Importance of planning early

Retirement represents a great opportunity for people to reward themselves after a lifetime of hard work. For most people, that meant decades of long hours in the office to provide for their families and fund children’s education. When those years of hard work are accomplished, retirement offers the opportunity to spend more time with friends and family, to travel, and to enjoy activities you did not have time for before.
But, for many, the big question is: How will I pay for all this once I am no longer drawing income from my job? Especially in these uncertain economic times, as clouds appear on the horizon, that could make realising this dream more difficult.
The worldwide financial crisis that hammered US financial institutions and crushed the fiscal strength of numerous European countries found its way to Asia.
These events serve as a wake-up call that, as financial services generally caution, previous performance should not be taken as an indicator of future events. While economies, stock markets and property values grew and were solid investments through most of the 1980s and 1990s, the currency crisis of 1997 and the more recent financial services meltdown that started in 2008, show that when times are good, that’s precisely the time to take decisive action to prepare for the future and build a cushion against potential economic downturns.
Getting started early in life is one of the most important things you can do. If the stock market crashes and property prices fall when you are in your 20s, it’s painful, but you can still recover lost wealth. But what if that happens much later in life, just as you are on the cusp of retirement?
If you’ve planned for retirement and taken the right steps along the different stages of your life, the answer is simple: relax, carry on and ease into retirement safe in the knowledge that you’ve done the right things to secure your golden years. This means following basic principles such as consistently saving and investing throughout your working years, and shifting your investments from higher risk assets when you are younger to increasingly lower-risk instruments as you get older.
The problem is, relatively few people plan for retirement early enough. The conclusions of recent research, the 2010 AXA Retirement Scope, show that only 40 per cent of respondents in Indonesia had started planning for retirement – this is down from 57 per cent just three years ago. In Hong Kong it was just 57 per cent, in Thailand only 54 per cent, and in the Philippines a mere 30 per cent (down from 41 per cent).
Few people even know how much they’ll need to retire. In Hong Kong, about half of workers know the approximate amount of their future retirement income, but only a minority know the exact amount. In Thailand, around 80 per cent said they could not predict their retirement income. The same is true for the Philippines – a major jump from three years ago when it was 50 per cent. This compares with 58 per cent in Japan and 62 per cent in Singapore.
And, while preparation and awareness are sliding, the ability of government-run programmes to serve as a retirement safety net is also weakening. Many Asian countries are experiencing declines in the number of young, working-age people – a smaller number of taxpayers will need to fund programmes for an increasing number of retirees. In Thailand, for example, the overall population is expected to grow just 6 per cent in the next 10 years, while the number of retired people drawing government benefits is expected to jump 50 per cent from 8 million to 12 million. And, improved standard of living means the life expectancy of the average Thai will be 81 years within the next decade – 10 years longer than it was in 2006.
Add this to the many other strains on government coffers, and you can pretty much count on the programmes that your parents relied on to provide retirement income being squeezed or phased out altogether by the time you reach retirement age. In fact, the Thai government has issued statements alerting young people that they should prepare for cuts in retirement benefits in the coming years.
In Malaysia, the average EPF retirement account has only about RM80,000, and most retirees use up their EPF money within three years of withdrawing it. To help address this, the government has said they are considering allowing retirees to withdraw savings in stages over time, rather than taking it all in one lump sum. And, more than half of young and middle-aged working people say they would like to supplement their EPF fund with savings and investment instruments of their own. For instance, retirees in the UK are constantly seeking various ways to boost their retirement fund, such as equities and bonds or private retirement schemes.
Now, knowing that there is greater need than ever before to begin planning early, what should you do? First, you need to start saving on a regular basis – and to help you figure out what to do with the money, the best approach is to seek the advice of a professional investment adviser.
A licensed, qualified adviser can help you create a portfolio with the right mix of investments and protections. Many life insurance policies, for example, will not only provide for your family should something happen to you, but will also pay out retirement benefits to you later in life. Education plans can help you put aside small increments of money each month, invest it and grow it into a fund large enough to cover your children’s education expenses – which often hit later in life just as many people begin thinking about retirement. There are even instruments that pay you cash to make up for lost wages should you for some reason be unable to work.
Times are changing, uncertainty is increasing – and those few areas where the future can be more accurately predicted show that the need is greater now than ever before for individuals to take greater responsibility for safeguarding their own retirement.