Working longer may be a necessity and not a choice

Anyone here does not know that within less than 20 years, Malaysia will become an ageing nation? What’s an ageing nation? Haha. Well in brief it’s not that awesome for the economy, where growth is concerned. As we get older, our productivity drops. Please do not debate about how some at 60 years old are still very fit, running marathons etc. We are comparing against the young people, says 20s and 30s and even 40s. When we look at  the number of babies being produced per couple, I do believe it is just a matter of time. Plus we are living longer too. According to the World Health Organisation (WHO) as at 2015, Malaysian men live to 72.7 years old while ladies are 77. Yes, still many years more for me to reach this average.

Oh yeah, earlier article here: Malaysia – Ageing population – stats and steps We need a minimum of 2.2 babies per couple or else the total population number would actually be  going down instead of up. Well, we are nowhere near that though.  2015: Fertility rate dropped to 1.9 for Malaysia And the numbers continue to drop. Just look around, how many of us have more than 2 kids? Even my wife said NO. What does this mean for us? Well, just look at all the countries in the world today which are having issues with their pension funds and we can more or less guess what’s going to happen to us in the future too. One article for reading? Here: ‘Disastrous Pension Fund Hole’ or this: Signs your Pension Fund is in trouble.

Where EPF is concerned, the returns would get lower. The reason is because the current interest rates are low and thus income fixed investment instruments would no longer yield high returns. EPF used to pay out high dividends of 8% in the early 1990s. In the past 15 years, the yields on MGS and Treasuries have declined. A 5-year MGS paper yield is less than 3.3% now. You may google for the typical returns one of our neighbour’s provident fund to get some ideas too. For the past 5 years, EPF was still able to provide returns of more than 6%. This came from some shrewd investment strategies in the equities market. Current low interest rate regime is likely to continue for the next 10 years or more, all over the world. Look at Japan or the U.S. and we can understand why.

Thus the question that we should also answer would be, how can I prepare for these possibilities? Well, it will happen that’s for sure. Perhaps we can get ready by having more assets than EXPENSES. The more we put into assets, the lesser we have to spend. Time to force savings? My wish is for every Malaysian to own at least one fully paid property so that by the time they are old, they have something to fall back on. Happy starting the property journey.

written on 3 Dec 2016

Next suggested article:  Malaysia: 42 percent senior citizens have zero savings

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