Looking Ahead

Looking ahead

By VIVIENNE PAL

Excerpt from The Star, Dec 22, 2008

Having a retirement plan helps you work towards a goal, especially when you have the children’s education to consider.

ASK any parent and they will tell you that having children changes everything.

There are the added expenditure, chores, responsibilities and sacrifices that have to be made.

Harminder and Balvinder foresee a leisurely life after retirement.

“It certainly wasn’t what we expected,” chuckles Karin Lim, 41. “We were not consciously maintaining a budget before we started having kids, but now we are.”

Lim, a lawyer, and her public relations consultant husband, Kelvin Boey, suddenly found themselves saddled with a monthly expenditure of some RM10,000 – about half their household income – since having Ethan, five, and Zachary, three.

This includes paying for utilities, groceries, loans, marketing, the maid and other necessities for the children. The rest of the household income goes to savings (about 20% of their earnings) and holidays for the family which is about three times a year, mostly within the Asia Pacific region.

“This year alone, about RM25,000 was spent on holidays,” quips Boey, 42.

Lim takes charge of the number-crunching, while Boey, who works from home, gets to play house-dad, buying the groceries, taking care of the boys and ferrying them around.

Kelvin Boey and Karin Lim have started saving for their boys’ education.

At a glance, it would seem that the family still manages to keep a tidy surplus.

But factor in expenses for the children’s education, and it is obvious that planning is still needed to ensure that the couple will be able to enjoy a decent retirement.

For the moment, the priority of the couple’s main savings pool, as well as Boey’s inheritance, will go towards the children’s education. The couple have also invested in education policies and insurance for both their sons.

“Having kids has substantially affected our financial planning. For both boys’ education, we have projected some RM3mil, and this is if we factor in private secondary school education and overseas tertiary education. But the amount may not be sufficient,” says Lim.

Like Boey and Lim, having Armaan, four, and Amanvir, two, changed life for Harminder Gill and his wife, Balvinder, who pool together a very comfortable household income.

Mohd Khairi Ibrahim and Fara Lucia Razali can expect expenditure to go up once they move into their new home.

With mortgage payments, loans, utilities, the daily commute between their home in Seremban and office in Kuala Lumpur and the usual necessities, monthly expenditure comes up to about RM12,000.

“The biggest expense right now are toys for the kids,” jokes Balvinder, 33, a bank officer.

Again, the main consideration for this family is the children’s education. “It will increase expenditure for sure. Yes, having children affects our financial and retirement planning. We believe that getting professional advice is beneficial in managing our finances,” says Harminder, 37, a general manager with a radio network company.

While the future of the children is the prime concern, both couples have also begun looking into planning for their retirement.

“We want to live life at a leisurely pace, be able to spend time together pottering around the garden,” says Harminder. For Boey, travelling and more family time is something he looks forward to.

Like Harminder, Lim foresees retirement at age 55, though both would consider working past 55.

Recently, Boey and Lim worked out how much they needed for their retirement using the Prudential retirement calculator.

“We need about RM4,144,515. And this does not include our children’s education, barring any mishaps with our investments,” says Lim, who agrees that the figure, while daunting, is achievable with proper planning.

For Harminder, paying off the mortgages first and putting away savings is important for a comfortable retirement.

“I have done the calculation myself, and I believe it would come up to the same number (as Boey and Lim) if I combine my income with my wife’s,” he says.

“Ultimately, your retirement depends on what kind of lifestyle you want. As long as mortgages are paid up and there are enough funds left over for daily use, it’s fine.”

While both couples have not started actively working out savings for their retirement, they have already begun putting their plans into motion.

Both have diversified in terms of savings by investing in property, buying unit trusts, shares and insurance.

Meanwhile, Mohd Khairi Ibrahim and his wife Fara Lucia Razali – both 28 – are in a fledgling stage where retirement plans are concerned.

They have a joint monthly household income of about RM7,000. Expenditure is low – about RM4, 500 – as they are currently living with Fara’s parents.

They have two children, Qawien Anaqi, nine, and Iman Qaisara, six, whom they see only on weekends. But things will soon change once their own house is ready.

“When our house is ready, we will bring our kids to live with us. Of course, by then we expect our monthly expenses to go up by RM1,500 or more,” says Khairi, a buyer at a media agency.

Having children has made things a little tougher for the young couple; they are putting the children’s education before their own retirement.

“Hopefully I will be able to retire about the same time as my husband, at 50 or earlier, and after that go for our haj or umrah,” says Fara, manager of a coffee outlet chain.

Khairi has also entertained thoughts of opening a small business to occupy his time once he retires.

“We will start planning for our retirement when we hit 30. Right now, our children’s education and health are our priorities. We don’t have many commitments, so our insurance policy will be dedicated to our children’s education; monthly savings is a separate matter,” says Khairi.

The couple project a budget of RM50,000 per child once both children reach 18.

Khairi and Fara have yet to calculate the amount they need to retire comfortably, but like the other two couples, acknowledge the importance of consulting professionals in managing their finances.