A Gen-Xer in Malaysia With His Retirement Plan

Mr X, a Malaysian Chinese, in his late 30s, falls into the category of Generation X, a generation born in between 1965 to 1980.

His parents are in their 60s, retired baby boomers with saving last only for 3 years of retirement. As long expected, taking care of them become his responsibilities. The baby-boomer is a generation which works the whole life to bring up their children, usually a couple of them, with little planning for their retirement in their early working lives. Their savings are usually insufficient for retirement as they have used up most of their hard earned saving for their children’s cost of livings and education. Most of them are expecting their children to look after them in their golden age, hopefully a shared responsibilities among the siblings. They believe in fixed deposit savings in bank or owning some real estates. Few of them can probably afford to retire independently, funded by their retirement savings, rental income, interest income from their deposit savings or dividend income from their stock investments.

Mr X has a lot of married colleagues and friends in the same age-group, in their mid 30s and 40s. Unlike their parent’s generation, they keep their family size small with 1-2 children the most. He even heard about the female colleague who aborted the unplanned baby so as not to jeopardize the family planning. This is a poor sandwiched generation which is caught in the rat-race situation. They have to look after their aging parents, their children and most importantly funding for their education. To maintain their lifestyle, they have no choice but to have both the couple working to earn the double incomes.

He counted at the time spent in the formal education and it was 18 years of his life (6 years of primary school, 6 years of secondary schools including an additional 1 year for Remove Class, 2 years of high school and 4 years of college). It is therefore no surprise that he entered the working life only at the age of 25, as compared to his peers in other countries with their age of early 20s when they graduated. With the official retirement age of 55, he has only a maximum of 30 years to accumulate savings for his retirement, which he expected to be another 30 years of life. It is definitely too early to retire at the age of 55 as compared to other countries which are now extending or considering to extend their official retirement age due to the higher life expectancy. Singapore is considering to raise the retirement age for its citizens to 65 from 62 by 2012 and eventually to 67 to account for the higher life expectancy of its ageing population. Spain has just announced recently the plan to raise the retirement age from 65 to 67 from 2013 onwards.

He owned his first property at his age of 30, similar to many of his colleagues and friends in the same generation. He was lucky as he bought the property at discount when the country is at the 97-98 financial crisis and the property market is at its trough. The price for the resident properties have since recovered, inflated much in the last 10 years and the prices are still on the way up without fail even in the current financial crisis. Many of the colleagues have bought their primary residence at the cost of RM500k or more. He knew that it is definitely tough for them even with their double incomes.

With the knowledge gained from his financial course, he estimated several years ago that he would require a total of RM2.5 mil at the age of 55 in order to support his retirement years at no degradation of the current lifestyle. He could not imagine at the whopping figure as he used to think a million ringgit is already a huge figure. His current net-worth is not even a quarter of the required figures even though he has used about half of his working life accumulating the savings with investments. He knew he is definitely not on the right track for a comfortable retirement. His fellow colleagues and friends are in the worse situation, struggling to maintain their decent lifestyles. He looks forward for the aim for Malaysia to become High Income Economy by 2020 as average Malaysian does not enjoy the fruits of the GDP growth for the country in their income over the years. He realized that he is about 50 by then and does not have many years left before retirement. Other than extending his retirement with a part time job, he is thinking seriously on what other options do he has now. He is really doubtful on this.

In the Mood of 1Q84

Novel has always not my cup of tea for reading in the last few years as I guess I am lacking now the kind of mood as well as the senses required for appreciating the novel. The latest release of "1Q84" from the Haruki Murakami, the most celebrated contemporary novelist in Japan, is certainly one of the few exceptions for me.

It comes in 2 volumes with many readers believe that more volumes to be released in future. The book was published in Japan mid last year and has sold for more than a million copies. It was reported that the English version will only be available in Sept 2011, definitely a long wait for the fans eagerly awaiting the release. I read the mandarin-translated version from Taiwan, published recently in Nov 09. The translated version is certainly also a big hit among the local Chinese readers as well.

