(Last Updated On: 11/11/2016)

The layman approach to retirement is to save a huge lump sum of money, and then set a limit of how much one could spend on annual basis for the next, say 20 to 30 years. Now, layman doesn’t necessarily means he or she is not educated. In fact, a person could be a successful businessman but because of this distinct lack of understanding on the time value of money, he could still be a layman when it comes to retirement planning. Of course, this could be detrimental to one’s financial position due to one’s inability to extrapolate their retirement landscape in the future.

In the book, Roadmap to Financial Freedom by Yap Ming Hui, he quoted a case study where Tim, 50,  the owner of a chemical distribution company sold off his company for RM 3 mil and planned to live off the 4% fixed deposit interest rate generated by his 3 mil principal (4% x 3 mil = RM 120k) for the next 20 years. It goes without saying that he intends to maintain his pre retirement lifestyle as well. The unspeakable flaw in this is that Tim treated inflation as non existent. He naively assume RM 120k in today’s value will be worth the same 2 decades later. The simple analogy to this is – we may earn thrice as much as our father in his age, but that does not mean we feel 3 times richer today. In fact, it’s quite the reverse! It only means our purchasing power does not grow in tandem in inflation.

With this first concept in mind, there are a few inputs to consider in drafting out a retirement plan. Inflation, retirement period, retirement withdrawals, lump sum retirement fund and its growth during retirement. Certain assumptions need to be made and nothing is accurate at the first go, so periodic and holistic review of the plan is absolutely essential.

retirement landscape retire method 2

The second is accumulation mindset. Now you may asked, what’s the difference between accumulation and savings? I don’t know about you but my parents are excellent savers. But saving only stops there – more often than not, it does not preserve the value of money. But we don’t have to like that since now, we know the concept of accumulation – which is, saving and growing our savings as well, beating inflation and preserving the value of money in the process.  Without this in mind, the result is quite tragic. We heard stories of people who depleted their EPF savings in just a few years even though they may have a substantial amount. Accumulation can only be accomplished with sustained spending as well.

retirement landscape retire method

The third, but certainly not the least, is medical expenses. This could potentially be deadlier than the silent killer – inflation, when it actually hits. I’ve talked to individuals in their fifties who admitted to me they overlooked of getting their own medical card when they were in employment. Then, just before the mandatory retirement, it struck him – nobody is going to cover his post retirement medical bills.

If you are reading this, then I don’t want this to happen to you. Yet, I know what you are thinking – you probably don’t want to get a redundant medical card while you are covered by your company.

But do you know that there is this Second Medical Card in the market nowadays? It could well be a good complement to your company medical card. Best of all, it is auto-convertible to First medical card at retirement age – 55.

For example, if your company medical card coverage is RM 30k/year, you could get a RM 30k deductible medical card, with minimum premium. Which means, only RM 30k and above medical expenses will be covered by this second card. However, when you reach age 55, this second card will convert to become a zero deductible card – which means any medical expenses can be charged under this card – at the time when your company medical coverage ceases. This happens without needing you to prove your health condition at age 55.

How much this cost? Here’s how much it cost per year for a RM 15k deductible. Cheap? Yes. Peace of mind when you retire? Yes. Note that I could not explicitly state in this article which company is offering this because I am not an agent of any company, so I don’t want to risk being seeing as promoting any company product. But for further details, drop me a mail.

deductible medical card

But most people would have NEVER thought about all these until it is too late to do anything. Unless, you can turn back time, of course. Even with a lump sum EPF money (which many people are dependent on, solely), it would be depleted in a matter of years if prudent post retirement money management is not practised.

Know this that every individual retirement need is different – in a sense that, it would depend on your needs and wants. That means, your financial goals, lifestyle, post retirement expenses, etc will all be major life determinants. A good analogy is – Mr A who stays in the outskirts of the city and only needs $ 2500 expenses a month will be “richer” by having $ 1 million in retirement than Mr B who stays in the heart of the city with $ 8000 expenses a month living a lavish lifestyle.

Before we wrap, below is a 13 minutes video on how a 50+ something is regretful about NOT planning for retirement in the earlier stages of life. Hint – it is NEVER too late or TOO EARLY to plan ahead.

Send me an email HERE

Your say?

    22 replies to "3 most overlooked aspects of retirement & what to do about it"

    • JG

      Hi LCF

      Thanks for this info. Can you drop me an email with details on this deductible medical card ? Exactly what I need.

