The retirement lifestyle is all the rage these days. Based on The Star’s “Yes to villages, no if it’s expensive” report on 9th July 2017, people are beginning to view the idea of moving into retirement villages and communities that have aged care facilities – such as senior day care centres – as an acceptable lifestyle option, so long as it is affordable.
While choosing either to age in your own home or move into a retirement village is a matter of lifestyle choices – the fact is: receiving care isn’t a lifestyle, it is a need and it becomes greater as we move further along in age.
In the same report, many Malaysians express concern about whether these facilities and services are affordable as not all Malaysians will have enough savings for their old age. The general consensus being to forgo these facilities and services if they are too expensive.
However, the need for care still remains despite the lack of finances. A person with a debilitating condition – either with no family members or ones that aren’t able to care for him/her – would need to check into a nursing home.
Hence, while the retirement lifestyle is nice to have, ensuring you can receive care is a must. So the real question is: how can Malaysians afford to pay for their long-term care when they need it.
In the previous issue on “Paying for Aged Care: The Trends & Challenges”, it was identified that the major hindrance of care delivery is the existing payment options within Malaysia’s infrastructure. In defining that, we now examine the opposite spectrum that looks into the factors that impede Malaysians from being able to pay for long-term care. This is specifically in the context of nursing homes where one’s need for long-term care is at its greatest.
Financial Capability & Long Term-Care
While the infrastructure to pay for long-term care has its challenges, Malaysians also need to be proactive. We need to review our financial capability, learn to save and invest our money for old, and identify the factors that could hinder our ability to pay for long-term care.
In a recent study on “Provision of Long-Term Care and Payment Options for Elderly People Living in Kuala Lumpur and Selangor, Malaysia” (*Yip, 2017), a research on the financial capabilities of Malaysian seniors to pay for long-term care was conducted.
With a sample size of 419 seniors whose age ranged between 65 – 84 years old and living in nursing homes, care centres and at home, the outcome of the study indicated:
• 75.5% were unable to pay for their care needs,
• 10.6% have just enough money to pay for care if their needs are prolonged,
• 7.2% have savings but need financial assistance if care needs are prolonged, whilst
• 6.5% indicated they have more than enough money to last for as long as necessary.
The 75.5% were unable to pay for their care is because they did not have savings in the bank to pay for the required services. Regardless of ethnicity, there are 4 factors that contribute to the inability of this significant percentage of the senior participants to finance their long-term care needs on their own. These factors are namely:
1. The Gender Factor
Gender is one of the variables that may affect one’s ability to save and pay for care. It is possible that women – be it for traditional reasons or otherwise – may be more financially dependent on their spouses and family members. For example, if a woman undertakes motherhood they may stay at home to take care of their children instead of retaining employment. Thus, affecting their future ability to pay for care in their golden years.
Further evidence to substantiate the gender factor was in terms of percentage more senior males seem to have more than enough money to pay for care needs as compared to female elderly. The ratio being 10.14% versus 5.33%.
2. Age Defining Factor that Affects Payment Ability
There is a strong correlation between the senior’s age and their ability to pay for their long-term care needs. The study revealed that as a person ages, their ability to pay for their care decreases. The number of seniors who don’t have savings at all increases significantly to more than 80% after age 75.
Furthermore, the small number of seniors who have more than sufficient funds to pay for care needs decreases as the age group rises. These results affirm the fact that longer life spans does increase financial risks due to age.
3. Previous Occupation
The third factor lies in the senior’s previous occupation – depending on whether they worked in the public sector, private sector, or are self-employed. Where the individual worked or what was his/her previous employment prior to retirement matters as it determines the senior’s ability to save and make money in preparation for their golden years. This will undermine the impact on how long can their funds last to pay for their long-term care needs.
According to the findings, seniors who used to be employees (73.87%), self-employed (80.95%) and housewives (80.19%) are found to have the greatest risk of not having any savings at all to pay for their care needs. Meanwhile, those who owned a business (10.71%) and worked for the government as civil servants (11.76%) have a relatively better ability to pay for their care needs.
Within a typical traditional family setting, having many children is a blessing. As such, parents need to have a high financial capability to accumulate and grow their wealth in order to provide for their children during their developmental years.
The study’s results showed that more than 90% of seniors in need of care depend on family members for financial support. Filial piety is a deeply rooted value in Malaysian culture, so some would expect children to eventually take care of their parents in old age. However, there is no guarantee that they would or could do so – financially or otherwise – for various reasons.
Out of the group of seniors without children, 91.30% still needed financial support from family members. Only 34.78% of this grouping has their own savings to pay for care, while 32.61% possess other income sources to pay it. Hence, the assumption that people without children are more financially well-off to pay for their long-term care doesn’t appear to be true either.
Regardless if you have children or none, it is imperative for you to plan and accumulate enough wealth for your long-term care.
Whilst there are reports and research findings which are complementary to the idea and development of retirement villages, the income security of seniors needs to be addressed given the higher cost of living coupled with the increased number of seniors left to fend for themselves due to an ageing demographic.
Hence, industry players must be pragmatic and proactive in their approach when undertaking the task to develop a financially affordable aged care ecosystem in Malaysia. Meanwhile, Malaysians must reflect on the factors that hinder their financial capability to pay for long-term care and then arm themselves with the necessary financial knowledge and money management skills to save money and invest in assets that generate income for their long-term care.
Source: Smart Investor, August 2017
Written By: Aged Care Group
Yip, C. (2017). Provision of Long-Term Care and Payment Options for Elderly People Living in Kuala Lumpur and Selangor, Malaysia (Doctoral dissertation). Retrieved from Figshare Database. (MD5: 27fe2fa9e373fd58476ef48896a524c1)