Why Most People Are Not Saving Enough for Retirement

To retire or not to retire? I believe that is really not an option for most people. Retiring is only the privileged few, like, the 5% of the population who can really retire financially independent.

The majority of the people not only do not have the option to retire with financial independence, but they do not even have the option to retire at all. So, why is that the case?

We have to take a look at the problem in this equation. Let me illustrate. 

This is our lifeline. Assuming you start working at 25 – I believe most of us may start slightly earlier – and assuming you would retire from work at 55.

According to our Malaysian latest mortality rate, meaning how long Malaysians live, it has been said that we live to about 75 years old. We are not talking about now, so let’s take it further, about 20 to 30 years later although Malaysians will certainly live longer. Let’s say we retire from life at 85.

We can separate our life phases in to these two distinct phases called:

• Accumulation phase – This is from when you are 25-55, or your working years.
• Consumption phase, which is from 55-85 years old.

Do you see the problem? We have thirty years of working and thirty years of not working, meaning we will be consuming our savings. It simply means that each year of our working life, we will be actually saving for each year of our retirement years. At this point you cannot afford not to miss a years of savings because for each year of saving that you miss, you may not have enough for your retirement.

There’s another problem: How much do we save while we are working? Assuming all of you here are employees and you have EPF. If you have EPF you put aside 11% while your employer tops up another 12%. So, you get 23% going in to your EPF every month.

However, when you retire, you would need, I believe, a minimum of 50% of your last drawn salary. However your last drawn salary may be your highest income, assuming RM10,000. So, you would need about 50% of that, which would be RM5,000. Imagine why this is a problem. You need 50% but you are only putting 23% while you are working. That means there is a shortfall of 27% or more than a quarter.

Do you know the statistics from EPF?  It says 50% of retirees spend their entire EPF savings within 5 years. This is the problem. It is scary, yeah.

It is never too late to start planning for your retirement. The earlier you do so, the more advantages you have. As with any investment activities, diversification is still the key. 

Pick up investment books and get to know more investment products in the market would be a great start. Knowledge is power, especially when it comes to finding the best investment in Malaysia. 

HLA Cash Promise overview

In this case, hopefully you will build a profitable investment portfolio for your pension money. While you are at it, don’t forget to check out Hong Leong Cash Promise, the latest buzz in financial industry.

Feel free to contact me @ 0178865207 to know more about HLA Cash Promise!

Why you may lose your house if you simply opt for bank MRTA?

MRTA is the abbreviation of Mortgage Reducing Term Assurance.  For those who don’t know what’s MRTA – it is a life insurance plan with decreasing sum assured over time, just to cover your home loan owed to bank.

Normally, this is what happen. After you buy a house, the mortgage officer will normally ask you to buy a hassle-free bank MRTA, single premium, and financed into the loan. You only pay a little bit extra per month, what a fantastic plan!

But are you aware that buying MRTA may not be able to directly protect your asset and your family?

If you purchase MRTA, the beneficiary is the bank. If any misfortune happens, the bank get the mortgage outstanding balance from insurance company (and now the bank is safe).

What happen to your house by now? Your house will be frozen under the estate, your assets will be utilized to pay for other liabilities, clearing income taxes (including outstanding and uncleared taxes for the past many years) and settle legal and accounting expenses. 

Your family is the LAST party to receive your assets. And in this process, your beloved family will only receive the asset if your asset value is greater than liability, otherwise your estate will be declared insolvent (bankrupt). Your family is forced to leave the house even though the insurance proceed from MRTA has already been paid out. Isn’t it unfair?

In short, bank MRTA is meant to protect the bank, you and your family are only being protected conditionally.

Then what is the solution? Buying personal MLTA. It means Mortgage Level Term Assurance.

If you purchase personal MLTA, the beneficiary is your family. In case of any misfortune happens, your family will get insurance proceed equal to the value of the house. And the most important thing is that this insurance proceed is creditor-proof and will not be frozen.

What about the house? The house will still be frozen and subject to the same estate execution process anyway.

If your asset is less than your liability, your family at least have already got the cash from insurance. They can buy a new house now.

If your asset is more than your liability, your family get both house and the cash.

Does this make sense to you?

And the other wonderful thing is that if you finish your mortgage installment earlier and wanted to change to a bigger house. Your personal MLTA is portable to your new loan.

What is your choice?

Feel free to contact me or Whatsapp me @ +60178865207 to know more about MRTA and MLTA.

Why MLTA and not MRTA?

Basically there are two types of mortgage insurance available in the market, Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance(MLTA).

MLTA is a slight variation from MRTA and offers an alternative for a borrower who is looking for a life insurance which offers protection plus savings and in some policies returns on the premium.

In a nutshell, MLTA offer level/consistent protection, allow you to buy/sell property using the same MLTA protection & offer cash back and interest comparing to MRTA.

Also please note that most of the times, it is not compulsory to buy MRTA from the bank that you get the housing loan with, if the banker tells you so, do let me know

The table below shows the difference between MRTA and MLTA:

	MRTA	MLTA
Purpose	Protection	Protection, Saving & Cash Value
Protection	Reducing Protection throughout the loan tenure.	Protection is leveled throughout the loan tenure.
Transferability	Non transferable on New Purchase or Refinance. Premium will increase while age increases.	Transferable. One MLTA can be attached to Any Loan. Transferable on New Purchase or Refinance.
Cash Value	Reducing Cash Value throughout the loan tenure. Normally is much lower than Premium, and drop to RM0 at the end of loan tenure.	Fixed Cash Value (Guaranteed) throughout the loan tenure. Policy Holder will get back the paid premium in the future.
Nomination	Beneficiary is bank	Beneficiary can be anyone.
Payment	Lump Sum Payment or financed into Mortgage Loan.	Payment Mode can be Annually, Semi Annually, Quarterly or Monthly.
Premium	Low	High
Example on premium*	One time RM1,186.34	RM607.2 monthly or RM7,286.4 yearly or RM218,592 throughout the tenure
Example if there is no death or TPD*	At the end of tenure owner will received RM0	At the end of tenure, owner will received RM218,592
Example if there is death or TPD**	Insurance company will pay the loan balance of RM372k to the bank & beneficiary will received the home.	Insurance company will pay the loan balance of RM372k to the bank & beneficiary will received the home plus RM100k cash.
	MRTA’s Disadvantages Protection decreases annually Floating BLR rate = may cause unsufficienty coverage & need continuous housing loan No Cash Value Not Transferable To A New Property Can’t Help You Save on Loan Interest & Shorten Loan Tenure	MLTA’s Advantages Level Term Protection Guaranteed Cash Value Transferable To A New Property Help You Save on Loan Interest & Shorten Loan Tenure

Do call /SMS or Whatsapp me @ +60178865207 to know more about MLTA!