PETALING JAYA: The Employees Provident Fund (EPF) has warned Malaysians that they will need at least RM600,000 to retire comfortably in major cities.
As such, it has advised workers to start saving for retirement and diversify investments.
It also said advice on such matters is available for free from EPF.
Its chief strategy officer Nurhisham Hussein said: “Based on our data, an individual retiring in Kuala Lumpur today will need to set aside RM2,450 a month for basic necessities. Based on this and figures from the Statistics Department, which state the lifespan of the average Malaysian is now 80 years, it means a person will need RM600,000 to retire.”
He said the figures take into account the current economic situation. However, the numbers vary depending on several factors such as location and individual spending habits.
“For example, if a person were to retire in Alor Star today, he or she will need RM1,980 per month based on purchasing the same basic necessities (as a person retiring in Kuala Lumpur),” he said, adding that the key to growing one’s retirement savings is to diversify investments.
“Don’t put all your eggs in one basket. There are several options available for Malaysians, such as putting money in verified unit trusts and financial institutions.”
Nurhisham said on realising the Malaysian salary is one of the lowest in the region, EPF has taken several measures to help grow their savings.
For instance, Malaysians can start contributing to EPF from as young as 14 years old, he pointed out. “Their parents can help create their EPF accounts and kick-start their contributions.”
He said EPF is also aware that the cost of living is high and statistically, Malaysians will reach their peak financial stability at 40 to 50 years of age.
“Malaysians usually have higher commitments, such as costly childcare, medical expenses and financial commitments to immediate and extended family members,” he said.
Nurhisham added that regardless of their financial status, contributors must diversify their savings.
“My advice is, when you turn 50 and are still working, try not to make any EPF withdrawals because you are still working and have a monthly income.”
Nurhisham said even those who are retired should only withdraw what they need so that the balance of their money can continue to grow.
“EPF pays dividends up to the age of 100. So, let your money grow and only take out what you need,” he said.
He noted that Malaysians realise the cost of living is rising and wish to grow their savings.
“Many of those who came to EPF for consultations have expressed concern and interest in growing their savings,” he said, adding that EPF has set up an advisory panel to help Malaysians make smart financial decisions.
“The service is free, and our advisers can help explain and advise where you should invest your money if you want to diversify,” he said.
On “trading gurus” that have been advertising their services on social media, Nurhisham said EPF advisers can give the same advice for free.
Meanwhile, he said October is financial literacy month, so EPF is working with Bank Negara Malaysia, Permodalan Nasional Berhad and several financial institutions to raise awareness of the importance of savings and financial literacy.
As a final word of advice, Nurhisham said: “When you want to invest, do so only with the money you can afford to lose, and not your crucial savings.”