PRIME Minister of Singapore Lee Hsien Loong recently announced that the country’s retirement age will be raised to 65 years old within three years.
It was a long-term decision made prior to Singapore’s declining birth rates, longer life expectancy and the future plan to reduce foreign worker quota.
Singaporeans are expected to have a higher life expectancy with estimated average lifespan up to 85.4 years by 2040.
The minimum retirement age of an employee in Malaysia is 60.
The current retirement age suits the average life expectancy of 74.5 years, according to the Statistics Department.
Thanks to improved healthcare services, 60 is now considered a decent age for retirement. The question is, are Malaysians prepared for a comfortable retirement?
Roughly, Malaysians and Singaporeans are expected to live 15 to 20 years post retirement, therefore they must ensure that their retirement fund is adequate by the time they retire.
As of now, the idea of a happy retirement by the age of 60 is getting far from reality. The reason is because more than 50 per cent of Malaysians may not be financially ready for retirement, according to the Credit Counselling and Debt Management Agency, or commonly known as Agensi Kounseling dan Pengurusan Kredit (AKPK).
A study conducted by AKPK last year on 1,000 Malaysians aged 18 to 55, showed that although most of the respondents had set aside a portion of their monthly income as savings, one in five was saving less than 10 per cent of their monthly salaries.
Out of 14 million members of the Employees Provident Fund (EPF), only seven million members were actively contributing to the EPF.
In another account, the EPF stated that in March 2018, almost half of the members aged 54 had savings of only RM31,000 and most of the members were in the non-active category.
EPF has raised the minimum savings target to RM240,000 by the age of 55, which means after retiring, the retiree would have about RM1,000 monthly to spend. For an elderly person RM1,000 is quite paltry. According to BelanjawanKu, the expected expenses per month for an elderly couple is RM3,090.
The expenses were specified according to categories: RM850 for food, RM700 for housing, RM130 for healthcare, RM500 for transport, RM290 for utilities, RM90 for personal care, RM230 for ad hoc, RM170 for social participation and RM130 for discretionary expenses.
To ensure we have adequate savings for retirement, we should save 20 per cent of our income into our retirement savings fund.
According to the EPF savings target, we need to at least start retirement saving at the age of 18 to reach the EPF savings target at the age of 55. At the age of 18, we must have at least RM2,000 for the retirement savings and the amount should double up in the next years.
This reality in Malaysia is making it almost impossible for Malaysians to secure their future and have a comfortable retirement, mainly because of low wages and the high cost of living.
With low income and high expenditure, people’s ability save is getting lesser through the years and this could be alarming.
If this situation worsens, in future we might probably see more and more elders aged 60 and above still working to sustain themselves.
That is why the government needs to review the EPF retirement plan and ensure that most Malaysians are able to prepare themselves for future retirement.
The government also needs to increase the minimum wage to secure a better future for the people as well as for the country.
It is hoped that as minimum wage increases, the general level of wages will also rise in tandem.
Lastly, the government needs to constantly encourage people to do retirement savings for their own benefit. If not, we may have to follow in Singapore’s footsteps and increase the retirement age.
But it will exacerbate our problem as even with the current retirement age of 60, young people have been heavily marginalised by the job industry as evidenced by the high youth unemployment rate coupled with the younger demography.
Plus, our government may not be able to cope with the extra financial burden as the salaries for senior and experienced government servants is way higher than that of fresh graduates.
Hence retirement adequacy is an urgent issue for the government to look into.
The writer is researcher, Institute for Research and Development of Policy