THE STAR Sunday 7 December 2014

StarSpecial

RETIREMENT
PLANNING

Planning for the golden years

BY RACHEL PUNITHA

T 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

Ballooning factors

and retirement planning their biggest challenge.

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

Statistics
1. 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.

2. 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.

3. 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.

4. 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.

along with other equally critical

issues an ageing nation, demographic changes and the generational gap in workplace.
These issues need to be
addressed sooner rather than later.
Roughly 30 years from now, Malaysia 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 generation before them in many areas of
day-to-day money management.
(Financial Finesse is a financial literacy and wellness service
provider with more than 600
corporate clients).
A large contributing factor to
this is social media and the constant accessibility of the Internet.
But that same report explains that
millennials suffer from a relative
lack of investment knowledge
making long-term financial goals

my financial stability.
The Financial Finesse report
also says that the availability of
parental support from baby boomers (those aged between 45 and 65
now) has risen over the years. Baby
boomers probably had to be cautious with their financial planning
because of the lifestyles and economy 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

Earn while you save > 2

since you do not want to spend

your retirement years scrambling
to earn a living.
You must never take your financial status during your retirement
years for granted. Here, a twopronged approach can be assumed:
investing as a solution to the possibility 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 financially indestructible. Most of what

you earn is usually spent on depreciating things: cars, bills, clothes,
perishables. Two of the very few
things that appreciate are properties 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 apartment. 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.

Planning for retirement early

will also mean a lot of serious factors 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 factors looming over you.
Setting up and building a comfortable 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 financial objective has not been set, now
is the time to do so as there is no
second chance once you hit retirement.
To move forward as a whole
to become high-income society, 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 generation 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, investments and retirement planning are
probably one of the very few solutions 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.

Capstone to your financial journey > 4

2 RETIREMENT PLANNING

StarSpecial, Sunday 7 December 2014

Earn while you save

W

HEN 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

Bank Simpanan Nasional

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

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 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.

BSNs Fixed Deposit/Commodity

Murabahah Deposit-i
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.

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.

Terms and conditions CUTI- CUTI BSN campaign

Savings Growth (Conventional/Islamic) category:
Savings (RM)

Eligible entry

RM100 deposit growth

1 entry

New account opening with initial deposit of RM200

+ New BSN Visa Debit Card
ATM card conversion to the New BSN Visa Debit Crad

1 entry
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.

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:
1. Individual account holder aged 13 years and above
2. For joint accounts, the eligible participants will be the
primary account holders. The entries for deposit growth
will be determined based on per customer (CIS) regardless
of the number of joint accounts within the bank
3. For sole proprietorships, partnerships, clubs and
associations accounts, the eligibility is subject to the
conditions that such account is managed by an individual
4. Malaysian citizen
5. Non-Malaysian with valid working permit and passport

FD Growth (Conventional/Islamic) category:

Fixed Deposit (Conventional/Islamic) (RM)

Eligible entry

6. Permanent resident of Malaysia

RM3,000 in Special Rate

1 entry

RM500 in Board Rate

1 entry

7. The eligible customers who closes his/her account(s)

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

8. New customers who open an account with initial

deposits of RM200 with application of the new BSN Visa
Debit card
9. Existing customers who maintain deposits growth of at
least RM100 during the campaign period
10. Existing customers who convert ATM card to the new
BSN Visa Debit Card during the campaign period
11. Existing customers who spend RM50 using new
BSN Visa Debit Card during the campaign period
12. Existing customers who place RM10,000 in Special Rate
Conventional/Islamic Fixed Deposit
13. Existing customers who place RM500 in Board Rate
Conventional/Islamic Fixed Deposit

Sunday 7 December 2014

StarSpecial 3

4 RETIREMENT PLANNING

StarSpecial, Sunday 7 December 2014

Capstone to your financial journey

F

OR 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

Tunku Alizakri Alias, deputy chief

executive officer (strategy) of EPF.
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

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.
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.