90 percent of EPF members (under 30 years old) will not have RM240,000 by retirement age!

90 percent of EPF members (under 30 years old) will not have RM240,000 by retirement age!

We have heard this similar story many times from different studies. Generally, what it says is that we do not have enough money to retire. Gloomy but this will always be true, not just for Malaysia but also in most countries, whether they are developing or advanced countries. Anyone telling me that there are countries where the people have enough money to retire is lying.

Perhaps the Scandinavian countries have a better chance but other than that, whether it’s US or UK or Australia or even Singapore, it’s not an easy life once the income stops yeah. I just came back from Singapore. A typical meal with a cup of coffee would be around S$10. Nope, you would not get this price in malls yeah. For malls, S$20 is a better representative. S$10 is low, for the salary which the people are earning, right? S$10 x 3 meals x 356 days will be S$10,950.

We assume price never goes up; inflation is nothing in Singapore. We assume the person already have a home to stay and does not need to pay any rental. We assume the person retired at 65 (and not 60) and the person lives to 85 (average for Singapore actually). Thus, one would need to have S$219,000 just for food alone yeah. Please do not argue that they can spend less etc etc etc, I already informed, my numbers are inflation-proof for 20 years yeah. As conservative as I could be already.

What about Malaysia then? Here’s that report by Khazanah Research Institute (KRI).

Article in nst.com.my 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, according to a Khazanah Research Institute (KRI) report.

According to EPF’s estimation, 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 said data of EPF members’ contributions from 2019 to 2022 show that only the top ten per cent in the below 30 years of age category have more than RM35,000.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 per cent 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 target, which has not been revised since 2019.

KRI said the target assumes that the individual would use RM1,000 per month for 20 years.

“As the average Malaysian’s 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. Please do read here for the full Article in nst.com.my

All these calculations are always based on the fact that one has a home…

Frankly, whether it’s Singapore or Malaysia or any other countries around the world, do we want to worry about rental after our income stops? It’s easy to say I will spend less on food, I will buy a loaf of sandwich bread and eat that for two days and thus reduce my spending tremendously. However, a shelter over our head is not something possible to reduce yeah. Malaysia is nowhere near Hong Kong where many people share one room but are we ready to retire and then reduce the rental from a room into sharing the room? From sharing the room with 1 person to sharing the room with 4 other people? There is no need to do any calculation. The number is likely to be bigger than food. True for all countries as usual too.

This is why every time some clever personal finance expert tells me about how they can save money here and there, I will ask if they already have their own property. If their answer is no, perhaps it’s better to listen to other personal finance experts instead yeah. Of course, if we are already earning within the top 10 percent bracket, perhaps our savings would be more than enough even after our income stops. Provided we did not change car every 7 years and change handphones every 2 years… Haha. It’s all about choices we make.

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