Do You Need RM1m to Retire?

Those retiring in 20 to 30 years will need to have at least RM900,000 to RM1mil, according to Employees Provident Fund’s (EPF) chief strategy officer. The basic threshold now is RM240,000. The “bare minimum” after factoring inflation and medical bills is the higher figure of RM1m.

For those retiring soon, about RM600,000 is required to have a “dignified” retirement in Kuala Lumpur. Based on this, only about 4% of Malaysians could afford to retire.

Alor Setar was the cheapest place to have a comfortable retirement. A person would need RM480,000 to retire there. Still this is twice the basic threshold for retirement savings of RM240,000 earlier held.

Some 56% contributors, who are 54 years old, have less than RM50,000 in their accounts.

Source: https://ms.wikipedia.org

With RM50,000, one can only sustain for a little over four years, assuming that their expenses amount to RM1,000 a month. Currently, about 52% EPF members have less than RM10,000 in their accounts while about 27% have less than RM1,000.

Prior to the Covid-19 pandemic, about 22% members met the basic saving requirement but the numbers fell to 14% after several rounds of special withdrawal schemes namely i-Sinar, i-Lestari, i-Citra and most recently the special withdrawal facility of RM10,000.

Deputy Finance Minister I told the Dewan Negara in August that in total, RM145bil was withdrawn by EPF members under the four withdrawal facilities. Overall, the impact of these programmes related to Covid-19 on members’ savings was estimated at RM155bil, comprising RM145bil withdrawn by members under the four withdrawal programmes, and almost RM10bil from the impact of the employee share statutory contribution rate reduction programme.

Solutions are not easy. One may need to debate on extending retirement age to 70? Use the Socso funds for retirement – like a pension? Restore EPF savings partially though a government “bail-out”? Use “excess profit” earned by corporate for the EPF restoration fund?

None of the measures mentioned above are simple to implement politically but the government has a responsibility and an obligation to restore the funds after permitting the withdrawals from the four facilities.

Reference:

RM1mil needed for retirement, Fatimah Zainal, Ragananthini Vethasalam, The Star, 23 September 2022