For years, having RM1 million in retirement savings sounded like the ultimate financial safety net.
But with Malaysians living longer and everyday costs continuing to rise, financial experts say even a seven figure retirement fund may no longer guarantee a comfortable life.
According to The Star, economists and financial planners are calling for changes to Malaysia’s retirement system, including higher voluntary EPF contributions, better financial education and options that provide retirees with a steady income.
Rising costs are changing the retirement equation
Universiti Teknologi Mara economist Dr Mohamad Idham Md Razak said the changing value of RM1 million reflects broader shifts in Malaysia’s cost of living.
While headline inflation may appear moderate, retirees are often hit harder by rising costs in areas such as healthcare, housing and daily necessities.
He said Malaysians are also living longer, meaning retirement savings have to stretch across more years than before.
This creates what experts call “longevity risk”, where a person may outlive the savings they originally thought would be enough.
Mohamad Idham also pointed out that retirement savings remain unevenly distributed, with a relatively small number of EPF members holding a large portion of the total savings.
Only 1.2% of active EPF members have at least RM1mil
EPF data cited by The Star showed that 108,701 active members had savings of at least RM1 million.
This represents just 1.2% of EPF’s 8.78 million active members.
However, these members collectively held around RM190.05 billion, equivalent to 19.7% of the RM962.4 billion in total savings.
Of the EPF members with at least RM1 million saved, 39,358 were women, making up 36.2% of the group.
Coreplus Advisory Sdn Bhd co founder Lim Hooi Hooi said the RM1 million benchmark also needs to be viewed differently today.
Spread across a retirement lasting 20 to 30 years, she estimated that RM1 million works out to roughly RM5,000 to RM6,000 a month, which may only just cover an urban middle class lifestyle.
She added that inflation has significantly reduced the purchasing power of savings, meaning RM1 million today does not stretch as far as it once did.
RM1.3mil to RM1.5mil may be a more realistic target
Certified financial planner Jarvic Lau said inflation is one of the biggest reasons retirement savings are becoming less adequate.
Based on an assumption of 3% inflation and 6% investment returns, he estimated that RM1 million could last around 23 years if a retiree spends RM5,000 a month.
At RM10,000 in monthly spending, however, the same savings could last around 10 years, while RM15,000 monthly spending could reduce it to about seven years.
These figures also do not account for major medical bills or significant lifestyle changes.
Lau said a more realistic retirement savings benchmark today could be around RM1.3 million to RM1.5 million, although even that may not be sufficient for everyone.
With Malaysians increasingly living into their 80s, experts say retirement planning may need to shift away from simply chasing a lump sum.
Instead, the focus could increasingly be on building savings that can generate a sustainable monthly income throughout retirement.
