Category: Protect Your Wealth

The Future of Retirement?

Retirement, is defined as the ending of working phase in life, which is anticipated to be one that is dominated by leisure that is paid for by savings and benefits accumulated during the employment phase. This is how most investment companies sell retirement plans ideas anyway.

There seems to be a great divide of lifestyle – before and after retirement period. But most people who have experienced the shift would tell you otherwise, especially as we journey into the future with increased longevity, greater responsibilities, eroding filial piety, shifting attitudes and different economic landscape.

The idea of retirement would be rather different, say by 2050. I would think that in the future, the younger cohorts may not know the word retirement, either due to circumstances or by choice.

Stop Working? No Way!

“Oh I don’t plan to retire. I’ll work till I die. It’s more fulfilling.”

This is a phrase we hear increasingly often nowadays. Unfortunately, this may soon be a reality for many of us, as the sociographic landscape is bound to evolve in years to come.

The societal acceptance of single living or family without kids has dropped birth rates historically low, causing our projected population to be made out of a growing number of the elderly.

This would undoubtedly affect our dependency on the older generation to contribute to the workforce. Coupled with the increase in retirement age following the increase in life expectancy in the next 30 years, we would have no choice but to let the elderly continue working for the betterment of our economy.

Work? Leisure? Why Not Both?

Friedmann and Havighurst who first defined the concept of retirement which we think of today, in a 1954 research found that people at that time viewed retirement as a time that they could truly engage in leisure activities and that their working age was the period of time to save towards this end.

However, fast forward to today and towards the future, when general standard of living increase and leisure becomes more accessible and affordable, not to mention more varied, we tend to enjoy both work and leisure at the same time.

This makes the concept of retirement seems less convincing and attractive. In the past, people did not see work and the workplace as central to their life interests.

Today, as the pace of economic growth quickens, we look at our career as being central to our lives, and as work and leisure become inextricably interwoven, Friedmann and Havighurst’s idea of retirement as a discrete phase of life dedicated to leisure becomes less relevant.

Blessed With Longevity

With progress in medical treatments and the rise of health-conscious lifestyle through better awareness, an extended life expectancy can be expected.

There is a high probability that life expectancy will continue to increase in industrialised countries in the Americas, Australia and the Asia- Pacific. Already, the average life expectancy will increase in many countries by 2030 – with South Korea expected to exceed 90 years of age. (Source: A 2017 analysis by Imperial College London and the World Health Organisation)

As life expectancy increases, people are also living healthier lives both physically and mentally, and being “too old” to work may seem to come much later in life than anticipated.

Some would argue that the elderly would become irrelevant due to technological knowledge demands. We might be able to say this about the elderly of yesteryear, but it certainly would be different for current generations which grew up with technology and the Internet of Things, and whose lives are being intertwined with technology whether they like it or not.

Shifting Attitudes – Do You Even Want To Retire?

As jobs turn into careers and knowledge or experience is prized over physical labour, we value our contributions to the society.

With mundane jobs and repetitive tasks are replaced by technology and artificial intelligence, our society in the future would be left with nothing but intellectual jobs.

Having to stop working all of a sudden would certainly leave a gap in a person’s purpose in life, especially when filial piety is on a downtrend as well.

As we crystal-ball into the future, the very idea of retirement may seem invalid as people would continue working until they are mentally incapable. Indeed, the very idea that a person stops working and becomes irrelevant to society does not sound like a very appealing thing to do.

Do You Still Need Financial Planning?

With all that said, having a financial plan will allow you to successfully not retire. Financial planning is far more expansive than just “save for retirement.” There’s a lot of life to live between now and when or if you decide to stop working.

There are plenty of other short-term goals and milestones in your life that you likely want to hit – starting a new venture, growing your family or buying a new home and traveling around the world. And financial planning provides a system and a process to make some of these goals possible.

About the Author

Alvin Kwan, CFP ^{CERT TM} is the executive director and head of financial planning at Redvest Wealth & Asset Management. He has over 12 years industrial experience in the financial industry, specifically in wealth advisory, private banking and stock broking. He was also a lecturer in areas of investment management, derivatives, and financial markets.

We at Smart Investor and Redvest is committed to help you better manage your financials. Get a free consultation from an expert by filling in your details here: https://www.smartinvestor.com.my/SIxRedvest

June 22, 2022
Your Money Is Being Robbed, People!

