PETALING JAYA: Malaysians who start saving under the Employees Provident Fund (EPF) at 18 could accumulate about RM45,000 more by the time they retire, compared with those who begin at 25.
Licensed financial planner Rafiq Hidayat Mohd Ramli said someone who invests RM100 a month from age 18 could accumulate RM128,000 by 55, compared with RM83,000 for someone who starts at 25.
The estimates assume an annual return of 5% until age 55, although actual EPF returns will vary.
Rafiq said young people should not feel pressured to contribute if they have no income, as many 18-year-olds might still be studying or managing essential expenses such as food, transport and education.
“Retirement planning is a long-term goal. It should not come at the expense of someone’s immediate financial survival,” he said.
He advised young people to prioritise essential expenses, avoid high-interest debt and build emergency savings before increasing their long-term contributions.
“An employee earning RM1,500 monthly could contribute RM165 to EPF based on an 11% employee contribution rate, while an employer contribution of RM195 at 13% would bring the total monthly contribution to RM360,” he said.
Under Budget 2027, all Malaysian citizens will be automatically registered as EPF members upon reaching the age of 18.
Resolute Planning financial planner Linnet Lee said forming a savings habit is easy, especially through EPF.
She also likened it to paying for either car or home instalments.
“Once you set it, you may feel the pinch for the first few months but you get used to it,” she said.
Lee, a certified member of the Financial Planning Association of Malaysia, also proposed introducing automatic savings mechanisms.
“Step-up savings should be promoted, where individuals increase their monthly contributions as their income grows.”
She also proposed accessible, affordable and appropriately regulated investment options that align with participants’ financial goals, time horizons and risk tolerance.
“Contributions should be allowed to be adjusted during periods of financial hardship while encouraging participants to maintain an emergency fund to avoid prematurely withdrawing long-term savings,” she said.
Licensed financial planner Rajen Devadason of Manulife Investment Management said the benefits of starting seven years earlier could be significant.
However, he cautioned against putting too much money into EPF through voluntary contributions, as the savings are generally intended for the long term and may not be readily accessible when needed.
“I would recommend dividing savings between EPF for retirement, bank or money market accounts for short-term needs, and a diversified investment portfolio for medium- and long-term goals,” Rajen added.
Putra Business School Assoc Prof Dr Ahmed Razman Abdul Latiff said early registration could encourage young people to view retirement planning as a lifelong responsibility.
“The real challenge is ensuring consistent contributions throughout their working lives, particularly for those in informal employment or the gig economy,” he said.
Assoc Prof Ahmed Razman said retirement adequacy depended on three factors: consistent and increasing contributions, sustained investment returns and sufficient time for compounding.
“Higher dividends cannot fully compensate for persistently low contributions,” he said.
He called for stronger incentives for voluntary contributions, suitable contribution-matching schemes for low-income earners and gig workers, and easier digital payment options.
Universiti Teknologi Mara economist Dr Mohamad Idham Md Razak said automatic registration could introduce young Malaysians to retirement planning before it became an immediate concern.
However, he stressed that adequate retirement savings would depend on whether young people entered employment and made regular contributions throughout their working lives.
“The key economic advantage of starting early is that young people have time on their side, reducing the pressure to accumulate a large retirement fund within a shorter period later in life.
“Financial literacy should be introduced in schools and universities, alongside efforts to improve wages and provide more stable employment,” he said.
