PETALING JAYA: An economist and a financial planner have dismissed a claim by deputy finance minister Ahmad Maslan that one could lead a “dignified retired life” on savings of RM240,000.
Economist Barjoyai Bardai of Universiti Tun Abdul Razak pointed out that it would amount to only RM1,000 a month over a 20-year period, which could barely cover the cost of food.
Licensed financial planner Saidah Asilah said Ahmad also failed to take into consideration other factors such as where the retiree lives and his personal inflation rate.
According to the Employees Provident Fund (EPF), basic savings is a sum considered sufficient to support an individual’s basic needs for 20 years after retirement, for instance from age 55 to 75.
The basic amount considered sufficient for a 20-year retirement was revised from RM228,000 to RM240,000 in January 2019.
The figure was benchmarked against the minimum pension for public sector employees, which was raised from RM950 to RM1,000 a month.
Barjoyai said the average expenditure on food was already in the region of RM800 to RM1,000 a month, depending on where the person lives and the nature of his lifestyle.
He said RM1,000 a month would be enough only for food.
“They have been working so hard for the past 35 to 45 years and suddenly they retire with nothing. I think that cannot be considered dignified,” he told FMT Business.
Saidah said consideration should be given to location and personal inflation rate as well.
“The cost of living in the Klang Valley is much higher than in rural areas such as in Terengganu or Perlis, so location is the number one factor. Number two is their lifestyle,” she told FMT Business.
She said personal inflation could rise to 6% for someone who relies on the food delivery service or one who has to travel on tolled roads on a regular basis.
But for those who lead a frugal lifestyle like shopping at wet markets and cooking at home, it could be as low as 4%. Even then, Saidah said, it would be difficult to survive on RM1,000 a month.
Barjoyai said another factor that has been overlooked is the need for social protection.
“We are going to be an ageing nation. Today, already about 7% of the population is over the age of 65. By 2035, that figure will be 14%. This group is vulnerable because they spend more on healthcare,” he said.
Last year, financial comparison website RinggitPlus quoted EPF chief strategy officer Nurhisham Hussein as saying that Alor Setar was the most affordable place in which to retire comfortably in Malaysia.
Even so, he said, a retiree would still need at least RM480,000 in savings to do so.
On why the EPF continues to cite the RM240,000 figure, Nurhisham told FMT Business the fund would gradually raise the level based on data from its budget tracking app Belanjawanku.
“This gradual adjustment is required since the change carries implications for some facilities, such as the members investment scheme (MIS),” he said.
“EPF will communicate with contributors on the timeline and pace of implementation when the time comes.”