I learned my first money lesson from my parents. Did you?

My parents are thrifty folks. They are always on the lookout for a bargain, down to the smallest item even when grocery shopping. The first thing they taught me about money is to always spend less than I make.

It is the first rule in personal finance – never spend more than you earn.

The Jews are one of the best wealth creators on earth. As part of their culture, Jewish parents teach their children about wise money management as soon as they can talk. One of the critical lessons is to have a “savings” jar. Children are required to put money in the jar, and they can only open it on special occasions like a medical emergency.

Now we can agree that saving is essential. But the problem is that saving money is hard. It is a money habit that is hard to practice due to the human nature of desiring instant gratification. If everybody can help themselves, there will be no need for charity. Kudos to you if you can regularly save a portion of your income.

During the old days, some determined families save their cash in Milo tins. It took a long time for them to trust the banks and deposit their money with financial institutions.

Back then those who did not bank in their money were losers because let’s face it, you don’t gain any interest return by having your cash sitting idly under your pillows, do you? Moreover, what if you got robbed?

After decades of changes, people are more comfortable depositing their money in banks nowadays. Most people perceive Fixed Deposit as the safest investment that gets guaranteed interest income, and capital protected. In Malaysia, we also have PIDM to safeguard your bank deposits with insurance. However, the same situation still persists – savers are still losers. You might be robbed too.

Now you must be wondering why I say saving money could get you robbed later. I am referring to the effect of inflation. Imagine your FD interest being 3.5%, and the inflation rate is 4%. The phenomenon depletes your buying power day by day, year by year…until it might be too late for you to do something about it.

Banks run a leveraged business. Your money in a bank’s savings account allows the bank to lend a higher amount to someone else, who is more capable of making good use of it. Borrowers fund their business ventures and real estate investments with the money you put in the bank.

In other words, think of the bank as the middleman. On one side, the poor and the middle class try to save as much as they can with the banks. On the other side, business owners and investors borrow more money through bank loans to leverage up their business expansions and investments.

Savings is for losers. Inflation and also the government that prints more money are probably “robbing” the savers. Going to the other side, when you take a loan from a bank, they become your business partners because they have confidence in you to make better use of the funds.

When you face problems while trying to pay back, they will share your fear as well. Therefore, if you want to beat inflation and do not want to see your savings depreciate over time, you will need to be the player on the other side.

In fact, saving money is just halfway to financial success. If you do nothing with the money to generate a higher return, you will always be on the losing side. Investing your savings and also borrowing more from the bank to invest will make you a player on the other side.

Treat the bank as your financier to fund your business and your investment. Don’t treat them as a safekeeper of your money. If you do, just wait to be robbed.

About the Author

This article is written by KC Lau. 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

June 22, 2022
Secrets To A Long Life

The search for “the fountain of youth” has had a long history, from tracking down sacred, life-giving water sources in the days of antiquity, to the invention of “miracle pills” and stem cell research in the modern age.

You are born with approximately 20,000 blood stem cells, which your body uses to replenish your blood. Over time, and depending on the “abuse” you put your body through, these cells become damaged and die. As your blood stem cells dwindle, your body becomes less efficient at repairing and regenerating itself.

In essence, your blood stem cells may be the proverbial “clock” that eventually runs out, no matter how well you take care of yourself. In the meantime, however, you have a great deal of control over how quickly those cells perish.

Is your personality geared for longevity?

Personality for Long Life

According to results from The Longevity Project, a Stanford study spanning 80 years, your level of conscientiousness may have a great deal to do with how long you end up living. Having a personality that strives to do things well; being thorough and vigilant − this is a trait that most of the people who live the longest share.

Sense of Purpose

The Longevity Project also dismisses the idea that hard work will kill you early. On the contrary, those who stayed productive and worked hard all their lives tended to be happier, healthier, and more social compared to those who didn’t work as hard. That’s not to dismiss work stress as a factor that needs to be addressed and kept in check.

Social Connection

But being productive can also lend a sense of purpose, which is very important for longevity. And working—especially in your later years—tends to keep you socially connected, which has repeatedly been shown to be an important factor for longevity.

