In a society driven by the pursuit of more gadgets, more vacations, and more experiences, an academician says preparing for the future often takes a backseat for most Malaysians.
Associate Professor Chong Wei Ying added the Employees Provident Fund (EPF) serves as the primary savings mechanism for most of the population, yet the savings often fall short.
“As of October 2024, only around 36 per cent of active formal EPF members meet the existing Basic Savings level according to age, anchored on RM240,000 at age 55. This is far below the updated basic savings benchmark of RM290,000, which is deemed necessary to cover 20 years of essential retirement expenses,” said Chong, who is with the School of Marketing and Management at Taylor’s Business School, Faculty of Business and Law, and a member of the Active Ageing Impact Lab at the university.
“Further data reveals significant disparities across demographics. Younger workers have lower savings compared to the elderly. Low-income earners and informal sector workers face inconsistent contributions, while women save less due to lower earnings, career breaks, and longer life expectancy.
“Rising healthcare costs, which increase by 10-15 per cent annually, and longer life spans (averaging 76 years) exacerbate these challenges.”
She added that the lack of preparation is evident.
“Stories of retirees struggling to make ends meet, facing financial insecurity, and living with regret over missed opportunities are far too common. While these situations may not always be catastrophic, they are undeniably disheartening.
“Preparing for a secure retirement requires a conscious effort to understand and manage one’s finances, emphasizing long-term planning over short-term gratification.”
Chong added many Malaysians approach money passively. Most of them focus on day-to-day needs without considering long-term consequences.
“A simple exercise can reveal financial awareness. Do you know how much money you currently have? Can you recall your last significant withdrawal or transaction? Do you know your total expenses for the past month?”
“Most people struggle to answer these questions, highlighting a lack of financial literacy. Bridging this gap is crucial, as it can mean the difference between financial security and hardship during retirement. A proactive approach to managing finances can enhance individuals’ confidence in making informed decisions about saving, investing, and spending wisely.”
Chong added that planning for a comfortable and fulfilling retirement requires a fundamental shift in how people perceive and manage money.
“It’s not just about saving; it’s about defining your financial goals and aligning them with the lifestyle you envision for your retirement years. Your financial requirements will largely depend on three key factors — lifestyle, healthcare, and inflation.”
She added that the Rule of 375 simplifies this process.
“Multiply your desired monthly retirement income by 375 to estimate the total nest egg required for a 30-year retirement. For instance, if you aim for RM3,500 monthly, you’ll need RM1,312,500. This figure provides a clear target and underscores the importance of proactive planning.”
Chong said retirement was more than just an abstract dream — it is a reality that requires careful planning.
“By embracing financial awareness, leveraging tools and professional advice, and actively preparing for the future, you can shape a retirement that fulfills your aspirations.
“Every decision you make today brings you closer to financial freedom and the good life you deserve. Don’t let retirement catch you off guard — start planning now and ensure your golden years are truly golden,” she added.
