Too poor to retire

Concerned that an alarmingly high number of 54-year-old Malaysians have less than RM50,000 in their EPF savings, the fund for private sector employees will reveal tomorrow its policy proposals that will allow retirees to live comfortably.

EAGER to impress his relatives and friends, Jerry Chung’s father wiped out his entire Employees Provident Fund (EPF) savings to pay for his eldest son’s wedding banquet.

“My father worked as a night club supervisor for a short time so his savings wasn’t a lot. He had about RM25,000 which he withdrew at age 55 for my wedding. He is doing odd-jobs now because we don’t have enough to get by,” the 27-year-old hawker shares.

Blowing their savings on lavish weddings, home renovations and poor investments, are just some of the reasons why retirees are forced back into the workforce in their golden years.

EPF deputy chief executive officer (strategy) Tunku Alizakri Alias says globally, the trend is for people to spend their hard earned savings on holidays and cars.

He is concerned about the “instant gratification generation” and feels that financial literacy is still low among Malaysians.

“Wake up. Be aware of your retirement needs. EPF should not be your only source of retirement funds. You must have insurance and your own savings too,” he advises.

Explaining the urgent push for a higher withdrawal age from the current 55 years to 60 years - a proposal recently mooted by the EPF - he says it is because the need is pressing.

He describes the sandwich generation phenomenon (adults who are supporting their parents and their own children) as a “time bomb” that needs to be addressed immediately.

With rising costs, double income households are the reality of modern living, he adds.

“The worst case scenario has already happened.

“Last Tuesday, The Star Online reported that a 66-year-old former lab technician was chased out of his own home after he transferred property and savings to a family member,” he says.

Addressing doubts about how much difference five years can make, he says members can earn 20% to 35% more if they keep their savings with the EPF until age 60.

“The longer you save, the more your money will grow. Why lose out on your money’s compounding power?”

The fact that we will be an ‘aged nation’ by year 2030 is a challenge, especially when Malaysians are retiring at a relatively younger age than their counterparts around the world, he points out.

In Singapore, Australia, Denmark and Germany, he says, the people work past 60 while in countries like Canada and Norway, the retirement age is above 65.

The EPF, which currently has 14,192,832 members, recommends having at least RM196,800 in basic savings upon retirement, but only 22% of its active 54-year-old contributors met this minimum last year.

“This is not the 1950s where people die before they can withdraw their EPF at age 55.

“People are living past 100 now. On average, you need your retirement savings to last for at least 20 years beyond retirement. The quality of life starts to deteriorate at age 65 and that’s when you’ll really need money,” he says.

Financial security is a major issue that needs immediate tackling, National Council of Senior Citizens Organisations Malaysia president Datuk Dr Soon Ting Kueh opines.

The council represents 41 senior citizen clubs nationwide. He says EPF savings alone is insufficient for most seniors, especially when a major illness hits.

“The most worrying are chronic lifestyle diseases like diabetes and hypertension that require long-term medication. With no income, how will the elderly cope?” he mulls, urging the Government to take into account the ageing population in its development plans.

Malaysian society has evolved, Universiti Malaya’s Social Security Research Centre director Prof Datuk Dr Norma Mansor observes. She sees a break in the cultural and economic structure of the traditional family.

“We used to say that our kids are our insurance but that’s no longer so today. Children are not only too busy to look after their parents, they may not have the means to do so. They need two salaries to raise a family, meaning that both husband and wife must work.

“Unlike the Westerners, we don’t put responsibility on the Government to take care of our parents but still there should be policies that can support the new realities faced by families today.”

Prof Dr Norma, who was the National Economic Advisory Council secretary-general, calls on the Government to quickly set up the National Social Security Taskforce to look at policy reforms holistically.

The taskforce will bring together all the relevant ministries to study the need for a robust social security infrastructure covering health, education, housing and retirement.

She says new policies are needed not just for retirees but also for the unemployed and self-employed.

“EPF is among the best (retirement fund managers) out there but there are issues such as low accumulation and high member withdrawals that must be addressed.

“If you withdraw your EPF and find that the returns are less outside, you can still put it back in,” she suggests.

Malaysian Employers Federation executive director Datuk Shamsuddin Bardan believes that the withdrawal age should be in line with the retirement age which was increased to 60 in 2013.

He, however, cautions against raising Malaysia’s mandatory EPF contribution rate.

He feels that the current EPF statutory contribution rate that employers pay, at 12% and 13% (for employees earning RM5,000 or less) and 11% by the employees, are sufficient.

EPF , savings , withdrawal