You Are What You Eat

No discussion about longevity would be complete without addressing diet. A processed, high-sugar diet is undoubtedly the quickest route to an early death, barring a lethal accident. This is because consuming sugar and grains increases your insulin and leptin levels, which is the equivalent of slamming your foot on your ageing accelerator. Besides that, research by Professor Cynthia Kenyon shows that carbohydrates have a direct and detrimental effect on two key genes that govern longevity and youthfulness.

Ideally, you’ll want to replace all forms of processed and refined sugars and grains with healthy fats such as butter, olive oil, coconut oil, avocado, grass-fed meats, and raw nuts. Many would benefit from getting as much as 50-85 percent of their daily calories from fats.

Mindfulness and Perpetual Motion

There’s compelling evidence suggesting that having a calm mind and active body are two important ingredients for longevity. The meditative technique known as “mindfulness” has even been shown to have a beneficial effect on genetic expression. Meditation has also been found to affect the enzyme telomerase, which some researchers believe is actively involved with the process of ageing. As for keeping your body active, avoiding sitting is perhaps of even greater importance than having a regular workout regimen.

The science is very clear on this point: sitting too much is a surefire way to take years off your life! And that applies even if you exercise vigorously a few times a week. Basically, what the research is telling us is that getting too hung up on a once-a-day exercise routine is to put the cart before the horse. First, you need to make sure you’re engaging in more or less perpetual non-exercise movement, as this is an independent risk factor for chronic diseases like diabetes and heart disease.

Life Long Learning

Education is also strongly correlated with a longer life. If you think you know it all just because you went to high school or college, you might as well pack it up. It’s all downhill from there. My perspective is to be a lifelong student. If I lived for several hundred years, I don’t think there is enough time to learn all the topics I would like to. That said, merely getting an education can have a great impact, and perhaps it’s because it teaches you to be a student.

Lifestyle Choices Today Impact Tomorrows

The takeaway message here is that you have a great deal of control over your life expectancy, based on the personal choices you make − from how you think to how you move, and what you choose to eat − and when.

In the end, there is no quick fix when it comes to longevity. There is no magic pill and no fountain of youth. Although some people seem to be blessed with longevity in spite of their lifestyle choices, this is the exception and not the rule. For most of us, becoming healthy Centenarians will require effort and attention to the factors discussed above.

This article was brought to you by Dr Mercola, a New York Times bestselling author. For more helpful articles, please visit Mercola.com

June 22, 2022
Should I Take Out My EPF To Settle My Housing Loan?

I saw a news today regarding housing loan, and there are many netizens comment that they took their Employees Provident Fund (EPF) money to settle their housing loan earlier.

Is it a wise decision to take out EPF money to settle housing loan earlier?

Here is an example:

Housing loan amount: RM199,000
Interest rate: 3.15%p.a.
Loan tenure: 25 years
Outstanding balance at the end of 15^th year: RM98,635.60

Based on the information above, if I would like to do early settlement, I have to take out RM98,635.60 from EPF to settle off my housing loan at the end of 15^th year (180^th month).

According to the calculation shown below, I can save a total of RM16,477.72 interest for early settlement.

However, I could have made a potential of RM62,031.40 dividend if I leave the RM98,635.60 at EPF with expected 5% annual return (expected return based on past performance) for 10 years.

I might be earning additional RM45,553.68 (RM62,031.40 – RM16,477.72) dividend if I do not take out my EPF to settle off my housing loan earlier.

Hope that this simple calculation can solve the doubt of everyone who is planning to take out the EPF to do early settlement.

Yet, I received some queries regarding the high housing loan interest rate of about 4%-5% in 20 to 35 years back, is it worth to take out the EPF to settle their housing loan when the rate increases back to 5%?

Based on EPF historical performance, the time where the housing loan interest rate is at about 5%, the EPF dividend is about 7%-8%. Despite the historical performance does not guarantee future performance, but it can always serve as a guide for us before making our financial decision.

About the Author

Angel Chan is a Licensed Financial Planner attached to UOB Kay Hian Wealth Advisors Sdn Bhd. Besides providing comprehensive financial advisory to her clients, she is also committed to educate the public about the correct financial management mindset and methodology through article, YouTube video and Financial Management Workshop conducted by her and the team. Do reach out to her for more information.

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To book a free 1-hour consultation with Angel Chan: https://forms.gle/8Ur46Dox9T6g3yKS8

June 21, 2022

Insurance: Planning for the Future

Insurance planning is the foundation of a good financial plan, ensuring that you have a backup plan to provide enough family income and to fund medical expenses in the event of unforeseen circumstances such as premature death, total permanent disability, critical illness, accidents and hospitalisation, in terms of personal risk.

