MalayMail-Dec 17
A recent Khazanah Research Institute report has highlighted a pressing issue: financial insecurity among Malaysians, with many potentially lacking sufficient savings for retirement. According to the report, more than 52 per cent of Employees’ Provident Fund (EPF) members under 55 have savings of less than RM10,000. Recognizing this alarming trend, the EPF has introduced the Retirement Income Adequacy (RIA) Framework to help Malaysians plan for a more secure and comfortable retirement. This initiative aims to educate members on the savings required to meet their post-retirement needs.
The RIA Framework is built around three tiers of savings: Basic savings and income: covers essential retirement needs; Adequate savings and income supports a reasonable standard of living in retirement; Enhanced savings and income: provides greater financial independence and a higher quality of life.
Based on the Belanjawanku 2024/2025 guidebook, the RIA outlines specific savings targets: Adequate savings: RM650,000, equivalent to 240 times the monthly adequate retirement income; Basic savings: RM390,000, or 60 per cent of adequate savings; Enhanced savings: RM1.3 million, double the adequate savings target. 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.
The new benchmarks are expected to temporarily lower this percentage but are deemed necessary to address rising living costs and the current retirement age. Notably, inflation erodes the purchasing power of savings. The Belanjawanku guidebook also recommends the “four per cent rule,” introduced by US financial planner William Bengen, as a prudent withdrawal strategy.
For example, retirees with RM1 million in savings could withdraw RM40,000 annually while preserving their fund. Read more at: https://www.malaymail.com/news/malaysia/2024/12/17/how-much-do-malaysians-need-to-retire-comfortably-heres-a-complete-guide/159854
