PETALING JAYA: The latest report by Khazanah Research Institute (KRI) indicated that over 90 per cent of Employees Provident Fund (EPF) members under 30 years of age will not have enough basic savings of RM240,000 by retirement age.
In its report titled “Households and the pandemic 2019-2022” - the state of households 2024, KRI stated that its data of EPF members’ contributions between 2019 to 2022 revealed that only the top 10 per cent in the below 30 years category have more than RM35,000 in savings.
According to estimates by EPF, an individual needs to have a minimum of RM35,000 by age 30 in order to achieve basic retirement savings of RM240,000 by age 55.
KRI’s report further revealed that the top 10 per cent’s average savings in 2022 stood at RM49,061.
“This highlights the structural issue of low starting salaries among those beginning to enter the job market as they cannot achieve the basic EPF contribution for retirement,“ it said in its report.
The report also highlighted that those aged under 30 years were less affected by the EPF withdrawals during the Covid-19 pandemic due to the group having lesser financial commitments in terms of housing/vehicle loans, dependents etc.
“Although it can be argued that their wages may improve through career progression, there is a compounding effect attributed to low starting salaries, as it typically results in slower wage growth and even increased instances of job mismatches,“ KRI said.
The research institute in its report acknowledged however, that with the increase in the contribution share for EPF’s Account 1 from 70 per cent to 75 per cent, EPF projects that 65 percent of its members may have the means to achieve basic savings by 2035.
The report also highlighted the need to reexamine the RM250,000 savings bracket which has not been revised since 2019, as the target is based on the assumption that the individual would use RM1,000 per month for 20 years.
“As the average Malaysians’ life expectancy increases, the target of RM250,000 may be insufficient and would require re-examination as this figure has not been revised since 2019,“ KRI said.
KRI added that individuals heading towards retirement age and beyond could face increasing challenges, namely health and disability risks which run concurrently with the depletion of their retirement savings.
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