You should also extend your insurance planning to cover properties risk, liability risk and professional liability risk based on your circumstances and needs.

In the financial planning process, you must first determine your current financial position and make sure you have emergency funds for six to 12 months before you proceed to insurance planning.

With proper assessment of your current financial position, which includes your cash flow and net worth statements, you can determine your insurance needs more clearly in terms of family expenses and outstanding debts obligations.

As a financial planner, I would normally advise my clients to have adequate emergency funds and insurance coverage before they consider venturing into investment. As far as investment is concerned, all investment assets need time to mature to meet your financial goals without any disruption from personal risks, property risks, liability risks or professional liability risks arising from unforeseen circumstances.

Insurance serves as the cheapest and most effective tool to cover potential financial losses without touching your investment assets.

When engaging in insurance planning, seek advice from your trusted professional financial advisor to assist you while working out which insurance plan will best fit the requirements of you and your family, according to the following guidelines:

What kind of insurance do you need?
What will your insurance policy cover?
How much insurance coverage do you need?
How much will you be paying for the insurance coverage?
What happens if you fail to pay the required premiums?
Should you replace an existing insurance policy?
What happens if you terminate your policy?

Your active participation is required when working with your financial advisor to work out an insurance plan that best suits your needs. Be honest about your financial situation. Communicate your goals and objectives. Do not be afraid to ask questions!

In the attached charts, I have provided some guidelines as to the types of insurance coverage to consider. You may then determine the quantum of coverage to ensure you and your loved ones are protected. Take time to make your decision. Regard your financial advisor as a trusted partner, and not merely a salesperson.

What Type of Insurance Do You Need?

If you are worried about…	You may want to consider this type of insurance…	How it helps…
Life insurance
Death of breadwinner	Life	Provides some money for your family if you die.
Total & permanent disability	Life	Provides some money for your family if you suffer from a total or permanent disability.
Death of mortgagor/main borrower of home loan	Mortgage term reducing insurance (form of life insurance)	Pays off mortgage if mortgagor dies.
Health insurance
Trauma/critical illness	Critical illness	Pays a portion or lump sum on first diagnosis of serious illness.
Medical bills for major illness or accident	Medical expense, other hospital and medical plans & riders	The main medical expense insurance plan pays a portion of hospital and surgical costs if you are ill or suffering from injuries due to an accident. Complementary plans such as riders cover co-payment portions (eg deductibles and co-insurance) that are not covered under a main plan.
Long-term care for disability	Long-term care, eg supplements	Pays a fixed monthly amount for long-term treatment upon the insured’s inability to perform a number of “activities of daily living” like bathing, dressing, etc.
Loss of income because due to hospitalisation	Hospitalisation cash plans	Provides income if you are hospitalised.
General insurance
Loss of or damage to your belongings	Home contents	Pays for repairs or replacement if you suffer loss or damage to your home or contents. If you are renting your home, it’s your responsibility to cover loss of or damage to the contents of your home.
Damage to car/theft	Car	Pays for repairs or replacement if your car is stolen or damaged.
Damage to your home	Fire/home	Pays for repairs or replacement if you suffer loss or damage to your home as a result of perils such as fire, flood, and burglary.
Loss of luggage/trip delays/cost of medical care while travelling	Travel	Pays for repairs or replacement if you suffer loss or damage to your belongings. Also pays for financial loss if there are delays or cancellations. Pays for costs related to personal accidents while overseas, including medical and repatriation expenses.

About the Author

Tan Kim Book, CFP, IFP is a Licensed Financial Planner with Phillip Wealth Planners Sdn Bhd and certified member of Financial Planning Association Malaysia (FPAM).

June 15, 2022

Takaful vs Conventional Insurance: What’s the Difference?

There is a prevailing misconception about how takaful is simply the Islamic version of conventional insurance, and is therefore only available for Muslims. This is, however, inaccurate.

Takaful provides similar protection products as conventional insurance, and is open to anyone regardless of religion or creed.

What is Takaful?

Takaful is essentially a Shariah-compliant insurance option that is grounded in Islamic Muamalat (Islamic transaction) principles, and share the same objective of providing protection against financial loss in the event of misfortune that occur from an accident, loss or damage to property, hospitalisation, critical illness, disablement or even death.

