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By Kian Ng


Planning for retirement isn’t flawless. Learn about some common mistakes and how to avoid them.

Retirement planning is among one of life’s priorities as we would want to have enough to fund a retirement in the lifestyle and up to the life expectancy that we want to live out.


As you prepare for retirement, chances are you may have tripped over one of these mistakes that may cost you in the long-run, for example you may have to work for extra years before you can afford to retire. Luckily, there are ways to recover from them if you are willing to make changes.


Here are some retirement planning mistakes people commonly encounter and some tips to ensure your planning gets back on track.

Mistake #1. Not having retirement plans


Of all the financial mistakes, the most common mistake is when people don’t even have a plan.


In this day and age, you must have some plans to ensure that your retirement planning is on track.


Based on the Employees Provident Fund (EPF)’s annual report, majority of Malaysians have not saved enough to last them more than five years post-retirement. At the same time, according to the Department of Statistics Malaysia (DOSM), an ordinary Malaysian is expected to live for 74.5 years. If you retire at age 55, and your funds dry up by age 60, what will you do to provide for yourself for the following 15 years?


Even if you do have some money tucked away in a retirement fund BUT it is lower than what you have calculated you need, you are still in a vulnerable position. In your desperation, you are likely to become an easy target for scammers. You could end up losing it all.


Solution #1. Start making retirement plans


Retirement planning is important to ensure targeted funds are available upon retirement.


Even though a plan may only cover projected values for your retirement, at least these figures have taken into consideration inflation rates, interest rates etc. Knowing the numbers can give you an idea of what minimum amount you need to sufficiently supporting your chosen lifestyle.


A good retirement plan will also clearly tag different assets towards specific purpose i.e. children education, retirement, or discretionary expenses. The asset tagging for different purposes will allow retirees to cross-check whether their allocation is unbalanced and thus justify whether an adjustment is needed. For example, if investments in unit trust fund are tagged to your child’s education planning, it should not be calculated for retirement planning to avoid double calculation that could give an impression that all plans are still on track when they are not.

Mistake #2. Not investing; only saving


Many still believe the old rationale that their retirement can be funded by their savings. And so they save and save. To them, investing is risky and practically counted as gambling!


The truth is that money needs to grow to catch up with inflation rates. Low interest rates of bank savings accounts are not able to sufficiently grow your money on par with inflation rates.


This is made worse when individuals close their eyes and lump together all emergency savings, business funding, personal expenses funding into one pool fueled by savings while hoping that this is enough to cover all their monetary needs now and always.


Solution #2. Opt to invest your savings


Investing your money helps your money keep up with inflation rates. Avoid keeping all your eggs in one basket by choosing to invest diversely.


How do we invest with better certainty even though there is so much uncertainty in the market?


Managed Portfolio, income portfolio or private mandate accounts can be good options to diversify risk. However ,the composition should be based on your risk tolerance to ensure you have peace of mind while investing. Since we invest to ensure our net worth grows by years, changing asset classes combinations with time is necessary as the market responds differently to current events.


While investing is such a simple term, the options for investors are diverse. To begin, investors should have familiarity with the following questions.

  • Are you familiar with the various assets classes available in the market?

  • Do you know what suits your personal risk profiling?

  • Have you assessed your own risk tolerance?

Now, answering these questions aren’t always as easy as you would need some financial knowledge, time, and also capability to do an analysis on your own. If you need help understanding the questions, seek the aid of either knowledgeable friends (and second opinions!), or consider directly talking to a professional by engaging a licensed financial planner.

Mistake #3. Greed


Many people believe that they can earn easy money by investing in get-rich-quick schemes, with the hope that their wealth can be doubled in the shortest periods of time. Greed blinds their minds from even questioning the validity of such schemes.


A study carried out by the Telenor Group covering scam victims in Malaysia, India, Singapore, and Thailand concluded that Malaysians are the most vulnerable to Internet scams. Which means, the chances for a Malaysian to lose their money is high and this could be costly for those who have invested their entire retirement funding.


Solution #3. Seek a second (professional) opinion


Scammers have many ploys to trick investors into believing them. Even when it seems like the whole world is rushing to jump onto a super amazing opportunity with lucrative returns, it is best if one can stay rational. Face your fear of missing out and calm down.

When returns are lucrative, rather than jump into the pan while the fire is hot, take it more as alarm bells ringing instead. Seek a second opinion from others who are not involved in the scheme but have some good knowledge about matters related to the topic, preferably someone with professional certifications such as a licensed financial planner.


