PRACTICALITY OF ANNUITY WITHDRAWAL FORM INSTEAD OF LUMP SUM PAYOUT AS RETIREMENT BENEFIT BASED ON LIFE CYCLE THEORY

Abstract

All countries in the world no matter developing or developed countries have experiencing ageing population. Those who have not made any financial preparations for retirement can cause a major problem. In Malaysia, majority of the total labor force population were in private sector workforces, which covered by defined contribution retirement scheme, Employees Provident Fund (EPF). It is proved that their retirement savings had depleted within 3 to 5 years. Thus, lack of financial management can lead towards serious problems like poverty among elderly people. In this regard, the alternative of an annuity-based scheme from a popular lump-sum retirement benefit would be an ideal option to overcome the issues. Therefore, the study examined the option of annuity-based withdrawal retirement benefit through a Life Cycle theory would be the most practical choice among the retirees. The study found that the retirees can sustain their retirement savings towards a certain period by choosing annuity based as retirement form of benefit as compared to lump-sum payment since they are weakness in financial management, but to certain extends, it also subject towards inflation and salary growth in order to have a better preparation in their retirement savings.