Today after surviving the PIGS soverign crisis, the scenario has changed dramatically and for the worst. It is now more difficult to make ends meet. Many of us in the mid 50's who once thought they were secured are now forced to delay the retirement plans. More troubling are those who have retired or are going to mandatory retirement, they will have to work to break even. Since the financial and banking crisis of the 1998, signs started to emerge. Our economic tiger is whimpering like a kitten, the roar is not surprisingly absent.
Retirement now seems to be almost a luxury beyond the reach of the normal workers in this country.
Today the interest from our savings is very low. The interest rates have shranked dramatically from an average of 7.5% to less than 3% currently.
Over the last decade the yeilds from the goverment bonds decreased drastically from an average of 7.5% toless than 3%; so too is the interest declared by KWSP. All these has negatively impacted the growth of savings. This is not expected to change soon.
The equity or stock market performance is insipid, but volatile. To invest and hold Malaysian stocks over the last 15 years one will tend to underperform. The only way to grow the retirement egg in the local equity market is to trade.
One need RM3500 a month to retire today to maintain the average life style of the family. Assuming 300 months of retirement survival, the egg nest has to be RM700,000.
Notice the inflation? and the subsidy? This will negatively impact the people living here in Malaysia today.
Inflation will eat into our purchasing power and the future prices translated into contant values will significantly shrink our purchasing power and impact our life style. The RM3500 will be just RM1965.
The graph below illustrates the impact of low interest environment and inflation on the purchasing power or the retirees.
Unsurprising economic downturn will have a negatively impact on savings both from the amount saved and the investment returns. Yes, it is a severe migraine for many of us, for some it is intractible. Unless we plan well, many Malaysians will have to eat dog food, for retirement.
Unsurprising economic downturn will have a negatively impact on savings both from the amount saved and the investment returns. Yes, it is a severe migraine for many of us, for some it is intractible. Unless we plan well, many Malaysians will have to eat dog food, for retirement.