Split opinions over EPF’s proposal to increase age limit for withdrawal

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  • Friday, 17 Apr 2015

LIFE expectancy in Malaysia is about 75 years. Our neighbour Singapore has an average life expectancy of about 82 years and for the sake of comparison, in the Philippines, it’s about 68 years.

Our life expectancy has increased, and with it, the realisation that retiring at 55 years of age may not be such a viable option.

The main concern would be financial – would we have enough retirement savings for the rest of our lives?

If we died at 75, would we have enough money to live on for 20 years?

I really doubt we would. As we get older, the cost of living seems to rise in tandem. But our savings are not rising at the same rate; hence the disparity between our savings and cost of living, which makes things difficult for us.

In addition to that, more and more of the aged are relying less on their children, choosing not to burden them as they realise that the younger generation have their own financial stresses and issues to contend with.

This attitude is in stark contrast to the one I would have grown up with, when people of my grandmother’s generation took it for granted that they could rely on their children to support them in their twilight years.

My mother’s generation is more self-sufficient and I suspect by the time it comes to me, I will have no choice but to be financially independent till the day I die.

For those who have retired, their main worries centre around access to healthcare, nest eggs and being victims of fraud.

In Malaysia, we are somewhat lucky with access to almost-free public healthcare. I’m hoping the status quo will remain.

As for nest eggs, those working in the civil service have their Government pensions while those working in the private sector have their Employee Provident Fund (EPF).

Recently, EPF announced a proposal to increase its retirement savings withdrawal age from the current 55 to 60.

It clarified that under this proposal, while full withdrawals could be made at only age 60, withdrawals for housing, medical treatments and education from Account 2 could still be made prior to this age.

It said there was cause for concern which had prompted them to draw up this proposal.

The EPF Annual Report for 2014 revealed that 68% of its members had less than RM50,000 in their accounts upon retirement.

The majority of Malaysians are against this proposal. Having slogged their whole life, they see their EPF fund as an opportunity to spend some money on themselves.

As to how they spend this money, it varies from one individual to another.

Some use it to fund their children’s education while others invest in forms of investment which they feel offer greater returns than the EPF and some use it to put themselves through skills courses so they have a “retirement job” which is less stressful and more enjoyable than the career they had earlier.

I doubt there are many people who have truly retired. Most would like some form of a job – even a part-time one – to keep themselves active.

Many also find that having a good time in their twilight years cost more than it did when they were younger.

As of 2013, the minimum retirement age in Malaysia for the private sector is 60 years.

If anything, the EPF proposal is in line with the change in the minimum retirement age.

The minority who agree with the proposed EPF retirement age do so on the grounds that life expectancies have increased and therefore we should not access our savings too early.

A financial report by HSBC published earlier this year titled The Future of Retirement, A Balancing Act found that 21% of Malaysian retirees felt they needed to start planning for retirement at the age of 30 or younger to maintain their lifestyle while 5% predicted they would never be able to fully retire from paid employment.

I put myself squarely in those two demographics – I wish I had thought of how to save for my retirement at an earlier age, and now I think it’s doubtful I will ever have the luxury of retiring.

At best, I may be able to think of a “retirement job” although what that might be eludes me.

Unfortunately, at 30, I was still worrying about things like purchasing a house, a car, providing for my children and also, to be honest, enjoying life. Retirement was the furthest thing from my mind.

I honestly do not know whether I agree with the EPF proposal to increase the age of withdrawal of funds.

I still have about 15 to 20 years to go (depending on the age limit) before I have to face this choice and I doubt I will be able to retire within this time frame.

I suspect that my generation may live to an older age than previous ones. If I were being purely logical about this, it would make sense to withdraw my EPF money at only 60.

Besides, how much of a difference can five years make?

Unfortunately, logic doesn’t always dictate the choices we make.

Another part of me feels it would be nice to withdraw it while I’m younger, and use it to pave the way for my “retirement job”, or even make some alternative investments, whatever those may be.

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