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Do Malaysians Have Enough Money To Retire Comfortably?

After years of slaving away at the workplace, most people would look forward to their golden years. Work is no longer a priority and they get to kick back, relax and enjoy the retirement funds they’ve saved up. 

75% of the Malaysian workforce confidently said that they will be able to retire comfortably[1].

Admittedly, those that said so also mentioned that life after retirement may not be luxurious, but they would be content. 

Source: World Bank

Yet, on the same note, 50% of Malaysia’s retired workforce regret not saving money earlier for their retirement fund. The truth is, many Malaysians are not prepared for the reality of retirement and how much it takes to survive in their golden years.

The retirement age in Malaysia is 60 years old. While some have the luxury of retiring younger, there are many who wish to work longer. Data shows that 45.2% of Malaysians still hold a job within the 55-64 years old age group. Within this pool, there are fewer women in the workforce[2].

How Does Age Affect Your Retirement Fund? 

Most people rely on Employees’ Provident Fund (EPF) savings once they become a senior citizen. However, once you’re out of the workforce, it is no longer mandatory for you to save under EPF, thus reducing the possible years of savings. 

Those who are more financially savvy would have other means of savings such as investments, insurance and assets. However, if you are a regular worker, EPF would be the easiest and most convenient way to save. Yet, it is startling to know that not all Malaysians in the workforce have an EPF account. 

Only 60.8% of the Malaysian labour force contributes to the Employees’ Provident Fund (EPF), which is low when compared to an aspirational group of high-income countries[2].

The World Bank used official data to calculate and found that in 2019, 39.2% of Malaysia’s workforce were not signed up under a retirement fund be it in the private sector or government pensions[3].

Income Security Post-Employment May Still Be A Dream 

There is still no guarantee that one would live comfortably without financial worry even with an EPF saved up. In the same study by the World Bank, it noted that most senior citizens can only withdraw low monthly sums from their account. One of the reasons is that many of them tend to withdraw large amounts between 50-55 years old, leaving a low account balance[3].

Source: World Bank

Instead of allowing the account to grow as an investment for future savings, workers who reach the minimum age immediately withdraw, and even empty their EPF accounts before they actually retire. It has gotten to the point of concern as EPF revealed that more than two-thirds of people with EPF accounts withdraw their entire savings the moment they turn 55 years old[4].

In 2020, almost 75% of EPF members have account balances below RM250,000 at age 54. Simulations show that this would translate to a monthly income of less than RM1,050[2].

world bank

Many dream of enjoying their golden years, but are ignorant of the fact that their savings are far less than they imagine. The tendency of withdrawing funds early only exacerbates the problem and further reduces their funds for the future.

Low-Income Workers, Women And Retirement Fund 

Source: World Bank

Matters are even worse for low-income households and women. These two groups tend to have lower EPF savings, due to lower monthly contribution as a result of lower wages or inconsistent contribution to the fund as a result of non-contractual working agreement or part-time work arrangements[3]

In 2019, the percentage of men in the Malaysian workforce vastly outnumbers women with 80.8% and 55.5% respectively[3].

Between the ages of 50 and 60 years old, the employment gap between men and women is the largest. Only 17.9% of women are recorded as still employed in this age group, whereas men record a whopping 59.7%[2].

Source: The Edge Markets

When it comes to retirement, gender plays a major role. Women make up a larger portion of those self-employed or as unpaid family workers, resulting in less social insurance coverage.

At age 54, the average women have an EPF balance of RM177,000 compared to RM233,000 for men[5].

How Much Is Enough To Retire Comfortably? 

To each its own, as lifestyles differ from one to another. However, it is safe to say that oftentimes we underestimate how much we need to live through our golden years comfortably. 

Some factors to consider include our lifespan, health condition, financial commitments, housing conditions, inflation rates, and whether we have other savings or investments. 

There are various ways to prepare for retirement, but the savings will need to start today. EPF is the safest and surest way to ensure that you have a pool of money to start with – and then explore other savings options, even if it is a small amount every month. 

Give these calculators a try: Retirement Planning Calculator and Private Retirement Schemes see how much you have to start saving today.

Note: Wiki Impact is not related to any of the financial retirement schemes mentioned. 

Explore Our Sources:

  1. Mazlan, Mazlena.(2015). Time to be mindful of old-age poverty. New Strait Times. Link.
  2. World Bank. (2020). A Silver Lining: Productive and Inclusive Aging for Malaysia. Link.
  3. Lim, Ida. (2020). Malaysia’s ageing population challenge: World Bank moots RM350 monthly govt-funded ‘social pension’ for B40 elderly as a start. Malay Mail. Link.
  4. Bhattacharjee, Rash Behari. (2020). Politics and Policy: Old and out of money. The Edge Markets. Link.
  5. A. Jalil. Malaysia needs policies that foster productive employment. The Malaysian Reserve. Link.
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