Here are some questions you need to ask yourself NOW:

  • Are you ready for retirement?
  • Have you started planning for your retirement?

Many Malaysians are still putting off retirement planning not realizing its importance and urgency. Some go on assuming that their EPF savings would be enough to cover all their expenses throughout their golden years. If you assume the same, this article may shed some surprising light on you.


Malaysians are not ready for retirement

According to a statement made by Bank Negara Malaysia in 2016, 33% Malaysians were very worried about their financial health and needs at old age as well as being unprepared for retirement. While 52% were a bit worried.

However, despite all the worry, most remain indifferent to this problem. Based on a survey carried out by BNM in 2015, more than 75% of Malaysians find it difficult to raise even the amount of RM1,000 in an emergency situation.


The reliance on EPF for your retirement

Malaysians largely are dependent on their Employees Provident Fund (EPF) to fulfill all their financial needs during their golden years. This is a dangerous as well as foolish notion.

Based on Allianz’s International Pension Papers published in 2015, their Retirement Income Adequacy (RIA) indicator – which ranked 49 countries worldwide according to their potential to serve an adequate retirement income, showed that the fund provided by the EPF was among the least adequate, ranking at number 47!


Retirement Income Adequacy (RIA) Ranking (Source Allianz International Pensions 2015)


Starting January 2017, EPF has estimated that in order for its members to lead a sustainable lifestyle up to 75 years, they need to have at least RM228,000 in their EPF savings at the age of 55. This was an increase from the previous estimation of RM196,800. Sadly, in reality, only 21% of its members achieved this basic savings amount.

The RM 228,000 amount is derived from the assumption that its members would make a monthly withdrawal of RM950 for their basic retirement needs up until the age of 75 years in line with Malaysians’ life expectancy.


Reality check

With Malaysia’s rising life expectancy (72.1 years in 2010 to 74.6 in 2015 and 74.8 in 2017), soaring healthcare costs (12.7% expected for 2017), depreciation in currency and overall increase in cost of living, how likely is the estimated RM950 to last us an entire month?

According to EPF, as of 2015, a staggering 68% of its members at the age of 54 years had a saving of RM50,000 or less. Forget about a saving lasts 20 years. EPF has revealed that 50% of its retirees exhausted their savings within 5 years of their retirement.

Here are some more shocking revelations by EPF. Over 50% of Malaysians have no financial assets. And 1 in every 3 Malaysians do not even have a savings account.


How much savings do I need for my retirement?

So how much do you really need to ensure a comfortable retirement? How much do you need to last anywhere between 10 to 20 years?  We spoke to 2 experts in the industry and this is what they have to say:


Justin Nevis

“Due to many exhausting their EPF Savings by 60, the average Malaysian needs to have at least RM1 million in EPF account by the of age 55, factoring the rising inflation rates as well,” said Justin, a Senior Financial Consultant from Kuala Lumpur.

“Two most ideal insurance plans they should have are Comprehensive Critical Illness & Medical Card, to cover the high medical fees expected as yearly medical inflation is increasing at 10 – 12% per year. Other forms of investment they should build up and secure are mutual funds. Rental from Paid up Properties and some Good Stocks which can be cashed out. All three above with frugal lifestyle should be sufficient to last till the age of 75, ” Justin added .




Adeline Ong

According to Adeline, one should have at least RM 1 million in their EPF fund and other forms of savings. “This is assuming that you already have your car and home paid off and incurring a fixed monthly expenses of a conservative RM 1,500 for the next 20 years. Although this only amounts to RM 18,000 a year and RM 360,000 for the entire 20 years, the amount after factoring in inflation will look a whole lot different,” said Adeline.

“I would also encourage everyone to invest in unit trust. It has lower charges and this allows you to separate your risk by portfolio. Unit trust also offers higher rate of returns compared to life insurance. And most importantly, one shouldn’t ignore the power of compounding interest in unit trust! Although people are always encouraging you to buy life insurance, you should know that life insurance is more for protection. You should not treat it as investment,” Adeline further elaborated.


Why it is important to start saving now?

There is no such thing as too early to start planning for your retirement. Here’s why:

1.  Cultivate a solid habit of saving – Cultivating the habit of saving is not a simple feat. If you are used to spending all of your earnings all your life, chances are, you would not find it easy to start saving at the age of 45.

2. Reaching financial independence at a younger age – The earlier you start planning and more importantly saving for retirement, the better your chances are to achieving financial independence at a younger age. Surely no one could say no to this!

3. Compounding returns means more money saved – Use your money to make more money, that’s the concept of compounding. The interest you earn from your investment is reinvested to earn more. The returns over several decades can be astounding.


Want to start planning for retirement now? Speak to some of the best advisors in the country who specialize in financial and retirement planning here.