Increasing life expectancy of Malaysians has raised the concern incredibly on retirement issues. In 2006, the Organisation for Economic Co-operation and Development (OECD) findings indicate that Malaysians’ life expectancy has increased from 1960 to 2006. Women life expectancy has increased from 55.9 to 76.5 years, a 20.6% increment, while men increased from 52.8 to 71.8 years, or 19.0% (OECD, 2007). More, latest statistical findings from United Nation Statistical Division (2010) provide that life expectancy at birth of Malaysians for women and men in 2005 to 2010 has increased from 72 to 76.7 years. With the longer life expectancy among Malaysian means without extending the retirement age, a typical Malaysian will have longer time to spend in their retirement life. According to United Nations data reviews, Malaysia are expected to have total number of 3.2 million individuals who aged 60s and above by 2020 (Yip, 2010). Furthermore, the Global Demographics Ltd also estimates that a 10% increment in the number of grey citizens will take place in coming 20 years from now (Hunt, 2009). These figures tell us that more Malaysians will be reaching retirement age and it is important to raise their awareness towards the importance of retirement planning now.
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Recently, Malaysian Government’s announced that inclination of increasing the retirement age among civil servants in Malaysia is high. Retirement age may be set to 60 due to Government’s plan of keeping experience civil servants to contribute for more human capital in national’s performance (Sarban Singh, 2010). This projection was made because it is estimated that Malaysia will lose up to one million civil workers in the early of 2011 (Sarban Singh, 2010). Despite changes made on the retirement age of government servants to 58, the mandatory retirement age for private sectors remain at 55 (Sarban Singh, 2010. In view of this, postponement issues on the public and private servants means that longer retirement life may by experience by most Malaysians (Sarban Singh, 2010). As life expectancy has increased much faster compared to retirement age, our country will have more retirees. If this happens, more challenges are coming ahead and different approaches must be taken on retirement planning as Malaysians are expected to have longer retirement life.
As humans are bound with nature of biological aging process, shrinking in physical and mental strength is reality that no one can change (Yip, 2009). For that, continuous working becomes undesirable as age increases. Knowledge workers might be able to substitutes the physical strength with crystal knowledge and tacit knowledge gained through years of experience. However, for workers that rely much on physical strength might be a problem. Postponement of retirement age is not suits the physical strength workers because the physical body is unable to perform hard work in old age. Sometimes, they are not only having limited income but they only have limited education level. Retirement planning may serve as dreams but their income limit them to do so. Income earn is not enough for savings or investments. Proper preparation is needed financially to ensure that low income earners at least able to have minimum requirements to live and to ensure a bright future for them in retirement age.
Existing retirement planning practices among Malaysians are basically relying much on savings, Employee Provident Funds (EPF) and children. Majority of them are not actively involved in retirement planning (HSBC, 2010). Although there are as much as 72 % of Malaysians having high propensity to save for retirement, 41% of them do not have a solid plan on how to build their retirement fund (Hunt, 2009). In addition, 77% of those who save for retirement rely much on fixed deposit and savings accounts which give low interest yield to them. Also, they failed to segregate part of their savings for retirement needs (Hunt, 2009). Monies put on the savings are in essence for all purposes without specific purposes for retirement (Hunt, 2009). What is alarming here is that majority of Malaysian might not insufficient source of income and there might be some risk involve if retirement planning is not done correctly during their retirement life (HSBC, 2010).
Constant income scheme provided by EPF may seem adequate in the long run but it will never happen. Recent studies indicate that, 90% of EPF holders hold less than RM 100,000 in their accounts and almost 99.9% of the retirees withdraw their lump sum of EPF funds when they reach retirement years and surprisingly almost 70% of the retirees use up the money within 3 years (Hunt, 2007). EPF savings withdrawal in the early stage of retirement may create some risks during retirement (HSBC, 2010). In order to match with future insecurities, this action will without notice causes a poor retirement life. Solely depends on EPF savings may cause retirees to have a vulnerable financial position in their old age. To avoid this problem from happening, retirees’ awareness to act on retirement planning is strictly vital for an upcoming comfort and satisfaction in retirement life.