Do your homework too. Make sure that you have sufficient time to evaluate the cost-benefits analysis and learn the pros/cons of the scheme. Learn to resist peer financial pressure while you do your homework. This is to avoid rushing headlong into making the wrong investment decision which could have severe repercussions on your retirement fund.

Mistake #4. Investing in only 1 asset class


There are some investors who may also lean towards just 1 asset class to plan for their retirement planning. This would be a mistake.


For example, many people follow some unlicensed investment guru’s advise blindly thinking that investing in property is THE WAY to a secure retirement as property value may appreciate with time. These investors believe that they can live on the rent collected every month and live comfortably with that money.


The problem with this is that they fail to access their own risk tolerance. They may also overlook the risk of non-tenanted periods which may even last for years, especially during a financial crisis.


This can be applied to investors who rely heavily on other single asset classes such as stocks or foreign exchange schemes. In these situations, an even bigger risk needs to be factored in if they are not familiar the homework required to understand how they all work.


Solution #4. Building diversified and flexible portfolios


Retirement planning should not lean towards certain assets classes alone, which means one should not hold too much of one asset class and forget about the rest.


An example is holding onto too many properties for rental income. This may cause too little cash or liquid assets in hand as properties are fixed assets. If you were to need cash in hand, it takes time for the liquidation process to take place. Selling a property could take up to years for the right buyers and right pricing to be met.


A diversified portfolio has a good ratio to make up the composition of liquid assets, investment assets, and fixed assets. A good ratio should take up 1/3 of each assets class.

A flexible portfolio allows easy cash flow and liquidation to be made in the event of emergency. A good holding of income portfolio, fixed deposit, Tabung Haji, or ASB can be a good combination of liquid assets, which potentially could give better returns than savings accounts.

Mistake #5. Life changes occur, but retirement plans don’t change


As we live our lives, we encounter experiences and life events which change our plans. Because of this, very little of what we planned decades ago would hold true today.


For example, an unexpected occurrence forced a career change on you. Suddenly, although you are no longer young, you need to dip into your retirement fund to start your own business. This would leave you with a depleted income when you reach retirement age. What is more worrying is if the business encounters financial trouble leading to more money to be pumped from your retirement fund into the business.


Would your retirement plan made some time back still hold? Unlikely.


Solution #5. Regular reviewing of retirement plans


As life faces ups and down and is constantly changing, our retirement planning needs to be reviewed as well to adapt to the changes in our situations and our expectations.


Regular reviews are necessary to verify that our retirement plans are on track. This review serves as a checkpoint to safeguard the minimum required in our retirement fund that must be left intact. This review also assesses if changes to our plans need to be made to match our ability to accumulate retirement funds with the retirement lifestyle we want to lead.

Conclusion


Most people could have many things to be accomplished during retirement, but only have limited resources. We would like to travel all around the world during retirement but found out we can’t even meet the retirement needs up to our life expectancy. This is common amongst all retirees and potential retirees when the failed to plan for their retirement. Thus, one should be prepare not only to plan for their retirement, they should also aware of what financial mistakes they potentially committed to ensure their retirement is on track.


What other steps can be taken to avoid retirement mistakes?

Oleh Rafiq Hidayat Mohd Ramli


Analisis terperinci dan ulasan tentang Pengumuman Belanjawan 2021

Golongan yang paling ramai mendapat manfaat daripada Belanjawan 2021 yang diumumkan pada minggu lalu adalah golongan berpendapatan rendah (B40 dan golongan pendapatan rendah M40). Pelbagai insentif yang diberikan bagi membantu mereka menghadapi masa yang sukar ini.


Berikut merupakan ulasan daripada Pengarah Urusan Wealth Vantage Advisory, Rafiq Hidayat Mohd Ramli berkenaan insentif serta inisiatif yang diumumkan ketika pembentangan belanjawan berkenaan.


#1. Bantuan tunai


Isi rumah (keluarga atau individu) akan menerima bantuan wang tunai melalui sambungan Bantuan Prihatin Rakyat (BPR) bermula daripada RM350 untuk individu berpendapatan kurang daripada RM2,500 kepada RM1,800 untuk isi rumah yang berpendapatan kurang daripada RM2,500 dengan dua orang atau lebih anak.

