EPF’s Retirement Income Adequacy (RIA) Framework. What is this?

EPF’s Retirement Income Adequacy (RIA) Framework. What is this?

When we retire, we hope to have an ‘adequate’ life. What is adequate may be different to everyone. Maybe this is the minimum necessity? We should have enough for meals (no skipping meals), enough for maybe a holiday of a few days in some places in Malaysia every other month. Just note that if we still did not own any property at the time of retirement, it could be tough as rental itself would easily ‘eat up’ half of our typical retirement funds. Maybe more.

We should also have enough to pay for petrol and car maintenance. If I am 65, I would not prefer to walk a few hundred meters, climb stairs etc to take the public transport. What happens when it rains and it’s slippery? Or when it’s very hot and I have to keep buying water? Maybe just me. Maybe many 65-year olds prefer to take public transport since they do not need to worry about parking fees. Maybe.

Anyway, this is what EPF’s RIA framework is all about.

Source: kwsp.gov.my

Minimum savings one should have is RM390,000 when one reaches retirement age; 60 years old

If we have this amount, we will have enough for all basic necessities. However, this will not allow us to have a reasonable quality of life as follows: The below includes even social participation… discretionary expenses… ad-hoc or one-off expenses. In order to have a reasonable quality of life, one would need to have RM2,690 per month and this is where the next level of RIA comes in. It’s the RM650,000 level.

Reasonable quality of life post-retirement? RM650,000 is the amount we need to have

RM650,000 divided by 12 months divided by 20 years =1,042.857 weeks equals to RM2,708 per month. Okay, if we are living with a partner, two of us could share many of the expenses too. For example, transportation can be shared… utilities can be shared… even food can be better since we can have more varieties too. Maybe this is a better aim for all working Malaysians versus the RM390,000.

When will this be implemented?

The RIA Framework will take effect from January 1, 2026, with phased increases in the basic savings requirement, starting at RM290,000 in 2026 and rising to RM390,000 by 2028.

To keep pace with economic changes, these benchmarks will be reviewed every three years beginning in 2029.

For members exceeding RM1 million in savings, the framework allows flexibility.

Up to 30 per cent of savings beyond the basic threshold can be invested in approved funds under the Members’ Investment Scheme. More info: Source: kwsp.gov.my

Latest numbers for EPF’s active members?

As of October 2024, EPF data shows only 36 per cent of active members meet the current basic savings level of RM240,000 at age 55. Info Source: malaymail.com

Just one property, perhaps?

If we bought a property of RM300,000 today, it should easily be double in price by the time we retire. Just simply due to inflation… In other words, we can sell that property and maybe rent a place to stay at the time too. The RM600,000 we have divided by 12 months and 20 years will definitely give us flexibility in deciding the type of place we like to rent too. This will be on top of the RIA scheme by EPF above yeah. Still believe property is not a must? It’s okay, stay focused on just RIA then. Happy deciding

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