Revolutions from ancient Asian culture to modern world today have changed the structure of a family mostly in the way how children treat their parents and expectation of taking care of them. Old forks are view as burden. Additionally, employing maids to take care of old parents will indirectly raise the living expenses. Thus, tendencies for some aging parents end up spending their life in old folks’ home is high. Family members or children supporting rate is relatively low today (Lee & Law, 2004). Generation gap which indirectly affects the sense of belonging, responsibility, relationships and love towards aging parents has also lead to changes in cultural value (The Star, 2010). Late marriage and gap exist between children age is another issue affecting children support to their parents. Unique characteristics of each family have created different views on old parent’s retirement. Only strong family relationships may have higher chances to get financial aids and support from family members (The Star, 2010). Therefore, it is advisable for pre-retirees to pay more attention on retirement planning to avoid end up living in old forks home.
Worry-free retirement life cannot be easily reachable today compare to the past. Various impacts from macroeconomic events such as inflation, unemployment, and global recession may trigger the retirees in their retirement age. In 2008, due to increase in petrol price and global recession, Malaysia’s inflation rate was surged up to 5.4% high, a 0.6 % in year 2009 and now it is forecasted to be 2.0 % this year (International Monetary Fund [IMF], 2010). The impact from high inflation rate has lead to depreciation in value of ringgit, reduction in the consumers spending, and increases in cost of living over time (HSBC, 2010). No doubt, these will give a huge impact on pre-retiree of having insufficient money to spend or to save for the future reserves (The Star, 2010).
Immeasurable increment in the medical fees and medical services are likely to reduce spending power and quality of retirees’ life over time (The Star, 2010). Addition to that, the MasterCard Asia Pacific predicts that old population will have to spend more next 5 years and will surpass RM 35 billion compared to last 10 years (The Star, 2009). These spending not only cover existing daily usage on products and services but also huge cost on medical fees and medical services (The Star, 2009). If this situation continues to trigger the pockets of each individual, greying population may have tendencies to live in financially poor conditions. Risk from all these unpredicted future events or increase in medical fees can be reduced if retirees do early retirement preparation to hedge for unfavourable events to happen.
Without a proper retirement planning, increasing number of retirees might become a burden to government and society. Population restructure process not only increases the cost of government spending but may also serve a potential loss in human resources in labour force and affect the development of economy. Thus, consistent with the facts and issues raised above, preparation of retirement planning is important. Failure to derive proper retirement plan may cause various issues and impacts either to the individual, society, or government. Thus, the aim of this study is to examine the on the Malaysian awareness towards retirement planning, their plan for retirement, reasons for their retirement planning, barriers they face in planning for retirement and information and assistances they need for proper retirement planning. Through this study, more knowledge and understanding about planning behaviours in the context of Malaysian will be created.
Background of the Research and Research Question
Growing life expectancy among Malaysians over the past few decades have signalled that Malaysian will have longer time to spend in their retirement life (OECD, 2007; Yip, 2010; Hunt, 2009; United Nation Statistical Division 2010). Problems rise today for the preparation of retirement plan are generally due to natural biological aging process, types of workers, retirement age incremental policy, family cultural changes, unpredictable macroeconomic events, medical cost increases and many more. Pointing to existing poor retirement planning practices among Malaysians which relying much on savings, Employee Provident Funds (EPF) and children, proper actions must be done (Hunt, 2009; HSBC, 2010). These facts and figures highlight the raising concern and awareness of retirement planning among Malaysians is much needed. Through the view of all the poor or lack of retirement planning behaviour and challenges ahead that are going to affect the life of retirees, this research is important in creating new knowledge of better understanding of the underlying problems, barriers and factors face when doing retirement planning.
