Time for young Malaysians to prioritise retirement planning: Experts

PETALING JAYA: Experts believe Malaysia’s young adults will be confronting a bleak retirement if they continue to ignore planning for their golden years, as most young adults are inadequate where retirement preparedness is concerned. Retirement communication researcher Dr Steven KC Poh said a good majority of them have ineffective personal financial planning, and as a result do not have enough retirement savings due to the accumulation of excessive amounts of debt and overspending.He said in the Malaysian context, research indicates that financial literacy levels among the young adult population are still alarmingly low, underscoring the critical need for comprehensive financial education initiatives to address these challenges.“It is crucial for policymakers, financial institutions and non-governmental organisations in Malaysia to come together and develop a strategic communication framework and implement comprehensive financial education programmes that cater to the unique needs and demographics of our multiracial and multireligious population. “These programmes should focus on improving financial literacy, fostering future-oriented thinking, and providing individuals with the necessary knowledge and tools to effectively plan and save for their retirement,“ Poh told SunBiz. He added that the Covid-19 pandemic led to a decline in the economy and an increase in the unemployment rate, as many people had to dig deep into their Employees Provident Fund and other savings to tide them over. This effectively shaved off significant retirement savings from many Malaysians, young adults included, and building this nest egg up again and being retirement prepared would be an uphill task. VKA Wealth Planners licensed financial planner Kevin Neoh said for Malaysian young adults, the retirement planning gap extends beyond knowledge. “It’s a deep-seated lack of financial literacy, encompassing behaviours, attitudes, skills, and cultural beliefs. This then manifests as poor cash flow management, minimal or no savings, a weak grasp of long-term financial consequences, and emotional volatility regarding money.”The Financial Industry Collective Outreach 2023 report reveals that a staggering 88.7% of students could not identify two immediate post-Sijil Pelajaran Malaysia actions, highlighting low financial planning preparedness. Alarmingly, 71% exhibit poor financial habits, with 73% of Malaysian young adults in debt. Bankruptcies are on the rise as a result of easily accessible credit through buy-now-pay-later schemes, and a social media-driven comparison culture exacerbates the problem. “The curated images of success and wealth create a pressure to spend to feel ‘enough’ and when self-worth is linked to spending, saving becomes emotionally difficult, even if rationally understood,” Neoh told SunBiz. “Addressing these money beliefs and behaviours is vital, as they profoundly influence financial decisions and shape long-term financial well-being.”Meanwhile, the alarming rising cost of living coupled with stagnant wage growth has undoubtedly narrowed the financial breathing room for retirement savings. “Debt issues and the need to build financial resilience often take precedence, overshadowing long-term retirement planning,” Neoh said. “The focus shifts to immediate financial recovery, such as clearing debts and rebuilding emergency savings. This short-term financial stress can understandably push retirement planning to the back burner, making it seem like a distant concern,” he added.It is easy, and perhaps understandable even, to see retirement as a distant, irrelevant concept, especially for Malaysian young adults with decades until their golden years. However, ignoring it today could set the stage for future struggles, said Poh, who is also the CEO of The Perception Machine LLP, a strategic communication consultancy firm.For young adults, Neoh said, time is their greatest asset – starting early allows for greater savings accumulation and the benefits of compounded growth. Cultivating the habit of living within one’s means, such as spending only 80% of take-home income, is crucial. The misconception that “I can start later” overlooks the reality of evolving financial responsibilities. Future income may be committed to new commitments such as housing or family, and expenses can easily outpace income growth, Neoh pointed out. Job security and access to easy credit are different today, making it even harder to “save more later”. Instilling a retirement saving mindset early, Neoh pointed out, can really strengthen retirement saving and planning norms. “Behaviourally, humans are creatures of habit,” he said. “Starting early builds inertia, making it easier to maintain a savings habit.” Inertia can work for or against you, Neoh pointed out, highlighting the importance of starting now to leverage it positively. “Begin saving an amount you’re comfortable with, focusing on sustainability over rigid rules of thumb, and make it stick,” he said.In a time when daily survival feels more urgent than long-term planning, Malaysian young adults are understandably focused on the now. “But this doesn’t mean retirement planning is out of reach,” Neoh said. “It simply means we should acknowledge that what used to work for previous generations in building up retirement savings or wealth may not be as effective now and in the future. “Therefore, we need to rethink how we talk about saving and create low-friction, flexible strategies that meet young people where they are. The result is that you can understand, based on your current lifestyle, savings rate, net worth, and future goals, at what age you might run out of money,” he added. “This provides young adults with a good glimpse of their financial future and an idea of how retirement prepared they are. If they don’t like what they see, the good news is they still have time to make the requisite changes today. Different choices can significantly alter their trajectory and future outcome.”Benjamin Franklin, one of the signatories of the US Constitution, famously wrote that “in this world nothing is certain but taxes and death.” Retirement can be added to this quote because, in modern society, it has become a near-universal life stage for a significant portion of the population because it highlights the unavoidable realities of life, which many young adults tend to pay no heed to, Poh said.Retirement, as a social institution, is now a widely accepted part of the life course in many nations, he pointed out. “It’s a period that most people anticipate and plan for, marking the end of their primary working life. The key word here is plan, hence the emphasis on starting retirement planning young to ensure retirement preparedness,” Poh said.

