Category: business

From advertisement run by insurance company, investment company to banks, and even the likes of private pension and pension fund, the idea of retirement planning is central on the need to plan early so that we can have adequate savings that sustain our golden years.

That being said, most (if not all) messages revolving around the concept of retirement is more often than not about “whether you prepared enough money for your retirement”.

Imagine people who have been working diligently and save very hard to prepare for this eventual phase of life called retirement for the past three decades. When they finally retire from their full-time work, does this now mean they will have a very good retirement?

I believe that a good retirement is determined not by what product we use to prepare for it, but how we invest our retirement money. In fact, there are three non-financial sides that we should not ignore.

Time

“What we do with this luxury of time is equally important (if not more important) than whether we have prepared enough money for our old age.”

One of the biggest differences between before and after retirement is not just about our main income will come to a stop, but rather, we will now have all the time available to ourselves.

So, what we do with this luxury of time is equally important (if not more important) than whether we have prepared enough money for our old age.

There is a saying that sound like this, “Growing old with lots of money is no longer the goal. Dying rich cannot compete with living rich, and making a living does not measure up to making a life.”

This implies that while we may be rich financially, if we are not rich in life, then those money may not carry any significant meaning beyond fulfilling our basic need.

There are 24 hours a day and this means we will have 168 hours every week now. Before we stop working completely, assuming we spend eight hours a day for our work, and we work 22 days a month, we will now have an additional 160 hours available to us!

So, how are you planning to use this new found 160 hours of your life? Having an idea for this is crucial because how we use our time will determine how our money will be used.

Of course, we will have some ideas about what we want to do when we no longer have to wake up to clock in for work. Maybe we can go shopping, hi-tea with friends, travel and do some of our hobbies. This is such a good thing and it will surely be liberating for us to indulge in these activities. However, do we see ourselves constantly doing this to fill up the 160 additional hours for years or decades? Could we come to a point that these activities that look attractive to us now may then become boring in future (after enough repetition)?

Meaning

“When we do not find life interesting, we may start to lose a sense of what is worth living for.”

Another key factor for people not retiring well is boredom. When we do not find life interesting, we may start to lose a sense of what is worth living for. It may also lead to us seeking new excitement with the retirement funds we have and in certain extreme situations, the person may even squander away their retirement savings.

On the other hand, people who have retired well and happy in their golden years usually have a few things in common. One such trait is living their life with a purpose. This can include volunteering at certain organisations with a cause they believe in. It may also be work that allows them to use their talents or experience to help the younger generations, such as a mentoring program.

Money is not the main motivator for getting involved in such projects or activities, but rather living a life that is ‘rich’ in meaning and purpose. If we look around, there are many people that can already afford to retire, but yet they are still actively pursuing a certain cause.

Speaking with them to understand their mentality may also help in seeing a different perspective.

Health

“No matter how wealthy or how financially prepared we are, without good health, anything else hardly matters.”

Think about your retirement as having three phases. In early retirement, you hopefully have the time, resources, and fitness to lead an active life. In the middle of retirement, your level of activity will probably start to slow down. And in the third phase, most retirees begin to settle into their homes and prioritise their wellbeing.

It is in the third phase that health care costs can increase dramatically depending on your needs and your personal support network. This is also potentially one blind spot that most people have not come to realise.

Some retirees who anticipate assisted living or in-home nursing purchase medical insurance with very high coverage. But these products only can do so much, i.e. it only pays for our hospitalisation bills and some post-hospitalisation. Other things that require money but not a hospital stay are not covered (yet). Hence, there is still a need to plan for additional funds that cater to these situations and having a back-up fund that we can dip into is crucial.

A more sensible way is to plan and accumulate our retirement savings, while also planning how to keep ourselves healthy and fit so that we enter our retirement with reasonable health.

Sadly, too many seniors put off making these difficult decisions until they are dealing with a major health or financial crisis. Planning ahead puts folks in a much better position to choose how and where they are cared for on their own terms.

No matter how wealthy or how financially prepared we are, without good health, anything else hardly matters.

Retirement Planning Is Never Just About Numbers

Back to those advertisement messages we are bombarded daily, those are messages about how financial products can help us prepare for retirement. But it is not preparing for a full retirement as money is just part of the picture.