Issues on retirement planning have been well studied in more developed countries such as in United States (e.g. Joo & Grable, 2001; Taylor-Carter et al., 1997; Duflo & Saez, 2002), United Kingdom (Sargeant, 2003), Hong Kong (Lee & Law, 2004), and Singapore (Lim, 2002). These studies are targeted more to the Baby Boomer generation (e.g. DeVaney, 1995; Glass & Kilpatrick, 1998; Josloski, Ekerdt & DeViney, 2001; Lusardi & Mitchell, 2007). On the other hand, wide scope interest mainly on issues related to women in retirement planning such as the longevity life of women compared to men, economic and psychological issues on women, factors affecting retirement planning and financial literate among women have been done and the result shows that majority of women do not plan for retirement (Glass & Kilpatrick, 1998; Lusardi, 2006; Lusardi & Mitchell, 2008). Findings found that women are less financial literate and are economically and psychologically weak in retirement planning (Glass & Kilpatrick, 1998; Lusardi & Mitchell, 2008). Besides, some findings has also been directed on retirement income (Jing & Lakshmi Malroutu, 1995), level of retirement planning preparation (DeVaney, 1995; Lee & Law, 2004), antecedents or factors associate with retirement planning (Taylor-Carter et al., 1997; Kosloski et al., 2001; Duflo & Saez, 2002; Lim, 2003; Lusardi & Mitchell, 2008), retirement planning and satisfaction of retirement life (Elder & Rudolph, 1999), retirement educational programs (Joo & Graman, 1998; Hershey, Mowen & Jacobs- Lawson, 2003), retirement planning information search (Joo & Grable, 2001), marketing of retirement planning (Ekerdt & Clark, 2001), and developing guideline for retirement planning (Greninger, Hampton, Kitt & Jacquet, 2000).
In light of the piece of evidence from the previous research focuses on retirement planning, there are lack of retirement planning can be observed in Malaysia (Hunt, 2009). There is no research has been done to access how Malaysian plan for their retirement in Malaysia till today. The relativity low per capital income among the Malaysians might limit the applicability of the studies conducted in more developed countries to Malaysia context (Muzaffar, 2010). Therefore, this study is paramount important, in particular, to explore or fill the research gap exist and to gain insight into a proper understanding on how Malaysians plan for their retirement.
To address the research gap, this study focuses on the extent to which how Malaysians plan for retirement, reasons for their retirement planning, barriers they face in planning for retirement and information and assistances they need for proper retirement planning. Through this study, more knowledge and understanding about planning behaviours in the context of Malaysian will be created and a proper guideline to assist Malaysians in retirement planning and retirement preparation will be developed. To address this issue, the following research question is constructed:
“How Malaysians plan for retirement and why?”
The research objectives for this study include:
To examine the Malaysian’ awareness towards retirement planning.
To investigate how Malaysian prepare for their retirement life.
To study factors affecting the type of retirement planning.
To understand barriers or difficulties faced by Malaysians in planning for retirement.
To understand type of assistance or information needed for Malaysian to properly plan for retirement.
Significance and Justifications for the Study
This study is important to explore more knowledge about retirement planning among Malaysians. As retirement planning is complex and personalizes, it is important to recognize a “standard” guideline or procedures to assist an individual to plan for retirement can hardly be effective. Therefore, this study opt for qualitative study to better understand the current retirement planning, reasons for retirement planning, barriers face during retirement planning and information needed for proper retirement planning among Malaysians. By exploring these knowledge and information collected from their heart and soul, these knowledge may use to identify different retirement needs and challenges face by Malaysians during their retirement planning, more effective and efficient information and guideline can be developed to accommodate different needs of individuals in planning for retirement.
The outcomes of this study can be used by policy makers to identify the readiness and willingness of Malaysians in retirement planning. This information is important in helping Malaysians to facilitate and formulate better planning which ensure retirees to be independent in their financial support during their retirement age. Pre-retirees, retirees or individual may know how and what direction they must take to complete the journey of a successful retirement planning through the outcomes from this study. Addition to that, this will indirectly reduce the government burden to support them. Not only that, results from this study can also provide additional insights for policy makers to consider for the development of new policies to promote welfare of future retirees and better retirement life especially for economically and socially weaker group in Malaysia.
Finally, information gathered from this research can be crucial for banks, insurance companies and other financial institutions in designing and marketing their future retirement planning “products and services”. Proper customer segmentation can ensure the products or services being delivered to the market more effectively. Fulfilments on special needs of different market segment the different can satisfy more demand and thus, facilitate better retirement planning among Malaysians.