The term ‘takaful’ is derived from the Arabic word ‘kafala’ which simply means “to guarantee; to help; to take care of one’s needs”. The term also refers to the concept of Islamic insurance that is based on the Islamic principles of mutual assistance (ta’awun) and donation (tabarru’), where the takaful participants donate their money into a takaful fund that will be used to provide mutual financial benefits.

Similar to conventional insurance, there is an array of Shariah-compliant products under takaful which includes life, health, motor, home and travel insurance as well as many other types of protections.

While there are many similarities between Takaful and conventional insurance, a takaful company ensures that its products and operations are in accordance to Shariah principles. The key difference is in fact the underlying contractual relationship between the takaful operator and the customer.

An insurance contract mainly involves the purchase of a product or a service from the insurance company where the insurance risk is transferred to the insurance company.

Under a takaful contract, on the other hand, the customer undertakes a contract (aqad) to become one of the participants by agreeing to make a donation (tabarru’) to participate in the takaful risk pool fund for claims payment should any of the participants suffer from a defined loss, and appoints the takaful operator to manage the takaful fund.

An important feature of takaful is that the takaful risk fund is owned by participants, and therefore, the risk is shared among them and any surplus will also be retained within the fund or in some cases, distributed back to participants. The takaful operator, too, may be entitled to a share in the risk fund surplus.

The takaful operator is mainly remunerated based on wakalah (agency) fee. The tabarru’ amount and the wakalah fees are stipulated in the certificate contract, which promotes transparency to the customers.

As such, takaful funds are managed in accordance to Shariah, and invested in Shariah compliant assets, while the Shariah committee oversees the activities of the takaful operator to ensure that they are Shariah-compliant.

Takaful in Malaysia

Taking into account the current low penetration rate, rising standards of living, escalating medical costs and ageing population in addition to the robust growth in the Islamic banking and finance sectors, the long-term outlook for the takaful sector in Malaysia remains positive.

The development of the takaful industry is set to remain on a positive note in tandem with the government’s ongoing initiatives to spur the demand for protection among consumers.

The key component in driving growth in a competitive environment especially during the pandemic situation, is digitalisation. As such, takaful operators will continue to incorporate digital capabilities into their business models and marketing approaches to stay competitive in the market.

Within the Malaysian takaful industry sphere, the takaful operators continue with concerted efforts in enhancing awareness on takaful and in providing protection plans suitable for every segment of the society to increase the takaful penetration rate.

These initiatives include strengthening the professionalism of takaful agents, intensifying awareness and interactive programmes for the consumers as well as the introduction as well as the introduction of value propositions by embracing the concept of value-based intermediation.

Despite the cautious business sentiment, the Malaysian takaful industry is expected to remain resilient. The regulatory body, along with the takaful industry players, will continue to introduce and implement various initiatives to further promote the development of the takaful sector.

June 15, 2022
Fired Up: A Look At Southeast Asians Pursuing The Financial Independence, Retire Early (FIRE) Movement
Having an early, secure retirement is a dream of many, and a small, but growing number of people are striving to turn this dream into reality. The FIRE movement, acronym for Financial Independence, Retire Early, is essentially about aggressively tightening belts, and finding multiple sources of income in order to achieve early financial freedom.

Milieu Insight released the results of their ‘Financial Independent, Retire Early’ study, which aimed to find out how common the FIRE movement is among Southeast Asians, and the steps they are taking to achieve their goal. The survey was conducted in May 2022 with N=1500 employed respondents, aged 18-49 years old, each from Thailand, Singapore, Malaysia, Indonesia, and the Philippines.