In order to plan holistically for a retirement that really has meaning, you will have to engage in deeper conversation that helps you in understanding yourself better, discovering your personal values, identifying how you envision your retirement life to be, and how are you going to fill up your 168 hours a week, before looking at the numbers.

Real retirement planning should be a process that integrate numbers, and your life. Because eventually, it is the person (you) that gives meaning to the number, not the other way around.

About the Author

Kevin is a NextGen Money Mentor and founder of NextGen Independent Advisors. He works with people to transform their relationship with money and be brave in their pursuit to live a meaningful life with their money. He is a CFP professional, a certified member of Financial Planning Association Malaysia (FPAM). Kevin can be contacted at www.kevinneoh.my.

Most people, especially family breadwinners, have life insurance policies. They assume that on their passing or if they are permanently disabled, the policy will pay out the sum insured that will take care of the financial needs of his family.

However, depending on the circumstances, things may not pan out as the policy holder intends. The following story about Sam highlights the different scenarios that may lead to unintended consequences, and offers the solutions to deal with it.

Question:

Hi, I’m Sam and I’m 43 years old. I’m happily married to Jenny, a 40-year old housewife and together, we are blessed with two children namely, Jim and Gina aged 6 and 3.

As I write, I wish to continue to provide for my family’s living expenses and pay for Jim and Gina’s tertiary education fees if I pass on prematurely. In view of this, I intend to buy a new life insurance policy where the sum assured is RM1 mil and nominate Jenny to be the sole beneficiary of my new policy.

With that being said, I have a few concerns. My question is: ‘Who would receive and manage the RM1 mil in sum assured if:

• I become comatose or mentally disabled?
• After my passing, my wife passes on before my children reach adulthood? Or,
• I pass on simultaneously with my wife due to an accident?

Answer:

In Sam’s case, having a life insurance policy or a handful of them is a good start. The sum assured is helpful to his loved ones if he passes on prematurely as the money will be paid to his wife Jenny in a couple of weeks after Sam’s passing.

It is unlike Sam’s estate which may consist of cash, shares, and properties which will be frozen upon his death. It could take 1-5 years to unlock Sam’s estate and have them distributed to his beneficiaries, depending on his testacy status.

Here, I’ll list down possibilities of how his sum assured of RM1 mil could be received and used in the three scenarios above. More importantly, I’ll share a simple solution that Sam could use to be assured that his life insurance policy will be able to serve his intended objective.

For a start, most, if not all, life insurance policies will cover both death and total permanent disability (TPD). If Sam becomes comatose or mentally disabled due to an accident, his insurer will pay out the RM1 mil in sum assured to him.

But, is this RM1 mil collected helpful to his loved ones?

Well, it depends on the type of bank account his RM1 mil will be deposited into. First, if the RM1 mil is transferred into Sam’s personal savings account by his life insurer, who can have the access to his RM1 mil if Sam is the only person who has the username and password to his bank account?

Thus, his RM1 mil will be stuck and is of no immediate help to his family members.

Second, if the RM1 mil is banked into Sam’s joint account with Jenny, she will have full access to the money. So, is this problem solved? Well, I don’t think so because Jenny could be prone to mismanaging the money.

This could be due to a variety of factors ranging from overspending, to being conned by swindlers and failures in business ventures and investments. But then, Sam could place great confidence in Jenny’s ability to manage his finances.

If that’s the case, will it solve the issue? In a way, the answer is yes but it’s only if Jenny remains alive on planet earth. If not, this would lead us to:

It is possible for Jenny to pass on before their children reach adulthood, and this is after Sam’s demise. In this scenario, Jenny’s balance sum from the RM1 mil given would form a part of her estate and be distributed based on her testacy status.

If she has a written will, the balance sum would then be distributed to her beneficiaries accordingly by her executor.

Otherwise, without a will, the sum shall be allocated based on the ratio of ⅔ to Jim and Gina and the remaining ⅓ to Jenny’s surviving parents as mentioned in the Distribution Act 1958. If Jenny has no surviving parents, then, the sum shall be allocated to her children in full.

Here is a question. How will Jim and Gina collect their sum allocated, if they are below 18 years old?

The answer: Jim and Gina must have a trustee to help them collect the money and manage it on their behalf until they reach, at least, 18 years old.

This leads us to another question: ‘Who shall be their trustee?’