Bantuan bagi kanak-kanak daripada keluarga miskin juga meningkat daripada RM150 seorang (umur 7-18 tahun) atau RM200 seorang (umur 6 tahun ke bawah) hingga RM1,000 setiap keluarga. Mereka juga akan menerima baucar telko berjumlah RM180 dan data internet percuma di bawah insentif Program Jaringan Prihatin. Ia akan membantu mengurangkan bebanan rakyat Malaysia yang termasuk dalam kategori tersebut.


#2. Moratorium pinjaman dilanjutkan


Salah satu daripada insentif terbesar yang diumumkan semasa pembentangan Belanjawan 2021 adalah peminjam B40 yang menerima Bantuan Sara Hidup (BSH) atau Bantuan Prihatin Rakyat (BPR) akan menerima bantuan untuk pembayaran pinjaman mereka. Mereka akan diberikan 2 pilihan: moratorium selama tiga bulan, atau pengurangan jumlah bayaran bulanan kepada 50% selama 6 bulan.


Proses permohonan untuk bantuan pembayaran bagi golongan M40 akan diringkaskan, dengan peminjam hanya perlu membuktikan pengurangan jumlah pendapatan mereka bagi mendapatkan bantuan tersebut.Bantuan ini akan bermula pada Disember tahun ini.

Lanjutan moratorium pinjaman untuk individu yang terkesan ini akan membantu golongan berkaitan bagi mengubah situasi kewangan sekarang sehingga ekonomi negara bertambah baik dan pulih.

3. Peningkatan pemilikan rumah


Kerajaan turut mengumumkan beberapa inisiatif untuk membantu meningkatkan pemilikan rumah dalam kalangan golongan berpendapatan rendah seperti memperuntukkan RM500 juta untuk membina 14 juta buah Projek Perumahan Rakyat (PPR), lanjutan skim Sewa-Untuk-Beli (RTO) hingga 2022 dan pengecualian duti setem untuk pembeli rumah pertama hingga RM500,000 dari 2021 hingga hujung 2025.

Walaupun ia mampu membantu golongan berpendapatan rendah untuk membeli rumah dengan harga mampu milik, kami berpendapat bahawa insentif ini memberi manfaat terhadap industri pembinaan kerana golongan berpendapatan rendah mempunyai kepentingan lain dan memiliki rumah akan menjadi perkara terakhir dalam senarai keutamaan mereka.


#4. Kumpulan Wang Simpanan Pekerja

Bermula dari Januari 2021, pekerja boleh memilih untuk mengurangkan potongan EPF mereka dari 11% kepada 9%. Pemilik akaun KWSP juga boleh memohon untuk mengeluarkan wangan daripada Akaun 1 (ya, ini bukan kerana penulis tersalah tulis) sebanyak RM500 sebulan untuk 12 bulan bermula Januari depan. Kedua-dua inisiatif ini (ia bukanlah insentif kerana anda menggunakan simpanan sendiri) akan membantu isi rumah yang terkesan semasa waktu yang sukar ini.


Bagi mereka yang tidak menghadapi masalah dengan aliran tunai, inisiatif ini mampu meningkatkan simpanan kecemasan sedia ada atau mengurangkan hutang sedia ada (kad kredit, pinjaman peribadi) jika anda tidak mampu berbuat demikian. Nasihat kami untuk golongan lain adalah mengekalkan sumbangan sedia dan tidak mengeluarkan akaun 1 KWSP kerana tiada sebarang keperluan mendesak untuknya.


Keputusan kerajaan untuk pekerja mengeluarkan simpanan di Akaun 2 adalah bagi mendaftar untuk insurans hidup atau polisi takaful bagi penyakit kronik untuk diri sendiri dan ahli keluarga adalah amat digalakkan. Ia merupakan usaha kerajaan untuk meningkatkan jumlah perlindungan dalam kalangan rakyat negara ini.


Inisiatif ini juga memberikan perkembangan positif untuk sektor insurans dan takaful serta individu yang mempunyai jurang dalam keperluan perlindungan mereka tetapi tidak berniat untuk memohonnya. Perlindungan harta mempunyai hierarki yang lebih tinggi dalam kewangan peribadi dan jika dibandingkan dengan pelan persaraan. Kami sangat menyarankan kepada mereka yang mempunyai jurang dalam perlindungan sedia ada untuk mengambil inisiatif ini sebagai peluang menguruskannya dengan lebih baik.


Walau bagaimanapun, anda digalakkan untuk membuat kajian dan berbincang dengan perunding kewangan berlesen untuk lebih memahami keperluan kewangan anda sebelum membuat sebarang keputusan.

