EPF hopes that through RAS it can help younger members see that the most valuable asset they have when saving for retirement is time and that they get the advice they need for them to make vital decisions about their EPF savings as they set their

retirement goals, says Alizakri.In addition to giving advice,

the EPF says RAS will carry out awareness and education programmes on basic financial and retirement planning as well as work closely with other agencies to gradually increase the level of financial awareness and literacy in the Malaysian working population.

These programmes will include information on other cushions that can absorb the impact of retirement such as health protection schemes and insurance coverage, which are as important as having an extra piggybank, he adds.

The EPF is tireless when it comes to reminding its members that their EPF savings are for retirement and the pre-retirement withdrawal facilities should only be made when it is of absolute necessity and after all other resources have been exhausted.

Indeed, good financial help is not hard to find. By planning, you can design your future, and this encompasses looking beyond your EPF savings or pensions, says Alizakri.

There is more than a single approach to arranging your financial resources for retirement, each with its own set of advantages and disadvantages.

All it takes is the will to plan and strategise to ensure a smooth financial transition into retirement.

Tunku Alizakri Alias, deputy chief executive officer (strategy) of EPF.

The EPFs basic savings concept is designed so that by the time members reach 55, they should ideally have a minimum retirement savings of RM196,800 in their account. This amount was derived based on the national poverty line income index of RM800 per month.

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