Malaysia is a country whose most professed religion is Islam. As of the latest statistics, there were approximately 19.5 million Muslims or 61.3% of the total Malaysian population.
From another perspective, in 2019, it was estimated that the Malaysian population aged over 65 years stood at 6.7 percent. Malaysia is currently facing the prospect of an aging population, and the latest statistical data predicted this to be happening as soon as in 2030.
In a simplification, Muslims are the majority in Malaysia, and we are looking at the more significant rate of retirees as the year goes.
However, are we truly ready for it? According to a recent survey by the Credit Counselling and Debt Management Agency (AKPK), more than 50% of Malaysians may not be financially ready for retirement. While the figure alone is already scary, what been happening, in reality, is even worse.
We start to see the senior citizens who now need to continue working despite their retirement and against their suitability due to financial constraints and weak to no financial planning. Those with completely empty retirement savings within not even a few years without accomplishing anything contributing toward financial freedom – to name a few.
Why Islam Encourages Us To Plan Their Lives In All Aspects?
Islam encourages Muslims to plan their lives economically and financially to achieve the objectives of Shariah (Maqasid al-Shariah). As Islam governs all aspects of life, it takes full cognizance of how Muslims gain and spend their money, including wealth.
Even though the child should look after their parents, especially when the recipient becomes too old and incapable of sustaining themselves, however, with a good understanding by the parent that their children are responsible for their own families, too.
The need to plan one’s retirement becomes more evident as the years pass. Retirement planning becomes more significant as the financial impact and demands of modern society take their toll on the grown children’s lives. Then once the cost of living increases, the ability of the children to care for other people other than their immediate families will become increasingly difficult.
Hence, one should consider the Islamic retirement planning tools and processes as one’s preparation to be independent financially when one is old or retires from one’s job.
Aspects Of Islamic Retirement Planning
Retirement planning is one of the elements of Islamic financial planning and wealth management. Retirement planning is a process that includes a comprehensive review and analysis of retirement income, retirement goals, and investment strategy.
The purpose of retirement planning is to coordinate the financial resources available so an individual can plan for a financially secure retirement or reduce financial risk during retirement.
Role Of A Financial Planner
To build a retirement planning is not an uneasy task. That is due to while everybody has an opinion on how to plan their financial needs, the truth is, a wholistic plan from a financial planner point of view, it should start with assessing the future income needs of an individual.
Followed by financial objectives need to be established so that the retirement plan would have a clear target on how much future come to need to be achieved. Also, the retirement plan must align with the projected future income.
The most crucial part for the Muslims here is to ensure that shariah compliance must be taken into account. It is essential to make sure the retirement plan is free from prohibited elements, especially riba.
Even if one claims that they are ready for retirement period and have a clear set of financial and lifestyle visions and goals, it is always encouraged for them to seek advice from experts such as Licensed Financial Planner.
That because only a financial planner specializing in that area, to giving any pieces of advice or a financial planner, can be aware of several common missteps that many fall victim to, even those with a plan.
Many fields might fail to notice by one person when it comes to retirement planning. The most common mistakes made when we talked about retirement planning are lack of preparation of finances related to the impact on one’s health, misjudging how long one or one’s spouse will live, presuming a longer working life. Many take lightly how to prepare for and live in retirement.
To conclude, the retires worker’s situation is different from his previous situation during the working time with a specific income. Hence, everyone must prepare for their retirement by planning. In other words, planning one’s retirement is similar to planning against the risk of premature death.
The preparation should be holistic from the financial planning overview. It should be avoided element that is prohibited in Islam such as riba, gambling, gharar, etc. The planning should also prepare for the religious obligation that, as Muslims, we need to perform hajj, payment of zakat, and the recommended donations, helping the poor and needy.
About the Author
Nuraishah Hanani Abdul Ghani is a Certified Islamic Financial Planner with a demonstrated history of working in the banking industry.She has a strong finance professional background with a focus in Islamic finance and is a graduate from Universiti Islam Antarabangsa Sultan Abdul Halim Mu’adzam Shah (UniSHAMS) in Ba (Hons) Islamic Finance and Banking, Master in Chartered Islamic Finance Professional (CIFP) from INCEIF and Certified Islamic Financial Planner (IFP) from IBFIM.
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