Many Malaysians feel that retiring with RM1.3 million in savings is impossible. With rising living costs and longer life expectancy, the fear of running out of money in old age is real.
But financial experts say the target is achievable if individuals stay disciplined with savings, maintain stable employment, and avoid withdrawing from retirement funds too early.
This comes as the Employees Provident Fund (EPF) introduces its Retirement Income Adequacy (RIA) framework, designed to give Malaysians a clearer picture of how much they should have saved at different stages of life, reported The Star.
EPF’s new retirement savings benchmarks
Under the RIA framework, EPF savings are divided into three tiers:
- Basic savings: RM390,000
- Adequate savings: RM650,000
- Enhanced savings: RM1.3 million
Each tier reflects a different retirement lifestyle:
- Basic savings cover only essential daily needs
- Adequate savings provide a reasonable standard of living
- Enhanced savings allow for a more comfortable and secure retirement
To help members track progress, EPF also released age-based savings targets. For example:
- By age 35:
RM68,100 (basic)
RM90,000 (adequate)
RM165,000 (enhanced)
- By age 60:
RM390,000 (basic)
RM650,000 (adequate)
RM1.3 million (enhanced)
These figures serve as checkpoints so Malaysians can see whether they are on track long before reaching retirement.
How RM1.3mil can be reached
Financial planner Jarvic Lau said the enhanced savings target may look intimidating, but it is realistic under consistent working and saving conditions.
He shared a sample scenario:
- Start working at age 25
- Earn RM2,500 monthly salary as a fresh graduate
- Receive 5 percent annual salary increments
- Earn RM15,000 final salary by age 60
- Contribute 23 percent monthly to EPF (11% employee, 12% employer)
- EPF delivers 6 percent annual returns
- No withdrawals throughout employment
Under these assumptions:
- 35 years of continuous EPF contributions can grow to over RM1.5 million
- Even with 30 percent leakage from possible withdrawals, savings can still reach around RM1 million
Lau explained that the key is time. The earlier contributions start, the more compounding returns work in a saver’s favour. This is why young workers who delay contributions or withdraw early often struggle to rebuild later.
He added that many Malaysians retire with far less because they rely only on EPF and make early withdrawals for housing, education, or emergencies, shrinking their final retirement pool.
For Malaysians who feel they have started late, Lau said there is still room to recover.
If individuals in their 40s:
- Continue working for another 25 years
- Maintain consistent EPF contributions
They can still aim to accumulate RM650,000 in adequate savings by 65.
At this level:
- Retirees can withdraw RM2,708 per month in the first year
- This amount could rise to RM7,389 per month by the 20th year, depending on remaining balances and returns
This means even late starters can still secure a reasonable retirement if they stay committed in their remaining working years.
Simple habits that keep savings on track
Financial literacy advocate Amy Seok said the most effective retirement strategy is consistency, not complexity.
She advised Malaysians to:
- Maintain continuous EPF contributions
- Make voluntary EPF top-ups whenever possible
- Avoid early withdrawals except during real emergencies
- Build long-term investments beyond EPF
- Control lifestyle spending
- Reduce unnecessary debt
- Improve financial literacy
She noted that many Malaysians fall short not only due to low income, but also because of:
- Poor financial habits
- Career interruptions
- Informal or gig employment
- Early EPF withdrawals
She described the RIA framework as an important wake-up call to encourage earlier planning and shared responsibility between individuals, employers, and policymakers.
Working longer and earning extra income
Experts also highlighted that retirement planning is no longer just about EPF contributions.
Areca Capital CEO Danny Wong suggested Malaysians:
- Seek secondary income, such as part-time work
- Explore legitimate investment channels
- Spend less in younger years and invest more for later life
Meanwhile, Universiti Malaysia Kelantan professor Dr Balakrishnan Parasuraman proposed gradually raising the retirement age from 60 to 62, citing longer life expectancy, improved healthcare, and changing lifestyles.
He said retiring at 60 may now be too early, and any policy changes should take a holistic approach to balance work, health, and financial security.
The bottom line
EPF states that:
- RM390,000 basic savings cover essential retirement needs
- RM650,000 adequate savings support a reasonable lifestyle
- RM1.3 million enhanced savings allow a comfortable retirement
The adequate tier is based on the RM2,690 monthly income recommended in Belanjawanku 2024/2025, enabling RM2,708 monthly withdrawals in the first year of retirement.
