THE living standard of an elderly Malaysian household is lower than in most East Asian countries and yet, we want to retire early.
This is the shocking result of the latest East Asia Retirement Survey, Global Aging Institute founder and president Richard Jackson tells Sunday Star.
A whopping 92% of the retirees surveyed left the workforce before celebrating their 60th birthday – more than in any other country in the study. Yet, the share of their asset income is smaller than that in Singapore, Taiwan and Thailand.
Income from assets is insufficient to close the enormous gap in living standards between the retired elderly and more affluent rising generations, Jackson says, warning that the economic circumstances of retirees are far from secure.
A typical elderly household here, comprising those aged 60 and above, survives on half the income of a younger household, he says.
“That’s a relative living standard lower than that in any other country surveyed except South Korea,” he concludes.
As for asset income, the expectations of many of today’s workers are “merely aspirations”, says Jackson.
Among workers aged 20 to 39, only 59% of those who say that they expect to receive asset income in retirement have actually purchased financial assets. Even among those workers aged 40 to 59, the share is only 75%.
He says 32% of them also expect that they will receive more income when retired – a larger share than in any other country except China.
“You need to turn these expectations into reality,” he advises.
With an elderly population that is projected to double from 9% to 17% by 2040, Malaysia is facing a major retirement challenge.
The early retirement age constitutes a major handicap but Jackson thinks the Government’s recent move to raise the minimum mandatory retirement age from 55 to 60 is a step in the right direction.
“The mentality must change. Older workers have much to contribute and shouldn’t be forced out. But sadly, it’s the elderly themselves who are most likely to believe that they have little to contribute and are mostly a burden.
“Despite the raised age, the country’s premature retirement pattern may persist as 60% of today’s workers expect to retire before age 60 – a larger share than in any other country.”
This, he thinks, could be because the law allows voluntary retirement. Another reason is that the Employees Provident Fund (EPF) allows workers to cash out their retirement savings at age 55.
A great majority of today’s workers expect to receive benefits from the fund, he says, but the money will, in most cases, be far too small to maintain their pre-retirement living standards.
Our EPF and pension schemes need adjustment but they are fundamentally on the right track, says Jackson.
“The EPF is a sustainable model and it’s transparent. But the full withdrawal age needs to be in tandem with the retirement age,” he feels.
To improve their retirement prospects, Malaysians must save more and retire later.
More than half of today’s workers expect to receive social assistance when they’re retired which, he says, could indicate a failure of the system.
“Welfare aid is a necessity but people shouldn’t expect it. They should have enough savings and EPF not to need it.”
The survey also found that overwhelming majorities of Malaysians would support new government initiatives that encourage or require workers to save more for retirement.
“This is a vote of confidence for the Government. Malaysia is beginning to engage the retirement challenge but additional reforms are needed.
“Salaries should increase. The Government can consider making matching contributions or subsidising low wage earners contributing to the retirement funds so that they’ll have more in their old age.”
With fewer than one out of 10 Malaysians believing that the family should be mostly responsible for financially supporting retirees, traditional attitudes and expectations are also changing. As the role of the family in retirement security recedes, pensions and personal savings are becoming all the more important.
Jackson highlights how only 48% of the elderly here live with their grown children, fewer than in any other country except China and South Korea.
“Malaysia should work towards finding a unique retirement solution that’s suited to the local culture.
“It’s important for the elderly to be financially independent but staying with the kids isn’t a bad thing either because it creates a sense of belonging.”
Supported by Prudential, the East Asia Retirement Survey by the Global Aging Institute was conducted in Malaysia, China, Hong Kong, Indonesia, the Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam last year. Close to 1,000 Malaysians were surveyed. The US-based Institute is a non-profit research and educational organisation dedicated to improving understanding of the economic, social and geopolitical challenges created by demographic change.
Opting to retire