There are different interpretations for the title of the book whichever you choose to believe. The 1Q84 stands for 1984, a reference to George Orwell's Nineteen Eighty-Four (I have not read before but now included in my to-read list). The Q can also refer to the Questions or doubts. The story is fantastic and imaginative with each chapter dedicated to the tale of one of the two main characters - Aomame (青豆) and Tengo (天吾), who are in the memory of each other since the age of 10, and both are searching for each other for 20 years. The story shifts back and forth in between the 2 main characters, seems in isolation and yet so close, and finally it interlinks in the second volume. Despite this arrangement, the story is amazing and it keeps the readers' interests to keep on reading to find out their fates, love and of course a bit of sex scenes (I like the portion of the story in between Tengo and his elderly married girlfriend) and a few murders scenes in between etc. An interesting observation is the occupation for Tengo's father which is unheard of for me. He worked for NHK going door-to-door collecting the network's reception fee. I guess such occupation no longer exist now. We used to have television license fee in Malaysia in my teenage time, which is abolished long time back in 1999.

I read a couple of chapters in my leisure before the bedtime and it took about 3 weeks to complete the two volumes. I certainly looking forward to the future volumes, if any to be published.

Echocardiogram Check-Up

The insurer for my medical insurance has increased the premium with a heavy loading, an additional 30% on top of the annual premium due to the voluntary disclosure 2 years ago when I took up the medical insurance as an added protection. I have disclosed in the insurance proposal form for having a small VSD (ventricular septal defect), or generally known as the hole in the heart. The defect is a small hole (0.7cm in diameter) below aorta valve, diagnosed in one of the medical check-up during the school days. The defect does not cause any issue, nor any operation required as I guess it is a tiny hole.

It was rather annoying as the insurance company started charging insurance loading 2 years after the insurance were in force and before the annual premium is renewed for the 3rd year. (Frankly speaking I would say the insurance company is seeking additional protection for themselves rather than for the customer like me, who has been the loyal customers for more than 15 years).

I attended an Echocardiogram check-up yesterday in our the Sunway Medical Centre to obtain the latest medical report to support for the request for reduction of insurance loading. This is my third visit for the similar purpose in the last 10 years. I was overwhelmed with the courteous customer service at the counters as well as the medical practitioners met. A comfortable gown was arranged for the patient for wearing during the Echocardiogram check-up is one of the improvement seen, as compared with my previous visits. Another point to mention is the fees charged for the check-up have not increased much when compared to the similar check-up 10 years ago.

The services in private medical centres generally have improved thanks to the booming medical tourism industry in Malaysia. Malaysia is among the world’s top five medical tourism destinations for medical tourists and foreign investors. Malaysia came in third behind Panama and Brazil, and was followed by Costa Rica and India. The industry brought in large volume of patients in the last couple of years. In 2006, the revenue earned is approximately USD59 million or RM203.66 million.

Insurance Cash Dividend

It is very rare, but I have recently received a letter from a life insurer proposing me as the policy holder to encash all the bonus collected for a "well-deserved" holiday. Yes I am not wrong, the bonus is the accumulated cash dividend declared by the life insurer on yearly basis for one of my life policy, a 16 years old life insurance policy which I have been paying premium biannually without fail since my college days.

I called up the call centre for the life insurer to enquire on the proposal as I am little bit fishy on this. More importantly I would also like to check out the interest rates declared on the last few years of the cash dividend as I had not been receiving the statement for the bonus for the last couple of years. The call-centre agent responded hesitately that the previous interest rates declared was usually in the range of 4-5% on the account balances. The past returns were not bad, higher than the interest rates for the Banks Fixed Deposit for 12 months as the interest rate for our country is currently at its lowest. I figured out that the life insurer is trying to encourage the policy holders to encash th cash dividend so that it relieves the pressure for them to obtain a decent return similar to the EPF dividend for it's investment, with the limited investment vehicles for the life insurer.

With the lack of confidence for obtaining a higher return in these days (the equity and commodities like gold are all at their high), I have decided to leave it to the life insurer to work it out for me. A 4-5% return is good enough for me for a life policy and I would opt for premium holidays instead.

