Many years ago, I read Mr. Yap Ming Hui’s book ‘Maximise What You’ve Got… No matter how much you have now.’ Powerful title and something extremely important because it’s quite usual to hear people complaining how little they have. Yet, not many bothered to use whatever little they have to create more wealth. Frankly, not many in a million that would win a lottery no matter how long we keep buying… A few days ago, I read an article by him in TheStar ‘Making a smooth transition into your retirement years’ He shared many good points and I would encourage everyone to buy and read some of his books too. Here are some of his points in brief with additional resources that I have added for everyone.
A holistic financial plan is needed and everyone should have one. It will help to check our financial readiness for retirement. In fact, if we google for some financial planning resources, there are quite a number even within the Malaysian context. One example would be a Personal Finance checklist by Entreprenuer Insight. It tells us that it’s important to manage our finances right before we attempt to start any business. I think it’s even more important for working professionals to have financial awareness because else, peril awaits! Another one by Great Eastern allows one to actually do some calculations on how much one would need in order to retire. Quite an easy one to really make us understand that we may not have enough to actually retire! Here’s the page.
He says, “You need not be 100% debt free in order to retire.” Haha. While I agree with his statement but I think there are many who disagrees because when one retires, one may no longer have income, then if one has debts what will happen? He says one should not have massive debts; less than 30 percent of debt vs asset level should be ideal. He also shared that if we have settled all our loans, it may be difficult to apply for new lines of credit because once we retire, we have no documented source of income. He also shared this about credit cards. Many retirees streamline their credit cards and believe they could apply for it again in future. This may not be the case because financial institutions prioritise income levels when it comes to evaluating one’s ability to service the loan. Here’s an earlier article about retirees and property investment
His next point. It’s important to have CASH RESERVES. The recommended level? 6 months of active income. The higher the better. One should increase the cash reserves to three years when one is just three years away from retirement age. Reason is because even if one could cut down on monthly expenses such as petrol, parking costs and eating out but this may be be replaced or even exceeded by medical or health products and supplements. Here’s an earlier article about having strong savings
Next point is very important. Retire from work but NOT from investing! He says that the worst investment risk is to liquidate all the investments into cash because we could not run away from the risk of inflation. He advised that at this stage, high-risk/high-return options may no longer be advisable. In fact the prime objective now is to earn between 6% and 9% p.a. returns in order to stay ahead of inflation. Here’s an earlier article about retiring with just a property, possible?
He then shared about insurance coverage. He said that when we retire, we may lose the all medical benefits and insurance that we used to enjoy in our employment. Thus, one may not have any idea how much one has been paying until one has to pay for it themselves! It’s a must to get some health plans on our own because the longer one delays, the more expensive it will become. Remember, due to our health condition, the insurance company may exclude certain coverages, impose a loading or even reject your application. Here’s an earlier article in kopiandproperty.com
Last but not least he shared that about 85% of retirees in Malaysia feel a sense of regret at not having prepared adequately for retirement. Here’s that full article in TheStar for reference. So, are we ready for retirement? The secret to retiring is actually to prepare ourselves enough so that we can choose when to retire instead of being retired due to age. Oh yeah, working above 65 is actually something that will become common in the future. We either get ready to face it or face it without being ready. No other choices yeah. Cheers.
written on 6 May 2018
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