Retirement Planning Issues in Malaysia
A majority of Malaysians lack long-term financial planning, and only 40% of them are financially ready for retirement, according to Bank Negara Malaysia (BNM) Deputy Governor Abdul Rasheed Ghaffour, based on BNM's observation on long-term financial planning.
According to AKPK, more than 75% of Malaysians find difficulty saving RM1,000 for emergency needs, with the economic uncertainties and high cost of living. Malaysian should have a greater awareness on the importance of saving for the future.
A survey carried out by the Employees Provident Fund (EPF) IN 2017 showed that household savings in Kuala Lumpur and other big cities as well as in the rural areas, found that over 90 per cent respondents are not having enough saving to retire comfortably. EPF has raised the minimum savings target by age 55 from RM197,000 to RM228,000. But only 18% of members have this much, far short of its target of getting at least half its members to meet the minimum level by 2021. Low investment returns and withdrawals permitted – for housing, health and education – imply even less for retirement.
More than two-thirds (68%) of EPF members aged 54 had less than RM50,000 in EPF savings! With the household poverty line income at RM930 monthly, RM50,000 in savings will only last 4½ years. The bottom fifth of EPF members have average savings of only RM6,909!
According to EPF, 70% of members who withdraw their funds at age 55 use up their savings less than a decade after retiring. Most EPF savings are therefore not enough to stay out of poverty after retirement.
There are 32 million people in Malaysia, with 69% of the population of ‘working age’ between 15 and 65. Only 48% of the labour force of 14.5 million have active EPF accounts.
Around a tenth works for the Federal Government and are eligible for pensions, contributing to other pension funds, such as the KWAP (Kumpulan Wang Persaraan [Diperbadankan]) and the LTAT (Lembaga Tabung Angkatan Tentera).
Others remain uncovered. Many employees, in the informal sector and others casually employed, do not have active EPF accounts, while many in farming and the informal sector are self-employed.
ReplyDeleteWe’ll put ourself in the best situation if we start planning for retirement early on. Accumulating the funds we need for a comfortable retirement may take decades, depending on our income, and we’ll want as large of a nest egg as possible when we are no longer bringing in a salary. By starting to invest in our retirement early on in our career, our funds will accumulate and grow over time, leaving with a substantial enough fund to fulfill our retirement dreams. It is never too early to plan for our life after we finished our career
Come up with a budget to track how much your current expenses are. It would give you a rough idea of what living costs will be like after you stop working, and you’d be able to start saving accordingly. Bear in mind that spending doesn’t really decrease in the early stages of retirement; for example, many retirees would want to ramp up travel plans.
ReplyDeleteIn addition, remember not to overspend on major occasions. People in their 30s are typically faced with major events such as wedding day celebrations, welcoming their first child or even purchasing the first property. While these are important milestones, check the health of your finances first, before deciding to blow all your savings in one go.
retirement planning is very important for everyone. It will make sure your life after stop working will be okay without having a bad financial issues.
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ReplyDeleteFrom my understanding, I strongly agree with the retirement planning scheme. We have to contribute to it because when we have reached the age necessary to rest from work, we will get a return from the contribution during the working period. Therefore, we will have future savings.
ReplyDeleteBy investing in a retirement plan, we will get more benefit from the power of compounding. Our retirement account will have potential to grow faster because the money we have paid in taxes on earnings each year remains in the account and can earn additional money.
ReplyDeleteRetirement is an important reality for everyone. Most young people think retirement is a long way off. However, it is important to plan for your life post-retirement if you wish to retain your financial independence and maintain a comfortable standard of living when you are no longer earning.
ReplyDeleteRetirment planning is very important thing to care about because it will help us to ensure a comfortable life after retirement. Most basic thing to do in financial planning is reducing expenses.
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ReplyDeleteRetirement planning for me is very important. It because it can support us when we have retired from any job. It can help us to pay bill and so on.
ReplyDeleteI strongly agree with the article. Most of Malaysian do not care about what they gonna do when they have reach their retirement age. They do not have any plan after they are retired. So i think, an awareness need to be put ahead to them to make sure that they can live happily even when retired.
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