Navigating Path To Retirement

IT’S the end of May and it has been a busy month of announcements what with the extended tax dateline in mid-May, EPF Account 3 going live and upcoming diesel subsidy rationalisation.

For those who are employed, tax filing is a chore and we take that EA form for granted as long as the salary comes in our bank account every month and the number in the EPF account grows.

Then suddenly, you realise that you have time travelled and you are in your early fifties and your parents are ageing rapidly while your kids are still going to university. And your spouse decides he needs a new wife.

As women, we often face unique challenges when it comes to retirement planning. From longer life expectancies to wage disparities and caregiving responsibilities, there are several factors that can impact our ability to achieve financial security in our later years.

In today’s column, we’ll explore some key considerations and offer some practical tips to help women navigate the path to retirement with confidence.

Understanding Gender Retirement Gap

One of the most significant challenges women face in retirement planning is the gender retirement gap. Based on Department of Statistics Malaysia (DOSM) numbers, on average, women tend to live five years longer than men, which means we need to stretch our retirement savings over a longer period of time.

Additionally, women often earn 1/3 less over their lifetimes due to the gender pay gap and are more likely to take time out of the workforce for caregiving responsibilities, further reducing their earning potential and ability to save for retirement, which shows in the EPF savings rate of women at the age of 54.

Organise Yourself

The key to overcoming these challenges is to start organising before actually planning and saving for retirement. Many of us don’t organise our important information sufficiently, causing massive stress for ourselves during tax filing time as well as emergencies.

The issue is further compounded by the fact that most of us don’t share the relevant information with our loved ones, which leads to stress and confusion and delays in estate administration and faroid distribution. Try organising your information using a digital vault as a way to ensure you start on the right foot.

Start Early and Save

Even small contributions to a retirement account can grow significantly over time thanks to the power of compounding interest. Take advantage of the additional RM 100,000 contribution to EPF that you can make annually, as well as shop around for better savings deals including that made available by the new digital banks which are paying returns daily.

EPF and MyBudget recommends RM3,000 per month for the average household to live on. If we estimate a 20-year lifespan post-retirement, this would mean a savings of RM720,000 whereas most Malaysians do not even meet the minimum RM240,000 that EPF requires with 48% of members having less than RM10,000 in savings.

Educate Yourself About Investing

Investing admittedly can be intimidating, but it’s essential for building wealth and achieving long-term financial goals like retirement. Take the time to educate yourself about different investment options, risk tolerance and diversification strategies.

Consider seeking advice from a financial planner who can help you create a personalised investment plan based on your goals, timeline and risk tolerance.

You also need to be asking the right questions in respect to investing to ensure that your investments are also aligned to your ethical values. This is something not many of us think about but more and more people are taking into account to ensure it meets their social and ethical objectives.

Prepare for Career Transitions

Many women experience career interruptions due to factors like childbirth, caregiving, or pursuing further education. While these transitions are often necessary and fulfilling, they can also impact your earning potential and retirement savings.

Take proactive steps to minimise the financial impact of career breaks by saving aggressively during periods of employment, maintaining your skills and professional network, and exploring alternative income streams like freelancing or consulting.

Plan for Healthcare Costs

Healthcare expenses can be a significant burden in retirement, especially as we age and require more medical care. It’s essential to factor in these costs when planning for retirement and explore options for healthcare coverage such as supplemental insurance plans.

For example, cancer is now seen as an ageing disease with 1 in 10 males and 1 in 9 females expected to get cancer within their lifetimes. Consider setting aside additional savings specifically earmarked for healthcare expenses to ensure you’re adequately prepared for any unexpected medical costs. Remember, the medical insurance inflation rates have increased significantly with a recent report stating costs rising 13.8% in 2023 up from 12.9% in 2022.

Long-term care is another crucial consideration for retirement planning, especially for women who may be more likely to require caregiving services later in life. How do you ensure your retirement savings are not depleted by medical expenses?

Our research shows the costs of home nursing ranges between RM3,000 and RM6,000 per month for a full day service, i.e. not covering night-time care. There are currently few insurance policies catering to senior citizens needs.

Stay Engaged and Empowered

Finally, don’t underestimate the importance of staying engaged and empowered in your financial planning journey. Take an active role in managing your finances, stay informed about changes in retirement laws or regulations, and regularly review and adjust your retirement plan as needed.

Surround yourself with a supportive network of friends, family, or financial professionals who can offer guidance and encouragement along the way.

Retirement planning can be daunting, but it’s essential to take proactive steps to secure your financial future. As women, we face unique challenges in retirement planning, but with careful planning, disciplined saving and informed decision-making, we can overcome these obstacles and achieve financial security in our later years.