PETALING JAYA: Experts believe Malaysia’s young adults will be confronting a bleak retirement if they continue to ignore planning for their golden years, as most young adults are inadequate where retirement preparedness is concerned. Retirement communication researcher Dr Steven KC Poh said a good majority of them have ineffective personal financial planning, and as a result do not have enough retirement savings due to the accumulation of excessive amounts of debt and overspending. He said in the Malaysian context, research indicates that financial literacy levels among the young adult population are still alarmingly low, underscoring the critical need for comprehensive financial education initiatives to address these challenges.

“It is crucial for policymakers, financial institutions and non-governmental organisations in Malaysia to come together and develop a strategic communication framework and implement comprehensive financial education programmes that cater to the unique needs and demographics of our multiracial and multireligious population. “These programmes should focus on improving financial literacy, fostering future-oriented thinking, and providing individuals with the necessary knowledge and tools to effectively plan and save for their retirement,“ Poh told SunBiz . He added that the Covid-19 pandemic led to a decline in the economy and an increase in the unemployment rate, as many people had to dig deep into their Employees Provident Fund and other savings to tide them over.

This effectively shaved off significant retirement savings from many Malaysians, young adults included, and building this nest egg up again and being retirement prepared would be an uphill task. VKA Wealth Planners licensed financial planner Kevin Neoh said for Malaysian young adults, the retirement planning gap extends beyond knowledge. “It’s a deep-seated lack of financial literacy, encompassing behaviours, attitudes, skills, and cultural beliefs.

This then manifests as poor cash flow management, minimal or no savings, a weak grasp of long-term financial consequences, and emotional volatility regarding money.” The Financial Industry Collective Outreach 2023 report reveals that a staggering 88.7% of students could not identify two immediate post-Sijil Pelajaran Malaysia actions, highlighting low financial planning preparedness.

Alarmingly, 71% exhibit poor financial habits, with 73% of Malaysian young adults in debt. Bankruptcies are on the rise as a result of easily accessible credit through buy-now-pay-later schemes, and a social media-driven comparison culture exacerbates the problem. “The curated images of success and wealth create a pressure to spend to feel ‘enough’ and when self-worth is linked to spending, saving becomes emotionally difficult, even if rationally understood,” Neoh told SunBiz .

“Addressing these money beliefs and behaviours is vital, as they profoundly influence financial decisions and shape long-term financial well-being.” Meanwhile, the alarming rising cost of living coupled with stagnant wage growth has undoubtedly narrowed the financial breathing room for retirement savings. “Debt issues and the need to build financial resilience often take precedence, overshadowing long-term retirement planning,” Neoh said.

“The focus shifts to immediate financial recovery, such as clearing debts and rebuilding emergency savings. This short-term financial stress can understandably push retirement planning to the back burner, making it seem like a distant concern,” he added. It is easy, and perhaps understandable even, to see retirement as a distant, irrelevant concept, especially for Malaysian young adults with decades until their golden years.

However, ignoring it today could set the stage for future struggles, said Poh, who is also the CEO of The Perception Machine LLP, a strategic communication consultancy firm. For young adults, Neoh said, time is their greatest asset – starting early allows for greater savings accumulation and the benefits of compounded growth. Cultivating the habit of living within one’s means, such as spending only 80% of take-home income, is crucial.

The misconception that “I can start later” overlooks the reality of evolving financial responsibilities. Future income may be committed to new commitments such as housing or family, and expenses can easily outpace income growth, Neoh pointed out. Job security and access to easy credit are different today, making it even harder to “save more later”.

Instilling a retirement saving mindset early, Neoh pointed out, can really strengthen retirement saving and planning norms. “Behaviourally, humans are creatures of habit,” he said. “Starting early builds inertia, making it easier to maintain a savings habit.

” Inertia can work for or against you, Neoh pointed out, highlighting the importance of starting now to leverage it positively. “Begin saving an amount you’re comfortable with, focusing on sustainability over rigid rules of thumb, and make it stick,” he said. In a time when daily survival feels more urgent than long-term planning, Malaysian young adults are understandably focused on the now.

“But this doesn’t mean retirement planning is out of reach,” Neoh said. “It simply means we should acknowledge that what used to work for previous generations in building up retirement savings or wealth may not be as effective now and in the future. “Therefore, we need to rethink how we talk about saving and create low-friction, flexible strategies that meet young people where they are.

The result is that you can understand, based on your current lifestyle, savings rate, net worth, and future goals, at what age you might run out of money,” he added. “This provides young adults with a good glimpse of their financial future and an idea of how retirement prepared they are. If they don’t like what they see, the good news is they still have time to make the requisite changes today.

Different choices can significantly alter their trajectory and future outcome.” Benjamin Franklin, one of the signatories of the US Constitution, famously wrote that “in this world nothing is certain but taxes and death.” Retirement can be added to this quote because, in modern society, it has become a near-universal life stage for a significant portion of the population because it highlights the unavoidable realities of life, which many young adults tend to pay no heed to, Poh said.

Retirement, as a social institution, is now a widely accepted part of the life course in many nations, he pointed out. “It’s a period that most people anticipate and plan for, marking the end of their primary working life. The key word here is plan, hence the emphasis on starting retirement planning young to ensure retirement preparedness,” Poh said.

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