When it comes to retirement planning, the stakes are high. Very high.

Those who don’t take the time and make the effort to develop a specific retirement funding programme that optimally matches their personality and circumstances run the hideous risk of running out of money during retirement.

Serious students of personal retirement planning should realise that, at the very least, a person’s age, marital status, income level and educational background must be taken into account when crafting an appropriate retirement funding plan, either on their own or with the help of a professional.

Securities Commission-licensed financial planner Ken Lo of Money Concepts Corporation says, “Investment planning is a business of managing your risk and reward. You must always bear in mind that managing your risk is far more important than managing your reward!” This is a vital point too many people who carry out a D-I-Y version of retirement planning forget.

Financial planner and tax specialist KP Bose Dasan of ITF Management observes, “It is not the client’s age but knowledge that is the determinant of the risk profile. It is like the spots on a leopard; risk takers are a different breed!”

And so retirement specialist and Securities Commission-licensed financial planner Rajen Devadason spends extended periods with new clients determining their risk profile – but not in a conventional fashion.

His proprietary methodology hinges on what’s come to be known as the ‘Devadason W-A-N-T’ model, the salient details of which he first published several years ago. Devadason explains, “After countless client meetings and numerous audience interactions, I realised the simple quizzes many of us financial planners have been using all around the world to ascertain the risk appetite of clients just weren’t adequate! Eventually, I developed a holistic four dimensional model that accounts for a client’s Willingness to take risk, his Ability to do so, his Need for accepting any given level of risk, and the Time available.”

The interplay of different factors is well-recognised by veteran financial planners. Tan Kim Book, the chairman of the Malacca chapter of the Financial Planning Association of Malaysia (FPAM), says, “The relationship of a few factors will determine what amount of risk a person will take. Those factors include the time horizon, mode of saving, such as lump sum, lump sum plus fixed regular savings, just regular savings, or step-up savings, and the assumption of inflation rates during retirement age.”

Concerning his W-A-N-T model, Devadason says a person’s willingness to mentally accept risk is a psychological feature that can be measured – to some extent – by a conventional risk profile quiz or better yet by a cutting-edge one such as the comprehensive psychometric modelling offered in Malaysia by Deakin Wealth Solutions, headed by FPAM stalwart Ronald Leong.

Devadason maintains the individual’s ability to take on risk is fused to his cash flow profile; while his need to accept such risk depends upon the robustness of his net worth statement, and the time available hinges on his specific financial goal’s targeted attainment date.

The field is replete with innovative approaches because financial planning, in general, and its retirement planning niche, in particular, depend upon constant development to meet the growing planning needs of humanity. (That’s why the FPAM requires each of its current 3,800 professionally qualified Certified Financial Planners (CFPs) to undergo 30 hours of continuous education every 24 months.)

The best recognised and most useful definition of financial planning, used by CFPs worldwide, stems from the Certified Financial Planner Board of Standards: “Financial planning is the process of meeting your life goals through the proper management of your finances.”

Planning for retirement, therefore, is a subset of the broader process of financial planning. Indeed, attaining adequate retirement funding is arguably the goal shared by the largest segment of humanity.

Why? The other ‘big goal’ is tertiary education funding for children, but since even those who are single or are married without kids will one day retire, retirement planning has a broader reach. According to Lo of Money Concepts Corporation, “The minimum basic requirements for a comfortable retirement are:

  1. A debt-free residence;
  2. A few sources of passive income to maintain lifestyle;
  3. A long-term care programme;
  4. Adequate life insurance;
  5. A few good friends;
  6. Regular family gatherings; and
  7. Being in reasonably good health at least until the age of 75.”

Lo has developed a retirement planning model, which is outlined in the accompanying chart.

CHART (Source: Ken Lo, Money Concepts Corporation (M) Sdn Bhd)


A structured approach like Lo’s retirement planning model and a clarifying risk assessment methodology like the Devadason W-A-N-T model work for all people. So, to aid readers in figuring out possible smart moves toward a viable, long-term retirement planning solution, we’ll consider four groups:

  1. Young working adults who plan to remain single;
  2. Young working adults who plan to get married;
  3. Married adults with young children; and 
  4. Older couples with grown-up children.

Young working adults who will remain single for life are unlikely to set a financial goal of educating children up to the tertiary level. This leaves them with more money to make an early start on retirement planning. Possible drawbacks: They may erroneously believe their EPF savings will be sufficient to meet their seemingly distant retirement needs. And they are more likely to be drawn into expensive yuppie-type lifestyle choices that work against the development of an enriching ‘delayed gratification’ mindset.

Young working adults who plan to marry face the immediate challenge of meeting wedding expenses. Drawbacks: A miscalculation in the expenses associated with a fancy wedding can lumber some young married couples with a load of debt that lingers for many years! The interest on such debt as well as the diverted cash flow to repay the principal sum borrowed reduces the total number of future ringgit available for retirement funding.

Married adults with young children almost always decide to subordinate their retirement funding goal to the tertiary education one. Drawback: Those who opt to educate their children abroad may find that in pure RoI terms, the expensive ‘investment’ does not pay off. Possible upside: While there is never any guarantee how children will turn out, there remains a possibility – given the commendable Asian values inculcated in most Malaysian families – that filial children will choose to exert themselves to provide a portion of their parents future retirement needs through monthly allowances.

Finally, older couples whose children have left home to start their own careers may find themselves with larger than normal cash surpluses each month. Drawback: Those without a clear understanding of retirement funding needs may squander this extra money. Upside: Those who don’t fall into such traps will be able to add much needed ‘high octane fuel’ to existing retirement funding plans.

In closing, we at the FPAM hope you will scrutinise your situation and identify sound steps you should take to strengthen your prospects of retiring well… very well!

Suggestions: Start saving sooner rather than later. Organise your affairs to work as long as possible. Spend time analysing your circumstances and personality. And, if appropriate, seek out professional help; you may begin your search in the CFP Directory at www.fpam.org.my