Do Southeast Asians want early retirement?
- The bulk of respondents expect to retire in their 50s or 60s (62%); Indonesians tend to expect earlier retirement, with only 52% expecting to retire in their 50s or 60s
- Retiring early (defined as retiring before 50s) is a possibility for 60% of respondents, but only 14% think that they are on track for early retirement – Singaporeans seem most pessimistic about being able to do so, with only 9% indicating that they are on track
Steps towards early retirement
- Most common strategy towards early retirement is regular saving (71%), followed by ‘being careful with how I spend my money’ (63%) and ‘investing’ (63%).
- Finding additional employment is much less common (37%) as part of strategy to retire early, but tends to skew towards Thais (54%)
- Insurance – one way of investing – is also more common among Singaporeans (56%) and Filipinos (53%)
- Perhaps due to vast amount of resources on the Internet, most people are hands-on for retirement planning, with only 31% of those who plan to retire early saying that they have a financial consultant to help plan for retirement
A look at the most common strategies for early retirement: Saving and investing
- Among those who save regularly for early retirement, 43% save more than 20% of their incomes
- Among those who invest, 36% indicated that more than 20% of their incomes go towards investments
- The most common investment types are:
- Investment funds (56%)
- Stocks (53%)
- Real estate (52%)
- Cryptocurrency and NFTs, which are gaining momentum but have yet to enter mainstream investing due to their volatility, registers at 41%, and seem to be more popular in Thailand (57%) and the Philippines (54%)
How do people feel about FIRE?
- 57% feel very or somewhat positive about their journey towards achieving early retirement
- Comparing those who are on track to early retirement, and those who are planning to retire early but don’t think they are able to, the former tends to feel more positive about it (83% vs 49% who selected very/somewhat positive)
Methodology

Based on Milieu Insight surveys with N=1500 employed respondents, aged 18-49 years old, each from Thailand, Singapore, Malaysia, Indonesia, and the Philippines, conducted in May 2022.

About Milieu Insight

Milieu Insight is a consumer data and analytics company that connects businesses directly with their target audience. Milieu’s platform offers businesses a wide range of tools for accessing, analyzing, and visualizing high-value and timely consumer opinion data to help power better decision-making and strategy. For more information about Milieu Insight visit: www.mili.eu
June 13, 2022
Vital Role Of Insurance In Wealth Preservation
Wealth preservation is about managing your assets in such a way to make sure that it does not decrease in value. And after a lifetime of hard work, you want to ensure that as much of your wealth is protected.

Of course, optimising and growing your existing wealth is also a key task unless you plan to work for money all the time.

Wealth, just like your health, must be carefully preserved, and successful planning will help make your wealth last for you and your future generations – in case the unexpected happens.

One of the means that we can ensure our wealth is preserved in case something happens to us is insurance.

Demand for insurance as a low risk wealth management tool has seen a spike in recent years. The approach to insurance is also changing, with people from the middle-income group to wealthy families shifting perceptions on the need to protect their potential future income, as well as preserving their wealth for their next of kin.

When you read that insurance is a good instrument to preserve wealth, what exactly can it help you preserve?

Preserving Your Current And Future Income

The Covid-19 pandemic has made a strong case on the notion that nobody really knows what is coming around the corner.

Just imagine that if you pass away during your good earning years, your family could suffer a severe economic loss as a result of losing your current and future income to support them. In this unfortunate ‘fictional scenario’, your family would still have to pay their regular bills, including mortgage(s) and your outstanding debts.

They will also still have to continue accumulate funds for your family life goals, such as children’s education and retirement funds for your spouse. If you did not insure against this, you may leave your spouse or children in a very tight spot.

Preserving Your Dreams / Life Goals

For some people, this is also as good as preserving your family dreams. In this instance, insurance acts as a financial safety net that helps you financially protect your loved ones.

It also enables them to continue living with minimal worry, especially when large financial burdens like medical bills, mortgage, debts and others would easily change the financial status of your family.

Preserve Lifestyle During Difficult Times

We never know what life has in store for us especially while we are still feeling fit and healthy. No one likes to think that something bad will happen to us, and when something bad does happen, the first thing we usually say is “Oh no, he / she is so young”.

Illnesses and accidents are not age-specific. These are random events that could affect anyone.

But if you could not work due to a serious illness or accident, how would you manage financially? If the worst does happen, insurance helps you to minimise the financial impact on you and your family.

For example, if you need to give up work to recover from illness or if you are permanent disabled, the insurance could be used to help pay the household bills, mortgage, or even supplements, giving you and your family a peace of mind when you need it the most.

Recovery Takes Time

In a good ending, a person who is seriously ill may triumph in the fight against the illness, but, this person may not able to return to work immediately. All of these could incur many costs.

It is kind of heart-breaking to contemplate a situation where you survive a serious illness but fail to survive the financial hardship. This may be a time this person might have hoped he or she did not conquer the illness.

Obviously, you do not want an unexpected event that could easily change the financial status of you and your family. Preparing for the worst is not something we want to think about when we are feeling fit and healthy.

