Save for a rainy day! Your parents were right- setting aside money is one of the most important actions that you can take to safeguard your future. The recent global upheaval during the pandemic was a painful lesson on saving for many, with nearly 60% of households having to receive government assistance by mid-June 2021. Unexpected events happen- but whoever thought that the world would come to a standstill, in so many aspects?
Of course though… the question of how to save is not as straightforward, with no “one-size-fits-all” saving method to ensure you will have enough to meet your family’s personal needs through the years.
Julian Ng of Akrunow lends his expert advice on retirement funds, organisation of finances, and types of saving accounts for married couples to help you get started.
Financial Wellbeing: Part 4
Saving For Your Family’s Future
I am supporting my parents and I feel like I don’t have enough money for myself or savings. How do I help my parents, but also set aside enough for retirement?
Julian: If your parents own a fully paid property, you could do a reverse mortgage to get some income from there. What happens is that the lender would loan the parent-owner money secured on the property with no repayment until the death of both parents.
You could also also sell existing property and move to a smaller, less costly space which should raise a chunk of cash. Invest that cash and rent. Ditching the car also reduces expenses, while raising some funds. Grab and public transportation are much lower cost.
Go to job websites for retirees and see if there’s anything there to supplement income, while giving opportunity for your parents to continue to contribute to the workforce or society.
Retirement
Many Malaysians depend mostly on the Employees Provident Fund (EPF), a compulsory pension scheme, for their retirement. Unfortunately, recent statistics show that 70% of Malaysians outlive their retirement savings, with those who withdrew their funds at age 55 using up their savings less than a decade after retiring. It may just not be enough to save with EPF!
Add on the effects of the pandemic leading to Covid-related withdrawals over the past two years, with the EPF admitting in October 2021 that only 3% of EPF contributors can now afford retirement. Julian shares other ways we can save for our family’s future.
How do I invest for retirement besides EPF? How much do I need for my retirement?
Julian: EPF achieves a “balanced profile” with largely Malaysian investments. This gives average returns of 4-5% over the long-term. It is therefore a good idea to save as much as possible separately under the “growth profile”, which gives much higher returns and risks over the long term from global investments.
EPF also provides options for withdrawing under i-Invest to invest more into “growth” profiles.
While there are alarming stats for almost empty EPF accounts, the flipside is that it’s not impossible to save for retirement with the current earning potentials. It is important to supplement that by a moderate lifestyle.
Personalised Plans
Julian: [Saving for retirement involves the] same points as [what was mentioned in planning for] education,(as discussed in our Part 3 Session).
Bottom line: Plan and save as much as you can by setting up a retirement goal. The robo-advisor gives you a savings plan on how to achieve your inflated retirement lifestyle costs based on today’s expectations (which you can also modify according to how your expectations change).
Family Accounts
You are married, but should your accounts be married too? As with most things, there’s no outright answer, with considerations to be given to specific situations of every family.
Should a husband and wife have a shared account, or a separate account?
Julian: Having a shared account is great for budgeting, especially when incomes are mutually put into that account . It is also immediately accessible by either spouse without being included in the will, should death occur.
Separate accounts are understandable if either spouse had established own savings before the marriage. It is also good, especially for the protection of the wife who has no income of her own but contributes significantly to the household.
This sums up our four-part Financial Wellbeing Series with AkruNow! Parts 1, 2 and 3 can be found here, if you’ve missed out on the series thus far.
A big thank you to Julian Ng, for making this possible, and for sharing your invaluable thoughts with us over the past few months. We hope that these sessions have helped addressed many of your money concerns, and sincerely wish all our families a smooth financial journey ahead.
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