Do you save enough for retirement?
Financial planners believe the minimum basic savings revised by EPF may not be enough
THE Employees Provident Fund’s (EPF) declaration of the dividend for 2016 brings to mind the many Malaysians, especially those who are about to retire, who do not have enough in their EPF accounts to live on.
The numbers are sobering enough. According to the EPF, as of 2015, two-thirds of members aged 54 have RM50,000 or less in their accounts. This amount is likely to be used up within five years of retirement.
These members, assuming they work to 60, have only six years to contribute but what is worse is that the EPF has calculated that, at the minimum, a member must have RM228,000 at age 55. This is the official target as of the beginning of this year, from RM196,800 previously.
Escalating living and healthcare costs mean that these people will very soon exhaust whatever they have. “A financial timebomb” is how financial planners describe it because by 2035, those above 60 will make up 15% or 5.6 million of the total population.
MyFP Services Sdn Bhd managing director Robert Foo points to subdued wages as the main cause of the low savings.
“We are facing a financial time bomb, people don’t have much money in their EPF, income is not growing and cost is going up. That’s the perfect storm for an explosion,” he says.
EPF data also showed that more than half of Malaysians have no financial assets and one in three Malaysians do not have a savings account. Not having other savings to fall back on is hard enough but not having a savings account makes it harder for them to save too.
Financial planners believe that the minimum basic savings revised by the EPF will not be sufficient for a comfortable retirement due to increasing costs and the rise in life expectancy of Malaysians.
Often, the figures bandied around by financial planners when they advise clients is that, at age 60, a person must have around RM1mil. Excellentte’s Jeremy Tan points out that Malaysians are living longer and will need to factor in inflation for all their healthcare and day-to-day expenses.
The reality of life after retirement, when most except the financially savvy have no income, hits home when a person needs to be cared for, says New Legend retirement home founder Rajandran Pekchan. Roughly four-fifths of those staying in his retirement home is 85 and above. Rajandran,