MONEY THOUGHTS: The person, the pool and the pipeline

IN my small professional practice, which provides holistic financial planning advice and services to a wide cross-section of English-speaking adults, different goals motivate people to reach out to me.

The four most common goals which drive them can be thought to orbit the binary "stars" of their family and their future.

I'll explain:

Family — Providing their children with superlative tertiary education experiences, and escaping debt to reduce stress and strengthen their family finances, and

Future — Establishing robust retirement nest eggs and formalising next generation legacy gifts.

The first three goals depend on a proactive, highly motivated person increasing their active income through work or business while avoiding spending it all.

The gap between cash flow in and cash flow out can be — depending on each component's relative magnitude — a surplus or a deficit. (There's also the unlikely situation of the two cash flow halves being precisely the same size. While attaining cash flow parity, which is called breaking-even, is healthier than generating consistent cash flow deficits, it still is not ideal.)

When cash flow surpluses build up, they grow into a store of capital. This can be thought of as the person's pool of capital.

If we then fast-forward to the end of his or her life, the unspent pile of capital can be used for legacy gifts to children, grandchildren, religious bodies, charities and foundations because, after all, we can't take it with us!

The gap between the store of capital at the start of a person's full-blown retirement and his or her demise is the depletion level of the nest egg or pool of capital used to fund the retirement years or, more likely, retirement decades.

It is worth realising that arguably the biggest source of stress in retirement is seeing a painstakingly accumulated pool of capital evaporate because of inflation's inexorable effects and the steady drawdown of cash for normal, vacation, emergency and medical expenses throughout retirement. This is a less-than-optimal way of structuring a person's retirement.

One way to improve the odds of thriving in retirement is to work, where possible, well beyond retirement age. The longer we work, the shorter our total retirement period will be.

The legendary boxer George Foreman humorously hit the nail on the head when he purportedly quipped, "The question isn't at what age I want to retire; it's at what income."

Consider Foreman's viewpoint as we mull over what we might want to do for ourselves.

PROACTIVE ACTION

To help, here's a quick analysis of Malaysia's population. This breakdown will show why proactive action today can be beneficial tomorrow.

According to the Department of Statistics Malaysia (DOSM), our current population is 34.4 million people, comprising 31.0 million citizens and 3.4 million non-citizens. (Source: www.dosm.gov.my/portal-main/release-content/current-population-estimates-2026.)

Broad strokes: Our roughly 34 million people comprise 17 million working adults and 17 million non-paid individuals of all ages, including the young, old and non-working adults of employable age.

Of the 17 million-strong workforce, about 10 per cent, or 1.7 million, are civil servants working for the government — comprising civil servants, the police, armed forces, state-government, local authority staff and employees of statutory bodies. Most but not all will receive a government pension upon eventual retirement.

Plus, of the 17 million non-paid individuals, about one million of them receive some form of current, ongoing civil service pension.

So, even on a conservative basis, at least 15.3 million members of the Malaysian workforce won't receive a government pension. That number grows each month because civil servants hired after January 2024 will never be pensionable. They will be on the EPF (Employees Provident Fund) programme instead.

This huge and growing group of breadwinners lacking public pensions will need to:

1. Figure out how to fund their own retirements. and

2. Continue supporting non-earning family members.

As a ballpark figure, if we estimate the growing group to comprise about 15.5 million responsible adults today, the issue they must address for themselves and their families is whether they will fund their retirements from static pools of capital or use those pools strategically to create pipelines of monetary liquidity through flowing passive income.

The pipeline approach is wiser and will lead to happier, less stressful retirement periods.

PASSIVE INCOME

Possible forms of passive income include royalties from music, books and other forms of intellectual property, and, of course, annuities from insurance companies. But in my opinion, the four most practical forms of passive income most people are equipped to establish for themselves either on a DIY basis or more prudently in tandem with professionals who specialise in creating private pension streams are:

1. Interest from cash savings

2. Dividends from EPF and stocks;

3. Distributions from income-focused unit trust funds, and

4. Rental inflows from investment real estate that can be physical brick-and-mortar structures, or REITs, which securitise property ownership.

I urge every responsible working person to accumulate a pool of capital over decades of exercising delayed gratification, and to intentionally build and connect streams of passive income into a lifelong private pension pipeline.

© 2026 Rajen Devadason

Rajen Devadason, CFP, is a Securities Commission-licensed financial planner, professional speaker and author. Read his free articles at www.FreeCoolArticles.com; connect with him on LinkedIn at www.linkedin.com/in/rajendevadason, or via rajen@RajenDevadason.com. You may also follow him on Twitter @Rajen Devadason and on YouTube (Rajen Devadason).