Will it be one of Jim and Gina’s uncles or aunties from either their paternal or maternal side or both? This could potentially result in conflict and strife among Jim and Gina’s relatives, which leads to more financial uncertainties to them.

The RM1 mil in sum assured will form part of Sam’s estate. Thus, the sum is to be distributed based on Sam’s testacy status, which is similar to what we had discussed above in Scenario 2. But here, it is common for a husband like Sam to have elected Jenny to be the sole executor of his will.

Hence, in the absence of a written will or a will without an appointed substitute executor, the question of ‘Who shall be their trustee?’ remains. The siblings’ relatives (both paternal and maternal) may contest to be their trustee, which can result in financial uncertainties for both Jim and Gina as mentioned earlier.

First, the RM1 mil in sum assured shall be kept with Sam’s insurer for a period of 12 months until a trustee to Jim and Gina has been appointed.

Let’s say, Jim and Gina’s relatives could not come into consensus on who should be their trustee after 12 months of their parents’ passing. In this case, the RM1 mil in sum assured will then be transferred from Sam’s insurer to a public trustee, namely Amanahraya Trustees Bhd.

The money shall be kept until Jim and Gina reach 18 years old, the age when both of them are eligible to receive their rightful inheritance. However, this would lead to three common issues for both Jim and Gina as listed below:

• Who shall fund Jim and Gina’s daily living expenses before they hit 18?
• Would Jim and Gina be aware of their inheritance when they hit 18?
• If they do, how will they manage their inheritance after receiving theirs?

Hence, having a life insurance policy alone is insufficient to offer assurance that the money provided for will eventually fulfill Sam’s intended purposes. As such, what then is his solution?

The answer is for Sam to set up an insurance trust.

So, what is it?

For a start, it is the use of both a life insurance policy and a trust to manage the sum assured based on Sam’s intentions upon occurrence of events stipulated in his trust document. Here is how it works;

a. Sam buys a life insurance policy where his sum assured is RM1 mil.

b. He assigns his policy to his trust instead of nominating Jenny as a beneficiary.

c. Then, Sam may elect Jenny, Jim and Gina to be beneficiaries of his trust.

d. Sam may dictate how and when the RM1 mil would be distributed to his beneficiaries. For instance, he may instruct the trustee to distribute the sum in the event of his passing on or him becoming permanently disabled according to the following proportions:

First, if Sam becomes permanently disabled, his insurer will pay RM1 mil to his trustee. Thus, the sum will not be stuck in his personal savings account.

Second, the trustee is to manage the sum based on Sam’s intentions with professionalism and integrity. Thus, the trustee is not permitted to use the sum to invest in stocks, real estate, or new business ventures if it is not instructed by Sam beforehand. This helps to reduce the risk of his funds being mismanaged.

Third, if Jenny passes on prematurely, Sam may include one additional clause in his trust where it allows his trustee to distribute the money directly to both Jim and Gina. As such, this would assure Sam that his children will be taken care of financially if he and his wife pass on prematurely.

Perhaps your situation is uniquely different and thus requires assistance from a qualified estate planner.

About the author

Jocelline Chee is the founder of WG Legacy, a leading professional estate planning firm. You can download a Strategy Report at wglegacy.com/report to find out how she preserved her family’s financial future via a combination of insurance, will and trust and how you can do the same for your loved ones too. 

Congratulations! You have decided to take control of your financial life. You have researched your options, asked a lot of questions, and found the right licensed financial planner professional to help you plan for your financial future.

As you prepare for your first meeting as a client, it is likely you have even more questions, and if so, you are not alone. Many clients of financial planners are not sure what to expect, how much to divulge, or even what documents to bring to their first official meeting.

While every financial planner and firm are different, most follow a common general framework based on the six-step financial planning process. The first step often involves something called a ‘discovery’ meeting, in which the financial planner and the client form a basis for their relationship.

It is an opportunity to build trust, understand problems and priorities, and establish a roadmap for progress toward the client’s financial and life goals.

Licensed financial planners, CFP professionals, and their firms often have an established process that includes providing a checklist of required documents and information they need to get an accurate picture of a client’s financial situation. While it may seem a bit overwhelming to share your most important financial details with someone you do not know well, it is really no different than consulting with a physician about your health.

