A survey of 1,000 people in Malaysia by HSBC revealed that 43% of respondents are inadequately prepared, and that one in 10 are not prepared at all for retirement.
The survey conducted in July-August 2012, found 28% of Malaysian respondents have never saved for retirement, including 18% of those in the 55-64 age group.
According to HSBC, financial security after retirement is an issue that will affect millions of Malaysians, especially in light of the United Nation’s forecast that by 2050, there would be one Malaysian aged over 65 for every four aged between 15 and 64.
One interesting highlight from the survey is the question of how long respondents thought they would live after retirement and how long they thought their savings would last.
The answer: Malaysians expected to live 17 more years but their funds would only last them 12 years.
Many thought that in order to enjoy a comfortable existence after retirement, they would require 81% of their working age income. On average, respondents were of the opinion that they need a household income of RM76,900 a year.
As only 46% of those surveyed were regular savers, the crucial question is: Why are people not saving for retirement?
Half of those not saving for retirement said they were being held back by the cost of day-to-day living, and 30% believed that they were saving or investing in a “different way”.
The two biggest obstacles people cited for hampering their ability to save are buying a home (48%) and paying for the children’s education (33%).
On a brighter note, HSBC says Malaysian respondents are amongst the most likely to choose saving for retirement (59%) over saving for a holiday (37%).
“Nevertheless, a significant proportion of Malaysian respondents are willing to dig into retirement savings as a means of dealing with an unforeseen crisis. Taken together, this shows that whilst focusing on the longer term helps to boost savings for retirement, the readiness to draw on long-term savings in an unexpected crisis will act to reduce the value of retirement savings for some Malaysian respondents,” it stresses.
The survey showed that the most common methods of retirement financial planning are informal, such as people’s own approximate calculations (53%), and HSBC notes that people who got professional advice tended to save more.
Of those who used a professional financial adviser, 60% saved more for retirement as a result. And of those who consulted a professional financial adviser to develop a written financial plan, 67% saved more for retirement.
In comparison, among those who plan their own retirement, only 52% saved more.
The most popular retirement aspirations among Malaysian are 1) to spend more time with friends and family (75%), 2) to take frequent holidays (62%), and 3) to start a business (48%).
The biggest fears surrounding retirement were financial hardship (68%) and poor health (59%).