However, you will not suffer for thinking about it and preparing for it first. It is much better to be prepared, than to be in despair.

Preserve Your Legacy And Wealth

People are also promoting insurance as a tool to ‘create’ wealth, not just preserving it. Having adequate insurance that can help to repay your debt the moment you kick the bucket, can help ensure your assets get to pass down to the rightful beneficiaries.

Your family do not have to lose the assets such as your house due to their inability to redeem the loan from the financier. In time when the estate of the deceased is frozen pending the estate administration procedure, the proceed from insurance can help ensure life goes on for the surviving family.

If you are concerned your family may mis-handled the insurance claim, you can also have a proper legal structure to preserve this wealth. Through an insurance trust, you can decide the way how and when you distribute your wealth without actually physically transferring to your next of kin in a lump sum payment.

The trust assets are actually placed under trust to avoid your next of kin spending all of your wealth in few years when it took a lifetime to accumulate it.

Insurance And Your Life Stage

As you move on to different stages or wealth status in your life, the need for insurance will inevitably change.

One of the common questions people usually ask is “How much insurance I need?”

It really depends on your circumstances. There is no one size fits all solution and the amount of cover and how long it lasts for, all these will vary from person to person.

There are some events when you should consider reviewing your insurance needs:
- Buying new house with your partner;
- Building a family;
- Having children;
- Change of lifestyle i.e. salary increases;
- Covering loans;
- Reaching retirement;
- Starting a new business;
- Entering into a civil partnership;
- Changes in business ownership;
- Creating wealth to next generation;
- Transferring wealth; and
- Others
Clarify What Insurance You Need

Safeguard and preserve your wealth and then look at what types of insurance that you need to preserve your financial status.

It is important to manage your wealth and ensure you set aside a portion of your income to buy insurance, but don’t overcommit too.

It is advisable to seek for advice on how to optimally insure yourself and preserve your wealth against all the possible events that could disrupt your life.

About the Author

Keah EeWen is a licensed financial planner with VKA Wealth Planners Sdn Bhd
June 10, 2022
Malaysia’s Employer-Sponsored Medical Benefit Costs Expected To Increase 12% In 2022

Insurers in Asia are experiencing above inflation rises in the cost of employer-sponsored medical benefits programs over pre-pandemic levels, according to a report by Mercer Marsh Benefits (MMB). According to findings in MMB Health Trends, costs in Malaysia decreased by 3% in 2020, but increased by 8% in 2021. Insurers are expecting medical costs to further rise by 12% in 2022 – six times the predicted general inflation rate for Malaysia, the third highest increase in Asia, the report noted.

The MMB Health Trends report surveys 210 insurers globally, including 74 in Asia, and identifies key trends influencing the future of employer-provided medical benefits. The results show that five countries in Asia experienced higher medical trend rates than the regional average (8.8%) in 2021, namely India with the highest medical inflation rate of 14%, followed by China (12%), Indonesia (10%), Vietnam (10%), and the Philippines (9%). Overall, 81% of insurers in Asia indicated an upward trend in medical claims activity in 2021, even though 53% of insurers reported lower medical claims than pre-pandemic levels.

Malaysia’s Ministry of Health has estimated that non-communicable diseases (NCDs) cost the Malaysian economy RM 12.88 billion in terms of productivity losses arising from absenteeism, presenteeism or premature death in persons of working age per year.[i].

The MMB Health Trend report reveals that cancer (55%), diseases of the circulatory system (43%), and COVID-19 (36%) were the top cost drivers of medical claims in Asia in 2021, while respiratory diseases (47%), gastrointestinal diseases (36%) and COVID-19 (34%) are healthcare conditions that experienced the most frequent claims.

Joan Collar, Asia Regional Leader, Mercer Marsh Benefits, commented: “Costs have soared despite lower levels of medical treatment than before the pandemic, a trend exacerbated by deferred healthcare treatments that for many have resulted in more adverse outcomes, leading to higher costs. Reducing NCDs remains a key priority for employers for the health of their employees and their business. More than ever, employer-sponsored medical benefits should be viewed as an investment in employees’ well-being. Employees who feel their employer cares about their health and well-being are more motivated, productive, committed, and loyal.”