Interesting Behaviors

My foreign colleagues and friends like to share with me the interesting behaviors they observed for some of Malaysians they met here. Most of these are quite funny but it can be quite embarrassing sometimes. Here are some of the common observations:-

(1) Does not like to walk

An observation which I must agree with. Look at how we park our cars at the shopping mall. We will first park at the parking lots nearest to the entrance (even though it may be a parking lot for the disabled) so that it saves a few walking steps. See the cars illegally parked at the commercial streets especially around the banks during the weekdays. We can ask ourselves and look around how often we walk to the shops for meals from our apartments or houses even though the locations are near and the weather is not hot.

(2) Lack of patience

A lot of Malaysians will never queue up and wait patiently for the turn without the attempt to jump queue. A colleague of mine shared his recent experience when waiting for his turn at one of the hospital. Many visitors (generally they are not really sicks) walked to the counter every 15 - 30 minutes for checking their turns or negotiating for faster turn for them with all sort of excuses. They even asked their kids to check for the turn hopefully to obtain the service faster. I observed the similar experiences usually in the customers service counters at the bank. The walk-in customers would often interrupt the customer service staff that is serving the customer to hijack the attention for information. You will get so annoyed that the customer service staff often stop serving you and begin to respond to a couple of these adhoc customers who interrupted your conversation. This behaviors are really rude for me as they are wasting people's time.

(3) Keep "intimate distance" with others

Do you stand behind the yellow line or leaving some spaces in between when there is someone in front of you performing transactions at the ATM machine or at the counter? A lot of people does not realize this and keep very "intimate" physical distance when others are performing financial transactions which should be private and confidential. Frankly speaking I think this is because we are not sensible to the privacy for the others.

(4) Litter anywhere, anytime

My foreign friends are usually stunned when they see kids or even adults throwing out rubbish from the moving cars. I had worse experience in my apartment when the lift floor is often filled with kids' urine. Due to the open design, the balcony at my apartment had always been a rubbish bin for the residents at the upper floors. Once there is even a dead rabbits thrown at my balcony. A few years ago, the Indonesia house maid used to curse when she had to clean up the balcony littered with dirty woman sanity bags. What an embarrassing and disgusting behaviors by some of the people around.

(5) "Last Minute" Behavior

It is not uncommon to see our renown "last-minute" behavior especially before the deadline such as 30th Apr every year for tax form submission or the year-end rush for claims. I had a bad experience in the last year-end for the dentist visit when many people rushed for dental visit at the year end to utilize the dental benefits from their companies. I had to queue for more than 5 hours for the service. A visitor, who brought his entire family for dental visit, told me that this is the 7th dentist he visited for the day as all the other dentists were filled with year-end appointments. Well, I am one of those with this "last-minute" syndrome.

The Renminbi Foreign Currency Account in Malaysia

Public Bank Berhad, in collaboration with Bank of China (Malaysia), has just launched on the 18th Jan 2010 the first Renminbi Foreign Currency Account (CNY FCA) by local bank in Malaysia for both Fixed Deposit as well as Current Account.

For Fixed Deposit Account, the following is the interest rate as well as the additional interest rate for the first placement only during the promotional period, obtained this morning from the bank branch.

The minimum amount to open the foreign currency account is RM10,000 equivalent of Renminbi. (Customers can not open account or top up additional receipt using the Renminbi notes). The additional 2% mentioned in the press release is actually the promotional rates given to the existing MYR FD account holders to convert to this CNY FCA account without the fear of losing the interest rate earned in the existing MYR FD account.

In anticipation of the currency appreciation or interest rate upward revision in China in the very near future, I opened the fixed deposit account this morning. A surprise welcome mug is received. There were already a few customers like me queueing up first thing in the morning to open the first ever Renminbi Foreign Currency Account in Malaysia. I can expect the overwhelming response as lot of people have long waited for this to capitalize for the anticipated Renminbi appreciation, other local banks will probably lining up to offer the similar service very soon.

The Renminbi Current Account is also available at the same time with the interest rates of 0.4%. As there does not seem to have other additional benefits other than the marginal interest rate and the potential currency appreciation, I did not open this current account. The initial minimum deposit amount for current account is USD1,000 equivalent in CNY.