#5. Insentif cukai


Walaupun fokus Belanjawan kali in tidak kepada golongan berpendapatan tinggi, ia tidak bermakna mereka dilupakan. Kerajaan turut mengumumkan beberapa insentif yang berkait dengan perlepasan cukai untuk membantu perancangan cukai isi rumah. Berikut merupakn beberapa insentif cukai yang diumumkan pada minggu lalu.


  • Pengecualian cukai untuk vaksinasi pneumokokal, influenza dan Covid-19 hingga RM1,000 untuk diri, pasangan dan anak-anak

  • Pengecualian cukai untuk belanja perubatan bagi penyakit kronik meningkat dari RM6,000 kepada RM8,000 untuk diri, pasangan dan anak-anak

  • Pengecualian cukai bagi pemeriksaan kesihatan yang menyeluruh meningkat dari RM500 kepada RM1,000 bagi diri, pasangan dan anak-anak

  • Pengecualian cukai untuk ibu bapa atau anak bekeperluan khas yang memerlukan rawatan perubatan dan penjagaan meningkat dari RM5,000 kepada RM8,000 untuk diri, pasangan dan anak-anak

  • Pengecualian cukai untuk diri bagi pendapatan bermula dari RM50,001 – RM70,000 dikurangkan sebanyak 1%

  • Pengecualian cukai tahunan SSPN-I berjumlah RM8,000 dilanjutkan hingga 2022

  • Pengecualian cukai untuk Skim Persaraan Swasta (PRS) sebanyak RM3,000 dilanjutkan hingga 2025

  • Pengecualian cukai gaya hidup meningkat dari RM2,500 kepada RM3,000 dan akan meliputi yuran pendaftaran kejohanan sukan dan akhbar digital.

Walaupun insentif ini tidak sebanyak seperti insentif untuk golongan berpendapatan rendah, ia masih membantu individu dan isi rumah untuk membaiki tahap kewangan peribadi mereka.

Kesimpulan


Secara keseluruhannya, Belanjawan 2021 memberi fokus bagi membantu rakyat Malaysia yang bergelut untuk menghadapi waktu yang sukar ini, dan insentif serta inisiatif ini datang tepat pada masanya untuk mereka. Namun, perkara yang mencetuskan persoalan adalah sumber wang yang digunakan untuk menampung segala kos yang akan muncul nanti. Jangkaan kami adalah belanjawan ini akan memandu negara ke arah pemulihan, tetapi jika ekonomi tidak pulih, kerajaan perlu menjalankan kajian semula bagi mengenal pasti samada ia boleh dikekalkan untuk masa akan datang.


Apakah pendapat anda tentang Belanjawan 2021 yang diumumkan baru-baru ini?


By Saidah Nur Asilah Abdul Shukor


Planning for your retirement can be an overwhelming task. Learn about some useful advice before planning your retirement.

If you want to delve deeper into investing your wealth to secure a financially better retirement, here are 4 pieces of advice to get you on the right track to start investing.

#1. Grasp investing fundamentals


Whether you are a seasoned investor or just someone who is starting to invest, it is always good to have at least a basic foundation of fundamental investment concepts.

While there are working people who invest to supplement their primary source of income, there are also many retired people who continue to invest as they live off their investment income, for example, dividends from shares and rent from property. There are both working and retired persons who invest for capital growth – to build their wealth over time and protect them against inflation. Capital growth occurs when the value of investment increases.


However, there are many people who are unable to see the differences between investing and speculating.


Investing and speculation both put money to use in something that offers the potential for profitable returns. Examples include interest, income, or appreciation in value. However, that is where the similarities end. Speculators buy something expecting a profitable change in price. They will buy if they think something will rise in value and sell if they think it is going to fall.

Investing requires a deeper understanding of how markets work and making informed decisions based on this knowledge. Understanding the relationship between risk and return and how it is affected by time is probably one of the most important aspects of investment. With a good knowledge in certain investments vehicles, markets, and industries, you can understand which ones best suit your needs and goals.

#2. Understand how to accommodate low yield return for investment savings


In the world of investing, two elements that are important are the return and the risk incurred in order to achieve the return. Return is the benefits the investor receives as a result of an investment of some assets and a high return means the investment gains compare to investment cost or other investments.


Risk is the chance that an investment’s return will be different than expected. In practice, risk to many people, is the possibility of losing some or even all of the original investment. One common understanding is that:

  • Low risk is associated with low potential returns.

  • High risk is associated with high potential returns.

The risk return trade-off is an effort to achieve a balance between the desire for the lowest possible risk and the highest possible return. When you understand the risk-return element, only then you know that there are no guaranteed returns in investment.