Gaps remain in mental health coverage though inclusive benefits increase

Of all global regions, the report identified Asia as having the most inadequate coverage in relation to mental health, with only 34% of insurers providing coverage for outpatient treatments in mental health, and just 21% providing coverage for preventive mental health measures. Moreover, 32% do not offer any coverage for mental health services, reflecting a huge protection gap between access to benefits against the burden of mental health risks.

However, the study shows that 33% of insurers are making changes to facilitate more inclusive medical plan designs by allowing coverage for the non-permanent or full-time workforce with 54% either adding or considering extending eligible expenses that are more inclusive for women.

“Employers need to develop a mental health strategy to enhance the overall well-being of their employees and refine their benefits strategy accordingly to align it to their diversity, equity, and inclusion goals and the different needs of their employees. With a sharp rise in the number of employees experiencing burnout and fatigue, this has become a workplace imperative. Employers need to deploy investments and resources to ensure they maintain a mentally resilient workforce,” Ms. Collar added.

The Mercer Marsh Benefits (MMB) is the service value proposition that Marsh brings to its clients. MMB is not an insurance product. In India, an insurance product can be provided only by a registered insurance company. Insurance is a subject matter of solicitation.

About Marsh

Marsh is the world’s leading insurance broker and risk advisor. With over 45,000 colleagues operating in 130 countries, Marsh serves commercial and individual clients with data-driven risk solutions and advisory services. Marsh is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people. With annual revenue nearly $20 billion, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses: Marsh, Guy Carpenter, Mercer and Oliver Wyman. For more information, visit mmc.com, follow us on LinkedIn and Twitter or subscribe to BRINK.

[1] The Impact of Noncommunicable Diseases and Their Risk Factors on Malaysia’s Gross Domestic Product (2020). Putrajaya, Malaysia: Ministry of Health Malaysia.

May 25, 2022
Housing Loan In Malaysia: What Is Debt Service Ratio (DSR) And How To Calculate DSR?

Most of us are now more concerned about the rising of housing prices in Malaysia. Sometimes, we fear that with the rise in the housing price Malaysia will affect our dream to own a house.

Well, are you thinking of applying for a housing loan in Malaysia to buy the property you dream of? But, did you know whether your application will most likely be approved or not? It’s easy. You don’t have to worry. Before applying for a housing loan, you can do some self-checking of your loan eligibility based on the Debt Service Ratio.

What Is Debt Service Ratio (DSR)?

Simply put, DSR is a calculation made based on your income and your commitments. From here, the banks will calculate your DSR and see whether you can afford the loan you are applying for. It has its own formula and keeps in mind that each banks vary its DSR limit.

In terms of a housing loan in Malaysia, this formula helps the bank to get to know your commitments which then will be considered whether you’re eligible for the loan you’re applying for.

It’s based on your monthly net income and the total commitments that you have to pay every month. For instance, your car loan, student loan, personal loan, and any other loan that you need to commit monthly for payment. The bank will see and decide whether the loan you’re taking is within your financial limit.

At the end of the day, the bank has to be very selective and careful. They’re not doing some charity work but a profitable institution. DSR is one of the main factors that banks use to determine your borrowing power.

Your DSR is then compared to the bank’s maximum DSR limit. If your DSR is within the limit, then you’re one step closer to get your housing loan approval.

Remember! Every bank has its own DSR limit. DSR is not the only criteria for a housing loan to be approved but it is one of the main factors that banks consider.

How To Calculate DSR For A Housing Loan?

As explained above, DSR is calculated based on an individual’s net income. Whatever income that you gained after the deduction of income tax and EPF, then it will be divided by your total monthly commitments such as car loan, personal loan, PTPTN (student loans), credit card bills, and the housing loan that you’re applying for. From there, it will be multiplied by 100 to obtain Debt Service Ratio in percentage.

The formula is,

DSR = (Debt / Net Income) x 100

It’s very useful for you to calculate your DSR before applying for a housing loan in Malaysia. This will help you consider whether or not you’re pursuing a housing loan application.

For a better picture, let’s take RM7,000 as your net income. Your monthly commitment in total is RM3,000 while you’re now applying for a housing loan with a monthly payment of RM1,200. Both will sum up to RM4,200.

Divide the figure (RM4,200) by RM7,000, then multiply that by 100 and your DSR is 60%. Most of the banks in Malaysia has DSR limit at 60% to 75%.

May 23, 2022