Research Scope and Limitation
This study is conducted with the purpose of examine the retirement planning among Malaysians. As different people have different retirement needs and expectations, qualitative interviews are used to capture in-depth and rich information on Malaysians. Face-to-face interviews method is use in this study to focus on Malaysians awareness towards retirement planning, their plan for retirement, barriers they face in planning for retirement, reasons for retirement planning and information or assistance they need for proper retirement planning. At first, approximately 10 respondents made up from working adults in any part of Malaysia will be selected for convergent interviews. The interview will be audio recorded and transcribed. Next, another 20 to 30 interviews will be conducted for main data collection comprising semi-structured interviews will be conducted in Northern Malaysia, Central Malaysia, Southern Malaysia, and East Coast of Malaysia.
Definition of the Key Terms
Provide in the following format:
Table 1: Definition of the Key Terms
Financial Education Program
A program designed purposely to give inform knowledge on ways and skills to perform financial-related decisions.
Adapted from American Association of Retired Persons. (1992). Fact Sheet. Washington D.C.
Will be further update on this on chapter 2 is complete.
Organizational of Research
This research is being organised into 3 main chapters which provide details for better flows of the topic under study.
Chapter 1 gives the idea of how the current issues emerge real life situation on retirement planning and preparation for retirement planning. Also, it tends to identify the problems and research gap that exist in this study. Research objectives or research aim highlights the achievement needed towards this study. Other sub parts of this chapter are likely to find the importance of this research in fulfilling knowledge gaps exist in previous studies and knowledge creation in the end of this study. Justifications and limitation for this study emphasizes the importance of this study and how this study can fill up the knowledge gap exist. Finally, a table describing some key variables terms covered on this study is given for the sake of reference.
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Chapter 2 reviews related literatures from previous finding in the field of retirement. Next, the main context of the literature review such as the important issues on retirement planning is also being discussed here. Dependent variable and independent variables discuss the important variable exist in previous study. Summary gives a compact preview of what have been discussed earlier in this chapter.
Chapter 3 emphasize on research framework development. First few parts explain what research methods, research instrument, sampling plan use in this study. The next part of this chapter provides comprehensive overview of the data collection method. How actually this data is collected throughout this study. Data analysis method further explains the tool or software used in the analysis part of this study.
Chapter 2 Literature Review
Retirement represents a stage of life where involvement in certain social activities and desirable conducts become narrow or fewer roles when the person reached the old ages (Parsons, 1942). Adequate retirement planning and preparation is needed to anticipate the new roles involve with the changes in major life activities (Atchley, 1982). Retirement life without planning requires continuous employment or working, lifestyle remains same with young age although that individual reaches retirement age (Lee & Law, 2004). Lack of retirement planning preparation will generally bring some disappointment during retirement and yet preparation for retirement planning is not an easy task (Lee & Law, 2004). Thus, planning for retirement is important (Volpe et al., 2006).
Much of the literature on retirement planning focuses on studies to identify the relationship of socio-demographic factors to be related to the retirement planning (Lee & Law, 2004; Joo & Garman, 1998; Yakoboshi & Dickemper, 1997; & DeVaney, 1995; & Joo & Garman, 1998). Previous study emphasizes that income (Mitchell & Moore, 1998; Kim, et al., 2005), age (Richardson & Kilty, 1989; Joo & Pauwels, 2002; DeVaney, 1995), gender (Yakoboshi & Dickemper, 1997), education level (DeVaney, 1995; Joo & Pauwels, 2002; Hogarth, 1985; Bernheim & Garrett, 1996) and marital status (Glass & Kilpatrick, 1998) are all important factors for one’s behaviour towards retirement planning. DeVaney (1995) identified that income and age are important to guild pre-retirees in groundwork process of planning. In addition, gender differences also influence the early preparation for retirement planning (Yakoboshi & Dickemper, 1997). Retirement education and certain related programs also affect the retirement planning behaviours (Joo & Grable, 2001).
There are number of studies have been conducted pertaining to retirement planning as discussed above. The sections below summarize further description on dependent and independent variables which are important to retirement planning. Summary parts provide a compact preview of what have been discussed in the whole literature reviews on retirement planning.