However this investment is not necessary a sure-win as it is betting on the assumption that China will appreciate their currency in this year (say in the range of 5-6% as commonly predicted) and our MYR currency does not appreciate that much or better still stays status-quo. There is concern that our currency will also appreciate at the same time (like other currencies in Asia Pacific region) when China removes the repeg and allows the renminbi to appreciate again, making this investment less favourable. There was similar "alignment" experiences in the past when our government removed the currency peg to USD on 21 July 2005, at the same day shortly after the Chinese government announced their decision to lift their currency peg to USD to a managed floating exchange rate with reference to a basket to foreign currencies.

Google's Withdrawal from China

The news that Google Inc's potential withdrawal from China, over the censorship in China and the hacker's attack on GMail accounts for Chinese human right activists, sent shock waves not only in the investors world, it is also a hot topic that concerns a lot of Internet users worldwide as well as the players in the IT industry.

The mass Internet users in general supported the move by Google to protect the privacy and confidentiality of the gmail accounts as well as the Internet freedom.

However for some, this appears to be a calculated economic decision for the company. The operation in China contributes only less than 5% of the company sales. Based on the Sept 09 report on search activity from Comscore, Google Sites was the top search destination in Asia Pacific Region, accounting for 44.1% share of all searches in the region. However when drilled down the statistics by individual country, Baidu.com Inc. led as China's top search destination with 63% share of searches performed. Therefore the withdrawal does not seem to be fatal for the company in the short term as its market share is not that significant in China at the moment.

There was also conspiracy theory especially from China that the US is behind Google, engineering all this and this event is more of the political game in between US-China rather than a sole corporate decision.

Based on the research report from Comscore for internet population aged 15+ accessed the internet from a home or work location, China, home to the largest Internet population in the world, experienced a 31% increase to 220.8 million in a year from Sept 08 to Sept 09, making it the fastest-growing Internet country in the region. The long term effect for permanent withdrawal from China market is therefore unwise for any Internet company. I would rather think this event is just a tactic for the company to have a better position in the negotiation with China for more freedom in its operation in China. Let's wait and see how the story progress in Feb 09, after Chinese New Year.

An Abandoned Tin Mine in Puchong

It used to be an abandoned tin mine with the mounting sand hill as high as a 3-storey building, at the back of IOI Mall, Puchong, when I first moved in Puchong in 2000. In the last 1-2 year, the eyesore has turned to a big lake unnoticeably by the developer. Row of buildings were built facing the lake or facing the LDP highway. Eatery & shops newly opened are frequently packed with Puchong folks for meals in the evening.

Lake view - no longer an eyesore

Eatery and shops facing the lake

Currency Movements

In responding to the global financial meltdown from 2008 onwards, countries were implementing different measures to keep their economies staying alive. Other than the multi-billions or even up to trillions of government sponsored stimulus packages to boost domestic spending and revive respective economies, many countries especially export-dependent economies have also chosen to devalue their currencies to maintain their export competitiveness or to achieve other political agendas.

In 30th Nov of last year, North Korea announced the plan to devalue the currency (North Korea won) by 100 to 1 by rolling out 10 won of notes to replace the existing notes of 1,000 North Korea Won. This measure was practically equivalent to wiping out the savings for the people of North Korea. On hearing the announcement, the people in the country rushed out to convert their local currency to the RMB or USD to protect their savings. There were also cases reported that there were people committed suicide for the fear of losing the entire savings.

Venezuela announced on the 8th Jan 2010 that the government‘s intention to implement a dual system for a fixed rate Bolivar by devaluing the currency from the 2.15 per dollar, in place since 2005, to the range of 2.6 and 4.3 per dollar. Exchange rate for essential goods such as food, medicine etc will be devalued to 2.6 per dollar, while the exchange rate for the non-essential goods (such as imported cars) and services will be devalued to the 4.3 bolivar per dollar. The currency devaluation, according to the President Hugo Chavez , is expected to boost the export while discouraging the people from buying non-essential imports. After the announcements, it was reported that Venezuelans flocked to shops to buy appliances, electronics and other import items in anticipating of the upcoming price revisions.

