THERE are many parts to a strong retirement foundation. Three of them are good health, great relationships and strong cash flow. Our capacity to move around easily and safely throughout our later decades affects our quality of retirement.
Eighty years ago, in 1944, E.B. White, the American author of Charlotte's Web, wrote: "Everything in life is somewhere else, and you get there in a car."
Of course, in a nearby city-nation like Singapore, with its world-class integrated public transport, most commuters don't need a car — which is good because most regular people can't afford them.
The situation in sprawling, cheaper Malaysia is different. Almost everyone who can afford a car here owns one… or more. Our broad-based need for automobiles has been globally obvious for decades.
In a 1989 New York Times article, the then zoning director of New York's Department of City Planning Sandy Hornick said: "As you move away from mass transit, you become more dependent on the automobile, so you have to spread the housing out more to accommodate the cars."
And so, for Malaysia with its 34 million people, a recent estimate of actively used motorised vehicles suggests we have about 13 million motorbikes and 14 million cars.
Note: If family economic conditions are healthy enough to warrant purchasing cars, then it is safer for everyone — and especially older adults — to drive cars rather than ride motorcycles.
This is pertinent when we consider our countless Point A to Point B, and then B back to A, journeys related to maintaining good personal health and physical fitness, as well as developing and nurturing family and social networks in retirement.
And yet cars cost money...
SMALL STEPS
I've had numerous worrisome conversations with new retirees who tell me: "I'm retired now so I won't be buying any more cars." The sentiment is laudable given global warming, but is impractical.
Malaysia's current official retirement age is 60. Many retirees will live past 80. Also, growing numbers of nonagenarians and centenarians are surfacing in Malaysia, largely because our impressive public health sector and our profitable private health sector work well in tandem with each other.
Therefore, Malaysia MUST raise its official retirement age.
I urge doing so in small steps of one- or two-year increments, from our currently too low age-60 mark by five years to 65. My estimates suggest we should do so by 2033 if the country is to avoid a massive manpower crunch because of our current low national population replacement rate. Consider two current domestic trends:
1. Our net population growth curve is flattening; and
2. Our population's median age of about 31 now, this year, is projected to exceed 40 in 2050.
Earth's median age is rising, but Asia's and Malaysia's are rising faster. An obvious consequence of this ubiquitous graying of our species is the need for enhanced mechanical, robotic and electronic intervention by machines in the global workforce. Inevitably, in the developed world, first, mechanisation will usurp more and more human jobs.
Thankfully, newer jobs will also be created along the way, requiring (educated) human ingenuity, creativity and persuasiveness (Last week's Money Thoughts column will give you some ideas on how to future-proof your employability: www.nst.com.my/lifestyle/sunday-vibes/2024/01/998098/money-thoughts-sell...).
Bottomline: Within the context of retirement, do what you can to grab the reins of your career so you aren't forced out to pasture by someone else BEFORE YOU wish to stop work, regardless of what our national retirement age may be.
This brings us back full circle to a crucial tenet of retirement preparedness: DO NOT retire until you are 100 per cent debt-free. That's the principle.
EXTENDING VIABLE DECADES
Here's a specific application pertaining to your car purchases just before and throughout your retirement: Downgrade, if necessary, but buy your next several cars for cash so you don't end up having to make monthly car loan repayments when you no longer enjoy income flowing in.
Many working adults replace cars every three to seven years. Most wise retirees do so once every five to 12 years, well before their current car becomes unsafe to drive. You'll find this master formula for income useful; I teach it to my clients and students:
TI = AI + PI, which reflects this truth:
Total Income = Active Income + Passive Income
So:
1. Decide to delay retirement, if possible;
2. Well before retirement, use a slice of our AI to save and invest regularly so that the future yield from our portfolio can provide a private pension (in the form of various sources of PI) for our non-working years; and
3. Partially harvest the retirement portfolio's capital gains, at wise intervals — perhaps every five to 12 years — to fully pay for safer, newer cars to continue allowing us precious autonomy in our senior decades to continue driving in relative safety from A to B, and then back home to A, according to our personal whims and fancies.
We all hope to extend our viable decades. Well, managing our money prudently before retirement looms is a prerequisite for doing so — whether or not we possess a driver's licence.
© 2024 Rajen Devadason
Rajen Devadason, CFP, is a securities commission-licensed Financial Planner, professional speaker and author. Read his free articles at www.FreeCoolArticles.com; he may be connected with on LinkedIn at www.linkedin.com/in/rajendevadason, or via rajen@RajenDevadason.com. You may also follow him on Twitter @Rajen Devadason and on YouTube (Rajen Devadason).