Over the past few decades, life expectancy has risen drastically of about 2 to 3 years for each decade and this number is expected to further increase in the future (Selene, 2005). As for the rising figures, financial planning for retirement becomes more important (Glass & Kilpatrick, 1998; Grace, et al. 2010; DaVaney, 1995; Volpe et al., 2006). Retirement planning is vary from one another but can be observed by integrating individual’s intention and behaviour that are partially different or unknown to one another (Hanisch, 1995). According to Parsons (1942), retirement is defined as a stage of life where involvement in certain social activities and desirable conducts become narrow or role less.
Ming and Xiao (1995, p.17) found that “having adequate income is the key to minimizing some of the problems during retirement”. Income level is an important determinant for retirement wealth growth (Selene, 2005). Different types of planning will lead to different ways of wealth accumulations and lifestyle during retirement (Lusardi & Mitchell, 2007). At the same time as retirement planning involves awareness and understanding of the problem underlies in life, individual’s perception is strictly important to achieve the highest retirement satisfaction (Ming & Xiao, 1995). Besides, Taylor-Carter, Cook and Weinberg (1997) identified that planning improves one’s confidence and self-efficacy towards uncertainty typically in short or long time frame in retirement age.
Although there are much researches interest on retirement planning, focus given to obtain a retirement planning guidelines in relations to the retirement planning is even more imperative to achieve a successful retirement plan (Greninger et al., 2001). Study concluded by Greninger, Hampton, Kitt, and Jacquet (2001) on retirement planning guidelines found that families should have completed their first 50 to 60% successful retirement savings goal by age of 50 and about 85 to 90 % by the age of 60. Moreover, asset allocation on more conservative investment is expected to be done within 3 to 5 years before retirement. With this, Taylor-Carter, Cook and Weinberg (1997, p. 286) found that “Planning may enhance affective reactions to the financial and activity-oriented aspects of retirement, and informal transition”. Earlier saving or planning for retirement may assure one to live with truly ideal and better quality life in retirement (Elder & Eudolph, 1999).
Among the factors related retirement plans and decision, age, education level, gender, and household income are characterized as important demographic factors towards individual retirement preparation. Following parts will further discuss the demographic variables from the review of literature in details.
A number of studies examine the effect of age on retirement shown that age to be related to retirement plan and decisions. Age has emerged as an important and consistent factor in human behaviour towards retirement planning (Richardson and Kilty, 1989; Joo and Pauwels, 2002; DeVaney, 1995). A procedural assumption found throughout the literature found that age help to guide pre-retirees in groundwork process of planning (DeVaney, 1995), lead to attitude and perception changes on retirement and also help to raise retirement confidence (Joo & Pauwels, 2002). Lee and Law (2004) concluded that as age and income increases, individuals are more motivated to take action for retirement. This is supported by Montalto, Yuh and Hanna (2000) where as they found that planned retirement age are guided by reinforcement given from constant visit or review on the information needed for planning. Besides, age and income are found to be correlated in influencing one’s behaviour towards retirement planning (Lee & Law, 2004). DeVeney (1995) concluded that age and other demographic variables such as household income, educational level and household size are inter-related to guide pre-retirees in groundwork process of planning. Age has also shown to be important in the area of future educational program (Joo & Garman, 1998). On the other hand, Malroute and Xiao (1995) uncover more compelling evidence on the factors affecting perceived adequacy of retirement income among pre-retired household, the finding suggest that different respondents’ age is likely to give different perception on income adequacy. Normally, on average individual tend to retire 3 years before the expected age (Zappala and Depolo, 2008) and the different between preferred and expected retirement age are: chronological age, perceive of income adequacy, work condition variables, and retirement attitudes.
There are extensive studies on retirement covering education in general. The findings suggest that education is an important factor in affecting retirement planning preparedness (Hogarth, 1985; Joo & Pauwels, 2002). Education enables individuals to explore more information relating to their retirement planning and that sources of information will influence their decisions, attitude and intention to do retirement planning (Hogarth, 1985; Joo & Pauwels, 2002). Also, DeVaney (1995) addressed that the effect of education level may serve as a motivator or guidance for individuals to start the preparation for retirement planning. With the increase in age and educational level, individual tends to be more motivated to work on retirement planning preparation or take some action for their retirement (DeVaney, 1995).