When you engage a CFP professional, you are working with someone who has pledged to place your interests first.

The Big Picture

When financial planners conduct a discovery meeting, many will ask questions not only about their clients’ financial situation, but also about their personal interests, family and lifestyle. Often, a person’s interests, family or lifestyle can influence their financial goals and decision-making, so having a good understanding of the client’s background may help the CFP professional understand their willingness to take on risk, or the triggers that will make them excited or spark their concern.

The goal is to help clients create a plan that will serve them well in good times or bad, so they always feel confident about reaching their goals.

Thorough financial planners have a process to securely gather their clients’ information, analyse it, and synthesise their findings into a set of recommendations. After receiving and discussing the recommendations from the financial planner, the client and financial planner plan how to implement these, and the role each will play in carrying out the plan.

The more honest and direct clients are at the beginning of the relationship, the better the financial planner can help them create a sound, actionable plan to help them reach their goals. Although some clients might be hesitant to discuss embarrassing financial mistakes they have made in the past, it is important for them to share those so the CFP professional can address any consequences of those decisions.

Prepare For Your First Meeting

Before attending your discovery meeting with a CFP professional, take an hour or two to prepare yourself with answers to these potential questions:

Identify Your Goals

• What do you want your money to do for you? (Would you like a comfortable retirement, or a college education for yourself or your children? Would you like to start a business or buy a home? Contribute significantly to a favorite cause?)

• What are your professional goals?

• What goals do you have for your loved ones?

• What legacy would you ultimately like to leave for your family and the world?

Understand Your Attitude Toward Money

• Do you consider yourself to be a spender or a saver?

• What drives your decision to spend or save money?

• What scares you about money? What makes you excited?

Process

• How much would you like to be involved in managing your finances?

• How comfortable are you in using technology to access online statements, performance reports, tax returns or other documents?

• What do you expect from your relationship with your financial planner?

Get Organised

Your financial planner may also ask you to bring certain documents to your first meeting. Those could include:

• Bank statements from the past year
• Other financial statements, such as loan documents
• Insurance policies
• Tax returns
• Pension or retirement savings account information
• Estate planning documents, such as a will or a trust
• Brokerage statements

Some firms provide a checklist with secure links to enable clients to upload their information prior to the meeting, but you may also bring the actual documents with you, depending on your comfort level. Whichever option you choose, be sure to label your documents and clarify any information that could be confusing.

A Relationship For Life

Although it may seem like a significant time investment or an emotionally taxing experience, being well- prepared for your first meeting sets the tone for a successful, trusting, long-term relationship with your financial planner. The more your financial planner knows about your history, your family, your interests and your financial situation, the better he or she can help you achieve the financial well-being you and your loved ones deserve.

This article is courtesy of Financial Planning Standards Board Ltd (FPSB).

In April 2022, our national inflation rose to 2.3%, which exceeded the average inflation of 1.9% in Malaysia from the period April 2011 to April 2022. And just recently, it was reported that inflation rose to 2.8% in May against consensus of 2.7%. A vast development indeed. In addition, US Federal Reserve’s (Fed) move to raise the interest rate hike by 75 bps on 15 June 2022 had alarmed all quarters over the world on what could possibly be coming next – big inflation. However, what does all these means? Especially to the people out there?

Generally, if most people do not understand what the numbers above mean, they do know one thing – they are feeling the pinch from the price hike of basic necessities, which has begun trickling the wallets of every household. From there, they knew and sensed that the inflation period is here. Not very surprising but not pleasant either, inflation is to stay persistent this time around.

In concurrence with the recent development, Mr Jason Wong, Research Manager of FSMOne Malaysia commented: “On one hand, inflation is reducing the purchasing power of consumers. On the other hand, rising interest rates means that consumers are “forced” to absorb these rising borrowing costs. These are double whammies for consumers which would lead to dwindling disposable income while wages and salaries are hardly changed.”

“Nevertheless, Bank Negara Malaysia’s move through its raise of Overnight Policy Rate (OPR) in May 2022 by 25 bps to 2.00% is commendable as the central bank is being proactive to stave off rising inflation in the country. At the same time, we believe this move will cushion some of the negative impact on the Malaysian Ringgit caused by the Fed’s recent aggressive interest rate hikes.”

