A recent HSBC study revealed that 85 per cent of retirees regret not saving enough to achieve their goals, as many assumed their expenses would decrease after retirement, only to be surprised by unexpected bills.
So, how much is enough for a comfortable retirement, and how long should those savings last?
EPF’S BASIC SAVINGS: A STARTING POINT
The Employees Provident Fund (EPF) introduced the Basic Savings concept in 2008 as a minimum retirement benchmark. Initially set at RM120,000, it has been raised to RM240,000 by age 55, enough to provide RM1,000 per month for 20 years.
But RM1,000 a month may no longer be realistic. Bank Negara Malaysia estimates RM2,700 is needed monthly for a reasonable standard of living, while the Department of Statistics Malaysia sets it at RM2,338. Rising living costs highlight the need to reassess what “adequate” savings really mean.
The amount considered adequate for retirement today may no longer suffice 20 years from now. Living costs and healthcare expenses continue to rise over time, creating financial pressure for everyone, whether low-income earners or the wealthy.
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INTRODUCING THE RIA FRAMEWORK
With Malaysians living longer, retirement planning is both a personal and national challenge.
By 2048, Malaysia will be an aged nation, with the proportion of citizens aged 65 and above reaching 14 per cent of the population.
Without proper planning, longer life expectancy could become a financial burden rather than a blessing.
To address this, EPF launched the Retirement Income Adequacy (RIA) Framework in December 2024. It introduces three savings tiers based on lifestyle aspirations at age 60:
* Basic Savings (RM390,000): Covers essential needs
* Adequate Savings (RM650,000): Supports a decent standard of living
* Enhanced Savings (RM1.3 million): Enables aspirational lifestyles
These targets will be reviewed every five years to remain in line with current living conditions. The Basic Savings threshold will gradually rise over five years, increasing RM30,000 annually.
The RIA Framework also aligns EPF’s More Than RM1 million Savings Withdrawal facility with the Enhanced Savings tier, reflecting the rising cost of living and the effects of inflation.
The withdrawal facility was introduced in 2007 to provide flexibility for members under the age of 55 to manage their excess savings after meeting their basic retirement needs. At that time, an RM1 million savings threshold was considered a comfortable level for retirement.
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To ensure a smooth transition, the withdrawal facility will increase gradually by RM100,000 per year over three years, starting at RM1.1 million in 2026, allowing members to adjust their financial plans accordingly.
This alignment ensures the policy remains relevant amid changing socio-economic conditions and the evolving needs of members.
Future reviews will be conducted in a structured manner and based on comprehensive analyses of economic, demographic, and current member needs, ensuring that policy implementation continues to provide sustainable retirement income protection for EPF members in the long term.
As it is, all amounts in EPF savings will continue to earn annual dividends until age 100.
In addition, the RIA Framework will also realign the eligibility threshold for the Members Investment Scheme (MIS), allowing members to transfer up to 30 per cent of savings above the Basic Savings tier into fund management institutions approved by the EPF.
Members can also refer to the Belanjawanku Guide 2024/2025 for guidance on monthly expenses and retirement planning.
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EMPLOYER AND EMPLOYEE ROLES
“The impact of the RIA Framework will be more meaningful with deeper and greater commitment from both employers and employees.
“Employers should implement competitive salary increment policies and progressively enhance employer contributions to increase retirement savings.
“At the same time, financial literacy is crucial for employees to encourage voluntary contributions alongside upskilling and reskilling efforts to secure higher wages,” said Putra Business School MBA programme director Professor Dr Ahmed Razman Abdul Latiff.
By taking active steps in retirement planning and leveraging both employer support and personal contributions, members can maximise the growth of their savings over time through the power of compounding returns.
HARNESSING THE POWER OF COMPOUNDING
Albert Einstein famously called compound interest the “8th wonder of the world.” The earlier you start saving, the more powerful this effect becomes.
Take Siti, a general worker starting her career at 18 with a monthly salary of RM1,700.
By contributing 11 per cent to EPF and receiving 13 per cent from her employer, factoring in promotions and job changes, simulations show she could have RM1.01 million by age 60.
Even if she uses some funds before retirement, she would still have over RM760,000 — comfortably above the RIA Adequate Savings target.
Voluntary contributions, through i-Simpan (formerly known as Self-Contribution) or i-Topup (formerly known as Voluntary Excess), can further accelerate savings growth.
Deferring withdrawals allows funds to continue earning returns, generating compound interest, and providing a more stable retirement income.
EPF also offers free financial advisory services nationwide to help members plan effectively.
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FALLING SHORT? TAKE ACTION
If your savings are behind schedule, don’t panic. Steps to catch up include:
1. Extend your working years — Five extra years could boost savings by 40 per cent; 10 years by 90 per cent
2. Top up voluntarily — Boost your EPF savings by making voluntary contributions through i-Simpan or i-Topup via the i-Akaun app. Programmes like i-Saraan and i-Suri may provide matching contributions. You can also transfer two per cent of contributions to a spouse’s EPF.
3. Delay withdrawals — Allows dividends to compound further, ensuring a more stable retirement income
4. Seek professional advice — Free personalised retirement advisory services are available at EPF branches.
The key takeaway: start early, contribute consistently, and plan intentionally. Your future self will thank you.
© New Straits Times Press (M) Bhd