CAN YOU afford to retire at 45, 55, 65, 75 … or five years after you’re six feet under? That question might elicit some nervous laughs but whether or not a person can afford to retire is the most discussed factor when it comes to general discourse on retirement.

While the lack of retirement savings is a big issue that requires a lot of public policy attention, studies from developed countries show old age planning involves a lot more than just having enough money in the retirement kitty.

“On the social protection, I think one key policy focus should be affordable healthcare — free provision for certain groups,” says Lee Hwok Aun, senior lecturer at Universiti Malaya’s Department of Development Studies.

With 15% or over 4.5 million of Malaysia’s population expected to be 60 years of age and above by 2030, the setting up of a new advisory body under the Economic Planning Unit (EPU) to look into the adequacy of the country’s social security system is timely.

After all, not only will 1 in 10 Malaysians be at least 65 years of age by 2035, Malaysia is projected to reach the 7% threshold the World Bank defines an ageing society to be in just six years in 2021, according to data by the Statistics Department of Malaysia.

“We are strengthening the Senior Citizen Plan to ensure that age does not sideline a community that will still have so much to offer, and whose wisdom and experience will be invaluable for younger generations,” Prime Minister Datuk Seri Najib Razak told those present at Invest Malaysia Kuala Lumpur on April 23.

Child-minding is one of the post-retirement activities that longevity study experts say can help ease the burden of the younger working population that needs to support a larger group of retirees. The better educated baby boomers in Malaysia are also likely to have a strong command of the English language, a skill that may be harnessed to get children started early.

“Story time at the public library or child care centres is one way retirees can continue to contribute to society,” an observer says, referring to the reading of story books to children.

“In fact, with technology such as education through television, even one person can reach more people than he or she thought without physically having to move to the more remote places where I’d imagine there is more need for English teachers,” the observer adds, calling for more concerted effort to harness what he calls “hidden talents”.

In deciding what’s best for Malaysia, public policymakers may also want to consider the factors raised by Baroness Neuberger, who authored several books including Not dead yet — a Manifesto for old age.

“How do we think about older people and why do we see them as a problem? Is it right for older people to have universal benefits, such as bus passes or should those benefits be targeted at those who need them most? What quality of care should we be providing for older people and how should we pay for it? Is enough being done to ensure care workers are properly trained and remunerated?

“Is enough thought being put into creating work for older people, getting more older people to contribute to society?” she asked in a University of Cambridge’s Centre for Science and Policy (CSaP) public policy lecture in January 2013.

“Appreciating the unique challenges of ageing, as well as the great value older people contribute to a society” is how Laura Carstensen and Thomas Rando, co-founders of the Stanford Center on Longevity in the US, surmised their mission to “redesign long life”, according to its website. The centre’s three research divisions — mind, mobility and financial security — also indicate that apart from financial security, there is need to pay attention to physical and mental health.

While many old people are healthy and active well past their 70th birthday, policy makers will also need to deal with the fact that health issues such as dementia are more likely to hit people above the age of 65.

According to a study by the World Health Organisation (WHO) in 2007, Malaysians are expected to be healthy up to the age of 66 years on average. That’s some eight years short of the average life expectancy of 75 years — which means many Malaysians may need to prepare for the likelihood of a weaker state of health in the last 8 to 10 years of their lives.

Separate studies also show the health and wellness cost for those aged 65 and above can be three times more if one has Alzheimer’s and other types of dementia. That’s not all. The cost of providing hospital and community health services to people over the age of 85 is three times more than the cost of caring for those between 65 and 74, the UK’s Department of Health estimated in 2007.

This could be an issue in Malaysia, where average life expectancy had increased to 75 years in 2014 from 69 years in 1983 and 61 years in 1963, and is expected to continue rising in tandem with better healthcare, education and standard of living.

This raises other issues like the readiness of Malaysia in terms of infrastructure, finance and mindset for an ageing population whose health condition might not be as ideal as today’s younger population when they age, due to harsher living conditions for the baby boomers in their younger days. Taking a leaf from the experience in the already greying countries, Malaysia will need to prepare for a potential rise in the number of people with mobility impairment, hypertension and heart disease.

The higher cost of caring for a greyer population — be it to put in place infrastructure that is friendlier to the aged to more expensive healthcare requirements — would weigh on already tight government finances, experts say.

