PETALING JAYA: The Employees Provident Fund (EPF) should make drastic changes to how it evaluates retirement savings to ensure Malaysians have enough funds to support themselves, said economist and Southeast Asia Lead of the Global Labour Organisation
Prof Dr Niaz Asadullah.
He was commenting on a recent Khazanah Research Institute (KRI) report which stated over 90% of EPF members aged under 30 will not have savings of RM240,000 by age 55, and data on member contributions from 2019 to 2022 showed only the top 10% in the below age 30 category have more than RM35,000 in EPF savings.
The KRI report raises concern over an estimate by EPF that “an individual needs to have a minimum of RM35,000 by age 30 to achieve basic retirement savings of RM240,000 by age 55”.
Niaz said: “Given the annual increase in Malaysia’s cost of living, having RM240,000 in EPF savings by age 55 is grossly inadequate to support an individual for the next 20 to 30 years post-retirement.”
He said inflation, the rising cost of old-age care and increasing life expectancy all suggest that future savings goals need to be higher than the EPF currently estimates.
“There is no single figure that can be universally applied for an individual to sustain himself during retirement, but it’s a good practice to regularly update the retirement savings targets to reflect new economic realities.”
Niaz said doing so would ensure that there is relevance between retirement savings and the evolving economic landscape, “as a static savings goal is unrealistic in an environment where inflation and life expectancy continue to rise”.
Additionally, he said young workers are facing significant challenges in saving for retirement due to the dual challenges of rising living costs and slow wage growth.
“Many rely on the low-paying gig economy in which wages are unpredictable, and social protections are limited. Compounding these challenges is the debt burden of student loans, which reduce a portion of their income.
“The combined factors cause many young Malaysians to face an uphill battle in building a secure financial future during retirement.”
Niaz said EPF withdrawals made during the pandemic have had significant long-term economic implications, particularly for younger workers who accessed their retirement savings to cope with immediate financial needs.
“For many, rebuilding their savings could be delayed by up to six years. The premature depletion could worsen the retirement savings crisis as the workforce struggles to recover.”
Niaz said the low starting salaries for fresh graduates are not new, and are often driven by a mismatch between
university education, job market requirements and structural challenges such as low minimum wage.
“This leaves young workers financially vulnerable, often forcing them to live beyond their means to cover basic expenses.”
Niaz said addressing the retirement savings crisis among young EPF members requires policy interventions that extend beyond the EPF itself and should start with improving financial literacy among youths.
“By anticipating a significant drop in income upon retirement, individuals tend to save the most during their prime working years when their earnings are higher.
“This leads to them having an increased amount in savings as they near retirement, upon which they withdraw their savings to maintain their living standards.”
However, Niaz said many young Malaysians struggle to follow this pattern because of financial pressures like debt and low wages, which makes it hard to save enough for retirement.
“This is precisely why EPF must be more realistic in how it evaluates retirement savings and should constantly update the quantum required.”
