Malaysia Retirement Poor Security

Employee Provident Fund (EPF) was established in 1951 to ensuring financial security and retirement benefits for its citizens. Millions of Malaysians contributes a portion of their salaries to the EPF throughout their working lives. Over the past 14 years, the EPF has consistently delivered an impressive average dividend of 6%, significantly surpassing the returns of many managed funds and unit trusts in Malaysia. 

Recent statistics from the Employees Provident Fund (EPF) have cast a shadow over the retirement prospects of its citizens. These alarming figures shed light on a harsh reality: Most EPF members will find themselves with insufficient savings in their retirement accounts. As of the close of 2022, a staggering 51.5% of EPF members had amassed savings below the RM10,000 mark. Even more concerning, a mere 18% of EPF members are expected to reach the RM240,000 milestone by the time they hit the retirement age of 55.  

The RM240,000 benchmark has long been considered the basic savings target to furnish retirees with a modest average monthly income of RM1,000 for 20 years, and many experts now argue that this figure needs to be revised in light of the relentless rise in the cost of living. According to recent report - senior couples residing in the bustling Klang Valley area now require at least RM3,210 per month to cover their necessities. This figure escalates to RM2,520 per month for single retirees, with the bulk of expenses attributed to fundamental needs such as food and housing. These stark numbers underscore the pressing need for Malaysians to reevaluate their retirement strategies and address the growing gap between their EPF savings and the actual cost of living in their golden years. 

Low wages: The prevalence of low wages is undeniably a central catalyst behind the burgeoning retirement crisis in Malaysia. Data from the Department of Statistics Malaysia reveals a stark reality: a concerning 82% of employees in the formal sector earn less than RM5,000 per month. This challenge individuals’ ability to meet their day-to-day expenses and severely hinder their capacity to make substantial mandatory contributions toward their EPF retirement accounts. As a result, accumulating substantial retirement savings becomes an uphill battle. In stark reality, these economic circumstances constrain many Malaysians and face the daunting prospect of inadequate financial security in their golden years.

Early EPF withdrawals: During the challenging times of the COVID-19 pandemic, the Malaysian government took a compassionate step by allowing multiple withdrawals from EPF accounts to alleviate the financial hardships faced by citizens. This move provided immediate relief to those in dire need, enabling them to weather the storm. While these withdrawals were a lifeline for many, they came at a cost.

Approximately 8.1 million EPF Members experienced a staggering 50% reduction in their mean savings in 2022 during the height of the pandemic when special withdrawals were permitted.

Withdrawals have affected various races. Around seven million Malay EPF members, who had a median savings of RM16,900 in April 2020, now have an average of only RM5,500 in their EPF accounts. Similarly, other Bumiputera members, numbering approximately 1.4 million, have seen their average savings dwindle to just RM3,300, down from an average of RM10,600..