Saturday October 27, 2012

What to do when you’re old and broke

By EUGENE MAHALINGAM
eugenicz@thestar.com.my

OUR retirement years are supposed to be our golden years a time when we can finally stop working, kick back, relax and enjoy the rest of our lives.

Unfortunately, it's not a luxury that everyone can experience. Poor financial management and bad spending habits during your working years can lead to what all of us try to avoid when we reach retirement being old and broke!

It's a scary thought indeed, but what do you do if you happen to find yourself in this situation?

Reflect and re-evaluate

It's too late to regret over the previous actions that have led you to your present situation, but by re-evaluating what you did wrong in the past can help you avoid the same mistakes in the future.

“It's also a good time to look at how broke you are, how much assets and savings you have left,” says Whitman Independent Advisors Sdn Bhd managing director Yap Ming Hui.

“Also evaluate how much funds you have in your EPF (Employees Provident Fund) and explore the opportunities you can generate with the money that you have,” he says, adding that whatever resources available should be used to settle whatever debts or loans available, if possible.

Continue working

Yap: ‘Whatever resources available should be used to settle whatever debts or loans available.’

Yap notes that it's not uncommon for an individual to look for a job post-retirement, a sentiment that MyFP Services Sdn Bhd managing director Robert Foo concurs with.

“If there is no other alternative, then you need to carry on working (into your retirement years). If you have an existing job, continue. Otherwise, you need to find one,” he says.

Foo says getting paid less or even half of what you used to earn is “better than nothing.”

“Even though you're in your retirement years, you could still be very useful to a lot of companies because of your contacts and experience.”

He notes that many retirees are today still gainfully employed by companies as consultants.

“Alternatively, a lot of people also start up their own business, which can be (financially) rewarding.

Standard Financial Planner Sdn Bhd's Jeremy Tan says that as age and health is a factor, it's best to find a job that's not too strenuous.

“You should try to do something simple. In Singapore, for instance, many senior citizens are recruited in eateries, managing cashiers or the front office.”

Chuah: Getting a job can also help one settle an outstanding loan if there is still one.

He adds that if health is an issue, then one should consider getting a part time job rather than a full-time one.

Certified financial planner Joyce Chuah says getting a job can also help one settle an outstanding loan if there is still one.

“So long as you are gainfully employed, you can get a loan, because you still have the capacity to pay. You can get a loan until you are 70 years old,” she says.

Foo warns, however, that due to age and health limitations, one can't expect to be working forever.

“As you grow older, having a job won't be sustainable. Working has some kind of an end-life. After a while, you become less productive and companies will be more inclined to hire more productive (younger) and cheaper talents.”

Chuah says that if one has a house, and if it's possible, it's not a bad idea to rent out any spare rooms to generate extra income.

“And if the person has a family, he or she could get the spouse to start working (if they aren't) to earn more money.”

Invest what you can

It's never too late to invest your money and try to grow it further.

“People these days live to 70 or even up to 75 years old. Assuming you are 55 years old now, there's still some 20 years to go,” says Chuah.

“Take out equity from illiquid assets, if you can. If you have a house (and the loan is paid), get equity from it by refinancing it and create an investment portfolio for yourself. At 55, there's still time to make money,” she adds.

But due to the individual's age and health limitations, it's imperative for the person to be able to grow his or her own money as quickly as possible, says Foo.

“Of course, it depends on the individual, but just because you're older does not necessarily mean you must be cautious and can't take risks.”

If, during your working years, you were the type to wine and dine every other day and night, well, it's then time to turn over a new leaf!

Live reasonably

“You definitely need to downgrade your lifestyle if you're old and broke, says Chuah.

She cites the Latte Factor' which is essentially a money-saving method used to redirect cashflow from expenditure a person might have (like daily latte, for instance) to savings.

“We actually do have money to save (and invest) but because we spend unconsciously on certain things, we think that we don't.

“For instance, instead of spending so much on that one-year gym subscription that you're not going to keep up with, why not channel it into savings or something more worthwhile?”

She also notes that most people should be aware and manage their own personal inflation rate.

“Somehow, our personal inflation rate never seems to come down, which is due to our eating out and other spending unnecessarily. This is actually the worst kind of inflation!”

Tan points out that with the rising cost of living, it's important to live moderately and reasonably.

“Over the last 20 years, the salary being paid has not risen as much as we like, compared to the level of inflation.

“Today, a lot of youngsters that enter the workforce find it difficult to cope and have to rely on their parents to support them. In fact, many of today's younger generation are unlikely to help support their parents.”

Stay healthy

If you're old and broke, having to continue working is likely to be a necessity, but just as important is to be to remain healthy so that you can continue working to earn money.

Medical bills are likely to soar, especially as you get older.

“As you grow older, the bills will pile up. If you have the money to pay for it, than it's not a problem. Otherwise, just try to maintain a healthy lifestyle,” says Foo.

Of course, it's not a problem if you have medical insurance, but applying for one after 55 can be difficult.

“You can apply for medical insurance after you're 55, provided you have the financial means and don't have serious ailments, but it's not easy,” says an expert from the local insurance industry.

“You need to be of sound health but the premiums will be a bit steep, especially if the coverage you requested is extensive.”

Yap concurs: “Medical bills can be expensive. If you're old and money is an issue, then it's best to go to a Government hospital, which is cheaper than a private one.”

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Saturday October 27, 2012

What to do when you’re old and broke

By EUGENE MAHALINGAM eugenicz@thestar.com.my

By EUGENE MAHALINGAM
eugenicz@thestar.com.my