MALAYSIA: Many Malaysians dream of a comfortable retirement, but the reality is far from secure. With only 36% of Employees Provident Fund (EPF) members meeting the basic savings level, rising healthcare costs, and longer life expectancy, experts warn that most Malaysians are financially unprepared for their later years.
Associate Professor Chong Wei Ying from Taylor’s Business School and a member of the Active Ageing Impact Lab pointed out that retirement savings often fall short due to poor financial planning and an overemphasis on short-term spending.
“As of October 2024, only around 36% of active formal EPF members meet the existing Basic Savings level according to age, anchored on RM240,000 (S$72,174) at age 55. This is far below the updated basic savings benchmark of RM290,000, which is deemed necessary to cover 20 years of essential retirement expenses,” she was quoted as saying by Twentytwo13.
Why Malaysians struggle to save for retirement
A combination of low wages, inconsistent contributions, and short-term financial habits leaves many Malaysians ill-prepared for retirement. Younger workers tend to have lower savings, while those in the informal sector and low-income groups face inconsistent contributions. Women are also at a disadvantage due to career breaks, lower lifetime earnings, and longer life expectancy.
Rising healthcare costs add another layer of difficulty. Chong highlighted that medical expenses in Malaysia increase by 10% to 15% annually, making it harder for retirees to afford proper care. She also noted that with an average life expectancy of 76 years, many retirees outlive their savings, leading to financial hardship.
For many, retirement struggles are not hypothetical. Chong emphasised, “Stories of retirees struggling to make ends meet, facing financial insecurity, and living with regret over missed opportunities are far too common. While these situations may not always be catastrophic, they are undeniably disheartening.”
Financial literacy: The missing piece in retirement planning
According to Chong, many Malaysians approach money passively, focusing on immediate needs while neglecting long-term financial security. She argued that basic financial awareness is lacking, with most people unable to recall their savings balance, recent withdrawals, or monthly expenses.
She explained, “Most people struggle to answer these questions, highlighting a lack of financial literacy. Bridging this gap is crucial, as it can mean the difference between financial security and hardship during retirement.” A proactive approach to money management can help individuals make informed decisions about saving, investing, and spending wisely.
The ‘Rule of 375’: A simple way to plan for retirement
Planning for retirement may seem overwhelming, but Chong suggests using the Rule of 375 to estimate how much savings one needs, as reported by Twentytwo13. She explained, “Multiply your desired monthly retirement income by 375 to estimate the total nest egg required for a 30-year retirement. For instance, if you aim for RM3,500 monthly, you’ll need RM1,312,500. This figure provides a clear target and underscores the importance of proactive planning.”
Beyond just saving, she urged Malaysians to redefine their financial goals based on three key factors: lifestyle, healthcare, and inflation. Without careful planning, many may find themselves struggling to afford basic necessities, medical expenses, and rising living costs in their later years.
Reddit reactions: Low wages and daily struggles make saving impossible
While financial literacy is important, some Malaysians believe that low wages and high living costs are the real culprits behind poor retirement preparedness. One Reddit user expressed frustration, questioning how Malaysians are expected to plan for retirement when “RM6,000 is considered a high salary, and living expenses are not exactly cheap.” They argued that after budgeting for transportation, food, family expenses, and insurance, many barely have anything left to invest or save.
Others pointed out that wage stagnation and high-income inequality make it nearly impossible to save. One netizen commented, “Malaysians just deserve better wages. The income gap is too high, and employers are too cheap.” This reflects growing concerns that low salaries and lack of financial security leave many Malaysians with little choice but to prioritise survival over savings.
Another Reddit user highlighted the time constraints many Malaysians face, saying, “Already too occupied with work, chores, and DIY to cut costs. No time to do proper budgeting. Even weekends are occupied.” This suggests that for many, financial planning is not just about knowledge but also about having the privilege, time, and mental capacity to do it.
Retirement planning must start now
Chong stressed that retirement is not just an abstract dream; it is a reality that requires careful planning. As she put it, “By embracing financial awareness, leveraging tools and professional advice, and actively preparing for the future, you can shape a retirement that fulfils your aspirations.”
She urged Malaysians to start taking charge of their finances today, as every decision they make brings them closer to financial freedom and a secure retirement. With the right financial strategies, long-term planning, and proactive saving habits, Malaysians can ensure that their golden years are truly golden.
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Featured image by Freepik (for illustration purposes only)