EPF news: Only 19% have sufficient savings to live above poverty line after retirement
What is the poverty line for Malaysian households?
Statistics Dept: Malaysia’s new poverty line income is RM2,208, over 400k households considered poor. (Full article here in malaymail.com). It means that if a household has a household income of RM2,208 or lower, the household is considered very poor.
As for the household size, it’s 3.8 person for Malaysia as at 2020. This is a decrease from 4 or higher than 4 previously. Full information from statista.com here.
If we take these two and we combine the info, then RM2,208 divided by 4 persons meant that this household has RM552 per person in the household. Fortunately it’s a household, so whether rental / home loan repayment is just one person and not all. Meanwhile cooking at home will lessen some of the burden versus eating outside. Nevertheless, it’s not a good life and Statistics Department classified any household with RM2,208 as living under poverty line.
Only 19% of all EPF contributors could live above poverty line when they retire
Article in focusmalaysia.my here. PRIME Minister Datuk Seri Anwar Ibrahim said that as of December 2022, only 19% EPF contributors have reached the basic savings level based on their age to enable them to have RM240,000 in savings by 55 years old.
He said in a written parliament reply, “This directly shows that 81 percent of contributors aged 55 and below are in a serious situation where their savings will not be enough for them to retire above the poverty level.”
According to the Finance Minister, more than half (56%) of those who will be able to withdraw their EPF savings fully in a year – those who are currently 54 years old – have RM50,000 or less in their retirement fund.
He said then, “RM50,000 can only provide retirement income of about RM208 a month for a period of 20 years.” Do read the full article with more details here: Article in focusmalaysia.my here.
If not EPF, then what?
Actually the first line of defence against poverty is not EPF. EPF is the final defense line against poverty. We need to build more defense lines before the ‘war’ (retirement). Stay focused at the very least on managing expenses. Build upon our career, work more jobs if needed. When we can manage expenses and have better pay, we will have extra money which we could then use it for investment. I meant, investment. I did not say speculation or gamble.
When salary is okay but expenses are crazy
By the way, in the household income category, we have at least 50-60% who are categorised as T20 and M40. In other words, these two groups have the opportunity to manage their spending if they chose to. Whether it’s a new smartphone or a new car or even exotic vacations, all these are just priorities in terms of spending. We need to remind everyone that EPF is really the final place they could get money from, not the first. Before this last resort, build more others.
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Next suggested article: When money is not enough, just keep working till 70.
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