Most of the investment objectives, among others, are for safety, stable income, growth, and liquidity.  Investments that offer the least investment risk and more stable income have less potential to carry expected investment return and growth in value.


Therefore, by defining the objectives for each component parts of the portfolio, it is created for the purpose to invest in securities in such a way that the investor maximizes its returns and minimizes risks in order to achieve his investment objective. However, do not assume and think that one portfolio is suitable to all ages and financial situation.


Choosing a single strategic objective and assigning weightings to all other possible objectives is a process that depends on such factors for examples; investors stage of life, marital status, family situation, and many more.


Table below provides an example of asset allocation range for each asset class:

#3. Understand the importance of emergency reserves as part of a financial plan.


For retirement planning, it is very important to re-asses your stress level. One simple measure to do by yourself is to list down all your existing liabilities and expenses.


According to Danny Wong, the CEO of Areca Capital MJ, asset allocation is an investment strategy, besides of security selection and the right market timing strategy.  As such, you should have many portfolios as you have many goals.


Financial planning is very important regardless of your life stages, because everyone wants their needs to be fulfilled. However, the risk-return differs from one to another.  While the return depends on your goals and needs, risk is a match to the tolerance from you which depends, among others, your income and personal situation. For a person nearly to retire, some of the portfolios that different in term of amount to allocate are:

  •  Daily expenses or necessities

  • Short term cash needs or emergencies

  • Long term needs such as retirement

  • Extra or luxury wants such as travel and lifestyle

Hence, for retired spenders, the suitable investment portfolio is the one that can offer income and stability. The market speedy recovery is inharmonious with a still-struggling economy due to Covid-19. Global recovery is slow and full of market uncertainties. It is recommended to constantly monitor your portfolio in these times, in order to review and track the progress of your investment portfolio.


In reviewing your portfolio, secure the help of an expert if you need a periodic evaluation provided as a report . The report should address the portfolio performance based on the target allocation as compared to appropriate benchmarks, and the needs, if any, for rebalancing in target allocation, to ensure the objectives being aimed are being met.


Many people believe they are having unlimited resources but the reality is that they are not. Plan ahead and question yourself – how much do you need to sustain you and give you peace of mind for the next X decades?

#4. Revisit of health-saving assets and map-out a plan for sourcing in-retirement cash flow on a year to year basis


The pandemic’s economic side effects also have significant implications for when and how older adults plan their retirements. Not only have older workers experienced some of the highest rates of job loss of any age band, but in previous recessions, it has also taken older unemployed workers a much longer time to become re-employed than younger ones. That, plus the fact most of the companies that are struggling to survive their operating expenses, now are offering Voluntary Separation Scheme (VSS) to their employees, has no doubt prompted some to ponder early retirement.


For older employees that are having health issues, revisit a health-saving assets are important to re-organise existing resources. Most common mistakes are for this group of early retirees, they thought they have unlimited resources that they even do not mindful to spend the money to whatever cost they want. More alarmingly, based on Employees Provident Fund (EPF)’s annual report, majority of the Malaysians have not saved enough to last them more than five years post retirement. As such, it would be a good idea to maintain a well-stocked health saving accounts to be used in the emergency funds context to pay for healthcare expenses.


On the other hand, given that Covid-19 is the first and foremost a health crisis, spending on healthcare actually declined substantially in the first quarter 2020. That is because both patients and hospitals deferred in-person nonemergency medical visits and elective procedures, as patients were fearful of the spread of virus and hospitals needed to focus on their Standard Operating Procedures to limit the visits and to refocus their resources.


This situation, either from a business owner’s or individual’s perspective, certainly is cause for concern among many of them who are already paying high premiums on existing insurance. With the help of a licensed financial planner, after reviewing the current cashflow, advisors can help to select the best coverage, that includes premiums, healthcare usage and preferences, out of pocket expenditures like co-payments, and the client’s financial situations to cover unexpected healthcare expenses. Certainly, for many that are greatly affected by Covid-19, a room for surplus to save money is a great relief.

Conclusion


Retirement planning is not something to procrastinate over anymore. There are impacts and consequences of not doing proper planning. With adequate data and identified goals, the types of retirements that you would want can be worked on.


While the world we are living in is full of uncertainties, our best hope is to work with unbiased yet knowledgeable experts to plan for and execute our retirement plans while avoiding the financial mistakes.


How do you ensure a smooth retirement?

© 2020 Wealth Vantage Advisory

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