PETALING JAYA: Over 90% of Employees Provident Fund (EPF) members under 30 lack adequate basic savings for retirement, according to the Khazanah Research Institute.
The institute’s Households and the Pandemic 2019-2022: The State of Households 2024 report, released yesterday, reveals that only those in the top income decile (D10) in the below 30 age group have the required amount needed for basic retirement.
According to EPF’s estimates, an individual needs to have a minimum of RM35,000 by age 30 to achieve basic retirement savings of RM240,000 by age 55.
“Using this metric, the data shows that over 90% of members under 30 do not have enough basic savings of RM240,000 by retirement age,” the report said.
It highlights that a similar trend persists among the 30–54 age group, where only D10 contributors meet the RM240,000 target.
It said many in this group may have made withdrawals from their EPF Account 2 for purposes like education or first home purchase.
Additionally, the pandemic from 2019 to 2022 significantly impacted EPF savings for those in the 30-54 age group, particularly due to relief programmes such as i-Lestari, i-Sinar, i-Citra and the 2022 Pengeluaran Khas that allowed partial withdrawals.
Individuals under 30 in the lowest income decile (D1) withdrew 98.2% of their savings, compared to 79.3% in D5 and 29.7% in D10.
Among those aged 30 to 54, D1 withdrew 98.0%, while D5 and D10 figures were lower at 50.3% and 6.8%, respectively.
“This trend highlights the increasing vulnerability of lower-income individuals, risking inadequate savings for future emergencies or retirement,” it said.
The report also discussed the uneven income growth across Malaysia’s districts, which complicates effective policy targeting, particularly in addressing income contraction at the district level.
It said that while tax reform and subsidy rationalisation are seen as important measures to increase government revenue, they must account for the uneven recovery of household incomes, ensuring that vulnerable households are shielded from rising living costs.“
Additionally, targeted interventions, such as strengthening wage policies with higher minimum wages, improved wage transparency, and better wage-setting mechanisms, are essential for addressing the structural issue of wage stagnation in Malaysia.
“Consistent upward revisions to the minimum wage or better-targeted wage policy, especially for fresh graduates and lower-income groups, will help close the income gap, secure financial stability, and provide sufficient savings for retirement,” it said.
The institute calls for a reassessment of the RM240,000 savings target, suggesting it may be insufficient given Malaysia’s increasing life expectancy and the assumption that Malaysians would only use RM1,000 per month for 20 years.
“Individuals approaching their respective retirement ages and beyond may face increased adversities such as health and disability risks alongside the depletion of their retirement savings,” it said.