Already, the government needs to address the rise in the tax-funded civil service pension bill and a sizeable portion of its expenditure is due to its obligation to pay salaries and pension for the civil service, economists say.

Emoluments, pension and gratuities cost RM81.52 billion in 2014 or 36.8% of the government’s operating expenditure (opex) and 36.2% of federal government revenue. This is projected to rise to RM81.91 billion this year, about 38.6% of the revised projected government opex of RM212.4 billion and 36.75% of the revised projected government revenue of RM222.9 billion for 2015.

Tight government finances and rising cost needs mean Malaysians will likely have to play a bigger role in preparing for their old age. The Employees Provident Fund (EPF), for example, is providing retirement planning services to its members in the Klang Valley and has put up self-help calculators on its website for people to determine how much savings they will need for retirement. It also has a calculator to help someone determine the right level of home that one can afford to purchase based on his or her salary.

Still, given generally low wages, most Malaysians will not be able to have a comfortable old age without the right government policy, experts say. Raising the retirement age from 55 to 60 alone may not be enough as it still leaves a 15-year income gap, which means the retirement age will eventually have to increase further for Malaysians — without a government-funded pension — to have adequate retirement savings.

Regulations will also need to change to ensure that older people are able to find suitable employment, should they wish to do so.

For example, in Britain where more than 10 million people, or one in six, are reportedly over 65 and many continue to be active in the workplace because they are well and able, the default retirement age of 65 has been phased out and most people can now work for as long as they want to. Some employers in the UK can set a compulsory retirement age if they can justify it and it is the employee’s responsibility to discuss retirement with their employer — including phasing retirement by having flexible working hours. Like unfair employment termination, pension and benefit-related disputes in the UK can be forwarded to an employment tribunal.

At the same time, salaries for the average Malaysian will need to rise, says Lee who also co-authored the United Nations Development Programme (UNDP) Malaysian Human Development Report 2013 released in November 2014, in which findings include the fact that most Malaysians do not have precautionary savings due to low wages.

According to Lee, the large number of foreign workers — reportedly 6.7 million, of whom only 2.1 million are documented — is a reflection of “the pervasive dependence on low wage, low skill employment, predominantly foreign workers, which ripples throughout the economy, affecting Malaysian workers as well”.

“Utmost priority should be placed on increasing wages and lifting Malaysia out of the low wage and long hours “trap”. It is a trap in the sense that the market gravitates towards long hours, instead of raising hourly productivity, because it is still privately profitable — but economically detrimental in the long run. The focus should be on compelling hourly wages to rise, and to steadily lower the definition of full-time work from 48 hours toward 40. Based on 48 hours a week, the hourly minimum wage is a paltry RM4.33,” Lee tells The Edge.

Better work-life balance would also contribute towards improvement in health and healthcare cost in the longer run.

Even as corporates contemplate ways to raise female workforce participation and representation in boardrooms, studies on ageing and longevity show that the face of old-age poverty will be that of a woman — specifically  widowed women who depend on their older husbands for income as they stay at home to tend to housework and children.

Like most countries globally, Malaysian women live longer than men on average. In 2014, the average life expectancy of a Malaysian woman was 77.2 years. This is 4.7 years longer than the average Malaysian man’s 72.5 years. Older women are at greater risk of poverty than older men in 27 out of 30 OECD countries.

In the UK, for instance, where the number of women in their sixties in the labour force is expected to increase over the next decade, there is a “potential increase in the number of older women seeking, but unable to find, work”, according to Gemma Tetlow, programme director of work on pensions and public finances at the Institute for Fiscal Studies (IFS).

All these are important factors that decision-makers will need to consider. It looks like the advisory body under the EPU has its hands full. Fortunately, the country’s demographics mean there is the option to learn from the experience in the developed world before selecting the best method to secure Malaysia’s future.

For now, if indeed most Malaysians do not have adequate “precautionary” savings apart from the forced savings in the form of EPF, the average Malaysian wage earner can only afford to retire at 70. This is given that the average life expectancy was 75 years in 2014 and one’s average EPF savings can only last five years.

This article first appeared in The Edge Malaysia Weekly, on May 4 - 10, 2015.

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