“The Research Team at FSMOne foresees that the central bank will make another 3 more 25 bps hikes to the interest rate during the remaining Monetary Policy Committee Meetings (MPCs) that are set to take place this year. We believe the central bank does not wish to make the mistake like Fed did, by hiking rates too slowly and letting inflation to spiral out of control. Hence, BNM stays abreast on this matter,” said Mr Jason Wong.

Translating this to the current daily living of majority of people, Jason further elaborated that the current economic situation has led to Hobson’s choice moves by the Government. “Government has started the removal of subsidies moderately. As the pandemic came along with the Ukraine-Russia war recently, where supply chains were disrupted and shortages increased, many household commodities prices have been soaring up. China’s lockdown at certain provinces also affected major productions of industrial parts that they supply to Malaysia and other countries. Domino effect took place and subsequently, our local production is delayed resulted from this and affected end users as well.”

“All factors combined and ramped up, these contributed to the increasing inflation in the country. Malaysian Government is now challenged to cope with the increasing cost of many commodities,” added Mr Jason Wong.

By 1 July, the prices of eggs and chicken are expected to increase from the current price, RM8.90 per kg. The Prime Minister recently announced that the new ceiling price for chicken will be announced by Agriculture and Food Industries Ministry (MAFI) soon. The price ceiling for bottled cooking oil weighing 2kg, 3kg and 5kg will also be removed on 1 July.

Based on these factors, it is foreseen that Malaysians will be facing greater food security issues as food items, even eating out, will be more expensive. In addition, food supplies could be tighter than before which may lead to limited quantity to be sold to consumers.

Besides food security, majority of Malaysians are challenged with job security in terms of disposable income, as basic items are getting more expensive and possibly overall wholesale, retail and trade sales would drop as an effect to this. Malaysians may have no other choice but to start cutting off expenses and tighten their budget to match with their monthly income.

Not to mention commodities and energy prices are also increasing higher than ever. RON97’s price is now lifted to RM4.84 per litre from RM3.94, which was last recorded on 11 May 2022. Although the price of RON95 has not changed from RM2.05 per litre, but it is foreseen that the price of RON95 may follow suit RON97 at certain point of time. It is just a matter of sooner or later. However, the water and electricity tariff maintain in Peninsular Malaysia.

What does this mean to all Malaysians? Are we expecting recession in the near future?

We are living in the bubble of protection from the Government today, with the lifting of fuel subsidies, like a balloon, as the air pressure increases internally, it’s only a matter of time, the rubber material gives way and pops.

About FSMOne Malaysia and iFAST Capital Sdn. Bhd.

FSMOne Malaysia (previously known as Fundsupermart.com Malaysia) is a Multi-Asset Investment Platform under iFAST Capital Sdn. Bhd. (“iFAST Capital”), established in Malaysia since 2008.

iFAST Capital is a holder of a Capital Markets Services Licence (CMSL) and is licensed by the Securities Commission to deal in securities (includes Stocks & ETFs, unit trusts and OTC bonds), dealing in private retirement scheme, offer investment advisory services, financial planning services and fund management services in relation to portfolio management.

iFAST Capital is a Federation of Investment Managers Malaysia (FiMM) registered Institutional Unit Trust Adviser (IUTA) and Institutional Private Retirement Scheme Adviser (IPRA). It is also an approved Financial Adviser licensed by the Central Bank of Malaysia to conduct financial advisory business and also a Participating Organisation of Bursa Malaysia Securities Berhad.

iFAST Capital is a subsidiary of iFAST Malaysia Sdn. Bhd. which is wholly owned by iFAST Corporation Ltd. (“iFAST Corporation”). iFAST Corporation is headquartered in Singapore and the iFAST group of companies are also present in Hong Kong, Malaysia and China. The company was incorporated in Singapore on 10 January 2000.

iFAST Corporation was listed on the Singapore Exchange Mainboard in December 2014.

A middle-aged executive named John finished work, drove home, and the very first thing that he saw was an envelope that contains the latest credit card statement. It states:

Outstanding Balance: RM 36,867.44.

He was overwhelmed and pondered, “How on earth am I going to clear off my credit card debt? It’s way too much, and I don’t have much cash in my bank account to do so. I’m so screwed.”

If this sounds like you, fret not – let this article be a helpful guide on how to move forward.

