According to the report released from the World Bank, only 60.8 percent of working Malaysians are actively contributing their monthly income to their Employees Provident Fund (EPF). In the report, it gathered that their retirement savings collected are considered low compared to their peers and it is especially true for those in lower income groups.
Compared to a peer group from high income nations, the participation in contributing to their retirement savings institutions like EPF is low despite being at 60.8 percent. In fact, it is low among those from low income groups, with only one fifth of working age from the B20 income group actively contributing to their EPFs.
The report mentioned that the low savings happened due to employees contributing intermittently and that they can withdraw at the early age of 54. Their data indicated that three-quarters of working Malaysians have less than RM250,000 in their retirement savings by the time they’re 54 years old.
That means these Malaysians will enjoy less than RM1,050 monthly benefit which is too close to the poverty line of income (PLI) of RM980. The data even added that senior citizens in Malaysia will either have a decreased monthly income from their EPF or not at all and will have to eventually depend on living relatives or social help to fund themselves.
In regards to the report, The Minister in the Prime Minister’s Department in Economic Affairs, Dato’ Sri Mustapa Mohamed mentioned that it is important to create a market that has a regulatory environment for the provision of elderly care. The minister also encouraged strategic funding for communities and homes centered on elderly care, mentioning that it will become an important factor for the country’s progress.
Where do we go from there?
As the report highlighted the severity of the retirement savings problem, it is time to step up and rise above this adversity within our community. Here are a few tips to start saving for retirement.
Make a retirement plan
Yes, you read that right. Before you embark on saving for your retirement days, figure out your goals first. What kind of living standards do you want to enjoy when you retire? What house do you picture yourself staying in and who will you be staying there with? How many years will you be working? Will you be working part- time or have any form of passive income when you have retired? Ask yourself these vital questions and construct your financial goals for your days in retirement.
Start saving early
The key rule in retirement savings is that you can never be too young to start saving for your retirement days. In fact, as soon you start working in your 20s, it is best to start contributing into your EPF then. If you start saving from when you’re 25 years old and plan to retire at 65, you will have retirement savings from 40 years of working. The crucial factor once you start saving early is to do it regularly. Only then the constant flow of money will better secure your retirement funds.
Settle your debts as soon as possible
The best way to ensure that you can regularly contribute to your retirement funds is to ensure that you don’t have to pour your money into your debts. Most working Malaysians either have trouble paying off their student loans or their credit cards. Be vigilant in your spending habits and always set aside some monthly funds to pay off your debts as soon as you can. Spending on food and clothes are a necessity for you to live everyday but you can adjust your budget for these accordingly. Debts, however, will not just fade away if you don’t settle them so it is best to deal with them earlier on.
Find plenty of ways to gather more savings funds
As the saying goes, don’t put all your apples in one basket. The saying can be applied for a number of things, from diversifying your source of monthly income and diversifying your retirement funds.
One of the plausible reasons that working Malaysians from the younger age aren’t able to regularly contribute to their EPFs is due to insufficient income. They can either opt for a second job, start investing or find a method to produce a steady, passive income. Similarly, working Malaysians may also find other channels of retirement funds, like the ASB, and regularly channel some money into their ASB or EPF to ensure financial security when they have retired.
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