China, the world biggest exporter that surpassed Germany in 2009, has chosen to peg its renminbi at about 6.8 yuan to the US dollar during the recent financial crisis to boost its exports. The monetary policy has attracted many criticisms especially from the US and Europe. Paul Krugman, the Nobel prize winner in 2008, in his recent new year article, openly criticized China’s stand in devaluing the renminbi and blamed that this had created unfair advantages to China and had "stolen" 1.4 mil jobs from the US over years. The western countries are seemed to be standing together to force the fastest growing economy to appreciate its currency. This appears to lot of people as another plot from the west similar to what they have done to Japan which resulted to Plaza Accord in 1985 and the subsequent leading to the asset price bubbles and the eventual lost decade for Japan. The difference now is the victim is changed from Japan to China. All eyes are now on China on when and how much the country will appreciate its currency to ease the inflationary pressure as well as the mounting pressures from the West.

Like it or not, average people like you and me are definitely impacted by currency movements, no matter in what directions. Nobody wants their hard-earned money to be wiped out when the country devalue its currency. On the other end, we should also be alert that the country which we are dealing with is expecting to appreciate its currency as the prices of goods and services will be higher. As far as I am concerned, the renminbi appreciation would blow by travel budget for my China vacation in April. It looks to me that it is definitely make sense for me to convert to renminbi now before the appreciation.

2010 - Embracing A New Decade

It was not a good start for 2010 with the occurrences of few instances of churches and schools been perpetrated with attacks in the last couple of days, leaving many to us to wondering what had really happened to this country, which used to be and hopefully continue to be a harmonious country. You have never had before a new year wish to live in a safe and peaceful country (Malaysian have always take this for granted). Nevertheless for 2010, you have just included this as the main one in your list. You know you are not the only one.

In the last decade, we witnessed the worst financial crisis in 2008 Q4 - 2009, probably one of the worst in our life time for some with many tightened the purse strings in the economic recession. For Malaysian, 1997-1998 financial crisis was the probably a worse one with many of our friends, colleagues or family members & relatives lost their jobs or forced to change their careers unwillingly. We also had the memory of the worst scares during the SARS epidemic in 2003 and over 70+ death cases in the H1N1 outbreak, which caught a lot of us in surprise in 2009.

Other than the above, As the saying "The only constant in life is change" goes, you know you must embrace 2010 as a new decade of changes with the following wishes laid out in this year.

Moving into the next decade and worked for than 15 years in the same field, a strong feeling and urge arisen for diversification into another career, not in the IT field. This feeling existed in the last couple of years and became much stronger now at this juncture. All this while you often think IT is a industry which really discriminates the players by age. Staff moving into the middle age like you (35 and above) are often hit with bottlenecks and we are not as competitive as the new entries in their young age in acquiring the new technology & skills, which are essential for the survival in this field. In this aspects, you told yourself many times that you would spare more time this year to venture and diversify from the usual track.

This is also a year for your execution of planned travels with a minimum of 2 weeks for at least 2 trips. A trip is currently being planned for China ChengDu and Xi'an for 2-3 weeks in April this year, an extension from last year's trip of 6 cities in China. Another trip, hopefully in Europe, at the second half of the year have not been planned yet. You also hope that the trip to Shanghai for the visit to Shanghai Expo (held from 1st May - 31st Oct 2010) can be materialized, but this can be expensive due to the foreseeable huge crowd from the worldwide.

In addition, you would continue the reading habit for this year with at least 24 books per year (about 2 books per month). Books on Financials have been your focus in the previous years and you hope that this would change this year.

The final one would be to achieve the financial objective of the net worth target by end of the year, which you had initially stated from 2007. The journey is definitely bumpy considering the economic recovery does not seem to be as solid and sustainable as we first thought.

Attach here a photo snapped this morning, looking out to the window from the bed. The rising sun, hopefully would bring everyone a sea of good changes, and of course the required wisdom to enbrace the challenges.