Singapore Prime Minister Lee Hsien Loong recently announced that the country’s retirement age would be raised to 65 within three years.
It is a long-term decision made prior to Singapore’s declining birth rate and in view of the longer life expectancy and future plans to reduce the foreign worker quota. Singaporeans are expected to have a higher life expectancy with an estimated average lifespan of up to 85.4 years by 2040.
The minimum retirement age of an employee in Malaysia is 60. The current retirement age suits the average life expectancy of 74.5 years, according to the Statistics Department. Thanks to improved healthcare services, 60 is considered a decent age for retirement. The only question is, are we Malaysians prepared for a comfortable retirement?
Roughly, Malaysians and Singaporeans are expected to live 15 to 20 years after retirement. Therefore, they must ensure that their retirement funds are adequate by the time they retire. But as of now, the idea of enjoying a happy retirement by the age of 60 is fading.
The reasons are:
- More than 50% of Malaysians may not be financially ready for retirement, according to Credit Counselling and Debt Management Agency (AKPK).
- A study conducted by AKPK last year on 1,000 Malaysians, aged 18 to 55, showed that although most of the respondents had set aside a portion of their monthly income as savings, one in five is saving less than 10% of their monthly salaries.
- Out of 14 million members of the Employees Provident Fund (EPF), only seven million members are actively contributing to it.
The EPF stated that in March 2018, almost half of members aged 54 years old had savings of only RM31,000.
The EPF has raised the minimum savings target to RM240,000 by the age of 55. This means after retiring, the retiree will have RM1,000 monthly to spend. However, for an elderly person, RM1,000 is a paltry sum.
According to BelanjawanKu, the expected expenses per month for an elderly couple are RM3,090 — RM850 for food, RM700 for housing, RM130 for healthcare, RM500 for transport, RM290 for utilities, RM90 for personal care, RM230 for ad hoc purposes, RM170 for social participation and RM130 for discretionary expenses.
To ensure we have adequate savings for retirement, it is usually recommended that we save at least 20% of our income in our retirement savings fund.
According to the EPF savings target, we need to at least start saving for retirement at the age of 18 in order to reach the EPF savings target at the age of 55. At the age of 18, we must have at least RM2,000 in retirement savings and the amount should double up in the following years.
It is, therefore, almost impossible for Malaysians to secure their future and have a comfortable retirement, mainly because of the low wages and the high cost of living. This has resulted in people’s ability to save getting lesser through the years.
If this situation worsens, in future we may see more and more people aged 60 and above still working to sustain themselves.
That is why the government needs to review the EPF retirement plan and ensure that most Malaysians are able to prepare themselves for retirement.
The government also needs to increase the minimum wage in order to secure a better future for the people as well as for the country. It is hoped that as the minimum wage increases, the general level of wages will rise in tandem.
Lastly, the government needs to constantly encourage people to save for retirement. If not, we may have to follow Singapore’s footsteps and increase the retirement age.
But this will exacerbate our problem as even with the current retirement age of 60, young people have been heavily marginalised by the job industry, as evidenced by,the high youth unemployment rate coupled with the younger demography.
Plus, our government may not be able to cope with the extra financial burden as the salary for senior and experienced government servants is way higher than that of fresh graduates.
Retirement adequacy is becoming an urgent issue for the government to look into.
Aisyah Abdul Hadi is a researcher at the Institute for Research & Development of Policy (IRDP).
The views expressed by the writer do not necessarily reflect those of FMT.