Joo and Pauwels (2002) found that higher educational level allows one’s to experience and achieve greater confidence level in their retirement planning life. Men who had received higher education tended to be more confident in their retirement planning compared to those who had lower levels of educations (Joo & Pauwels, 2002). The level of education and confidence found to be positively related (DeVaney, et al., 1995). On the other hand, older women are found to be less likely to have higher education in general because of limited education which had been given to them in the past (Lusardi, 2004). The effects of education on women’s retirement makes women to be less financial literate or having knowledge on retirement and retirement planning (Lusardi, 2004; Lusardi & Mitchell, 2008). Joo and Pauwels (2002) suggested that women participation in retirement planning increases as they receive education.
In addition, Joo and Garman (1998) provide a good overview that education levels are significant to focus topic for future financial education programs. Highly educated people generally tend to posses and receive more knowledge relating to investing and knowledge on retirement planning compared to those who are less educated. According to Bernheim and Garrett (1996), education makes the possible of enhancing and exploring more knowledge and information on retirement for individuals and workers.
Gender differences are a significant predictor in retirement planning studies. According to Yakoboshi and Dickemper (1997), gender differences are the major influential factor for early preparation in retirement planning as male and female are generally will think and act differently upon their expectations and views. Males are found to be more ready and well prepared for retirement planning compared to women in general (Lusardi and Mitchell, 2008). In addition, Glass and Kilpatrick (1998) addressed that women are less prepared for retirement and this is generally due to women are lack of financial resources than men. Women are commonly found to be more economically and psychologically weak in retirement and are influenced by factors such as limited economic accessibility, low wage, pension scheme, gender prejudice and selection of career options in their intention towards effective planning (Glass & Kilpatrick, 1998).
Previous findings reveals that individuals either men or women who are more financially literate, richer, more tolerance to risk, and attitude towards retirement are among important factors in affecting an individual decision to engage in assistance in planning for retirement (Duflo & Saez, 2002; Lusardi et al., 2007) and seek professional assistance in planning for retirement (Joo & Grable, 2001). Gender differences do not bring any effect to the decision making on retirement as Joo and Grable (2001) highlight that the likelihood of both genders’ behaviour on professional retirement help-seeking are the same, but women involvement rate on professional help-seeking are slightly higher compare to men if they are given a chance. Women are more likely to seek financial advice from experts and those women who equipped with well financial knowledge tends to do well and more successful in their planning (Lusardi, 2004; Lusardi & Mitchell 2008).
Lusardi and Mitchell (2008) also pointed out that women are less financially literate to retirement planning compared to men. Majority of women do not have any plan to do their retirement planning and they depend much on the support from their family and friends in retirement age. On the other hand, Sunden and Surette (1998) identified that gender differences and marital status have significant relationships with investment decision on retirement planning. These factors will generate different level of assets distribution among women and men in retirement planning (Sunden & Surette, 1998).
Recent finding by Grace, Weaven and Ross (2010) indicates that males and females do not perceive and act for retirement planning in the similar way. Of an amount of 21 exploratory semi-structured interviews has been conducted to explore and identifying the differences, the result shows that males are likely to go for individual choice perspective while women tend to adopt life course perspective when it comes to retirement planning. Males tend to assume retirement as another stage of life in the future while women make no prediction on future life stages.
A number of factors influence the individual’s preparedness towards retirement planning. Kim, Kwon and Anderson (2005) identified that attitude and behaviour towards retirement are generally influence by household income. Household income is a critical measurement in some matter relating to retirement especially in retirement education program (Joo & Garman, 1998) and professional financial help-seeking (Joo & Grable, 2001). The findings by DeVaney, Gorham, Bechman, and Haldeman (1995) identified that household income is associated with the savings and investing behaviours in retirement preparation.
Retirement preparation can only work when one’s have enough money or wealth resources t
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