    • […] Also read: How getting a deductible medical card can reduce your costs before age 55, and to ensure you get fu… […]

    • […] Also read: How getting a deductible medical card can reduce your costs before age 55, and to ensure you get fu… […]

    • […] on your immediate family medical history. It could be a full-fledged medical card or it could be a deductible medical card which auto converts to a full fledged medical card without further underwrit…. If you choose to self-insure, be aware that there is no ceiling on how much it will cost in the […]

    • Ah CHUAN

      may i know which selling deductible medical card?, thanks

    • Ah CHUAN

      may i know which company deductible medical card?thanks

    • simkh

      Pls email me the deductible medical card brochure. TQ.

      • LCF

        Hi Sim, you are welcome to drop me an email for the details

    • Lee

      Hi,

      This article really strike me, I am always not clear, and not sure where to get it clear about insurance, they are just being too complicated after packaged, re-package and package …. like an onion, need knowledge to unwrap and understand …..

      BTW, i quote your link my blog, as a lesson learn for myself so I won’t forgot when I need to relook into it ….

      • LCF

        Hi Lee, glad you find it useful, thanks for linking to this from your blog. 🙂

        • Lee

          Hi LCF,
          I made a call to the insurance company where I hold my investment link policy (with the medical card as a rider), but they tell me their company don’t have such thing of deductible or non deductible medical card. Can you share to me which company offer that ? And, my medical card is the non “core insurance” (hope i spell that correctly) type, which now there more expensive to own one as i bought it before bank negara ruling.

          • Hi Lee, could you email me directly so we could talk? I don’t the company here because I am not promoting any company product. Hope you understand, TQ.

    • Steve Lye

      OK. Now I understand what you mean by deductible Medical Card. Actually, it is a Term Medical Insurance, which you pay every year regardless if you make a claim or not. Meaning if you make no claim, the money is “burnt”. Unlike an Investment Linked Medical Card, which expires at a pre-set age and may have some cash value left over on maturity, a Term Medical Insurance attracts no cash value on maturity as it expires yearly. I practice this as well as my Investment Linked Medical Insurance is a Non Cashless one as I prefer to pay a lower premium. In the event of claims, I will claim from the Term Medical Insurance first and upon exceeding the limit then I will claim from the Investment Linked Medical Insurance. Saves me a lot of money and helps with my budgeting and Financial Planning. On top of this I also have a Term Critical Illness (CI) and Total Permanent Disability (TPD) Insurance, which I pay a small premium every year. So if I have a critical illness, I will pay the Hospital Bills from the Medical Insurance and claim from the Critical Illness Insurance, which is paid to me. Best of both worlds in time of need.

      • LCF

        Hey Steve, great sharing here!
        Actually there’s 2 ways to this deductible card by the specific insurance company.
        Firstly, this deductible card can be a rider in the investment linked policy.
        Second, this card can also be a standalone card.
        In other word, it is sold as rider or standalone.
        Here’s the practical application.
        Say, if someone who is below 40, and didn’t have an own medical card or need additional basic coverage, then he could buy a investment linked policy with minimal basic sum assured with this deductible medical card as rider (because it is a very cheap rider)
        However, if someone who is over 45, then he better get this deductible card as standalone (which you refer as term medical) rather than later because as we know, the older we get, we would be at the mercy of insurance company underwriter.
        Once it is in-force, it has guaranteed conversion to a full medical card at age 55 without needing any evidence of insurability
        Also, the premium be more expensive at this age even to buy minimal coverage investment linked policy with this deductible card as rider COMPARED TO buying the same deductible card as standalone. In other words, the exact deductible card bought as standalone is MORE cost effective. Then again, the remaining years to accumulate the cash value in an investment linked policy by 40+ years is too short to build up any meaningful sum as the insurance charges are significantly higher.

    • Steve Lye

      Hi LCF,

      The sentence below in your article, where can I get hold of such a RM30K deductible Medical Card and how much would it cost in yearly premium? Which Insurance Company sells this card? Appreciate your advice here. Thanks.

      Steve

      “For example, if your company medical card coverage is RM 30k/year, you could get a RM 30k deductible medical card, with minimum premium. Which means, only RM 30k and above medical expenses will be covered by this second card. However, when you reach age 55, this second card will become a zero deductible card – which means any medical expenses can be charged under this card – at the time when your company medical coverage ceases.”

      • LCF

        Hi Steve, did you get my email?

        • Steve Lye

          No, did not receive your email.

          • LCF

            Just re sent the email to you via my gmail. Check?

    • Steve Lye

      Hi LCF,

      There is an error in your article ie. 4% fixed deposit interest rate generated by his 3 mil principal (3% x 3 mil = RM 120k)

      It says 4% but the calculation shows 3%. 3% x 3 Mil = RM90K not Rm120K.

      Steve

      • LCF

        Thanks Steve, corrected the typo. The example in Yap’s book is 4% but I mistyped it to 3% per our current FD rate 🙂

Leave a Reply

Your email address will not be published.