1. What’s a Bad Debt?

First, not all debts are bad. There are two types of debt: Good Debt and Bad Debt.

Good debt is debt that makes you richer. For instance, property investors are experts in using debt as their leverage to expand their property portfolio and thus, have become wealthier as their properties’ value continue to appreciate over time.

Bad debt is debt that makes you poorer. For instance, many borrow money to buy things where their value drops over time, thus, resulting in the person becoming poorer. These debts include credit card debt and personal loans, where the interest costs are substantially higher than collateralized obligations like a mortgage.

2. Discover the Root Cause

For some, such is life. For many people, their debts may stem from medical bills, a failure in business, a pay cut, or job loss. If this is you, just know this: It’s temporary and you may proceed to Point #3 to work on a solution.

In most cases, having excessive bad debt is more than just a financial issue – it can be a psychological issue. I believe there is a deeper cause that might be the main culprit to your financial problems. For example, let’s say now you don’t have much money. Why do you:

• Buy stuff that you do not need?
• Attend expensive social gatherings?
• Go on a holiday trip overseas?

3. Work with a Partner

If you are young and single, you may consult your parents for some financial advice. In many cases, you might even receive some financial grace which is much needed as a temporary relief to your problems.

But, with that said, you might lose a valuable chance to improve your financial intelligence as you’ve been bailed out. But, if you opine: “I still want to solve the issue like a man”, then your next best option is to find a friend whom you trust and is more financially-savvy than you to impart some financial wisdom to you.

If you are in a relationship, it’s ideal for you to work on these financial issues as a team. It’s helpful, but not easy, to be transparent about it and to find the solutions together. One thing is for sure: Both of you will come out stronger and more refined as a couple after you have cleared your bad debts.

4. Go on the Offensive

If you have little financial resources to work with, you may set a small goal to raise another RM500 a month which is dedicated to clear off your bad debt.

It may be hard initially. But, if you have learnt how to raise RM500 a month to clear bad debts, very soon, you’ll also know how to raise even more which could be used for your investments.

Here, I’ll share a guideline that enables you to take baby steps towards your freedom from debt. Firstly, you can split the RM500 a month into two categories:

• Earn RM250 a month
• Cut RM250 a month in expenses.

Secondly, here’s a list that you can do to:

Make RM250 a month

• Do Overtime
• Make more sales if you’re a salesman.
• Take up one or two freelancing jobs.
• Sign up as a Grabcar driver.
• Have a part-time job.
• Give tuition classes to school kids.
• Sell your unwanted stuff on eBay or Mudah.my
• Refer customers to your business friends for a commission.
• Join MLM, sell insurance, but please … don’t join money games.

Save RM250 a month

• Track your expenses. You’ll find items to cut on very quickly.
• Say ‘No’ to expensive social gatherings.
• Say ‘No’ to smoking, alcohol, nightclubs and KTVs.
• Say ‘No’ to gambling.
• Cut entertainment expenses.
• Cancel expensive gym memberships. Run in the park or do Tabata at home.
• Cancel Low-Yielding Unit Trust Investments.
• Cancel endowment plans with Low Sum Assured.
• Exercise delayed gratification.
• Quit drinking Starbucks or reduce four RM15 drinks a month.

5. A Word on Balance Transfers

Being aware of the latest promotion of Balance Transfers is helpful. Having said that, it’s essential for you to check the following before agreeing to do a balance transfer on your credit card debt:

• Is it on an Effective Rate or Flat Rate?
• Is it calculated based on an Annual Rate?
• What are the clauses for Early Repayment?
• How much is your monthly repayment after doing balance transfer?

If you are not sure whether a Balance Transfer is to your advantage, you may consult a trustworthy friend first before proceeding with it.

About the Author

This article is co-written by KC Lau and Ian Tai.

Ian Tai is a Dividend Investor. Financial Content Machine. Producer of 200+ Articles, Weekly Host and Presenter at KCLau.com. Co-Founded DividendVault.com, an online educational membership site that empowers retail investors to build a stock portfolio that pays rising dividends in Malaysia and Singapore. 

KCLau is a financial educator, having published seven books including the current bestseller Money Smart, and co-created a dozen online financial courses. He gives away his popular Money Tips e-book volumes free at his website: https://KCLau.com