One in 10 Malaysians are not prepared for retirement

Retirement planning ranks poorly on the list of Malaysians’ financial priorities. A survey by HSBC revealed that 43% of respondents were inadequately prepared, and that one in 10 were not prepared at all for retirement.

The HSBC study also revealed that Malaysians are expected to live at least 17 years past retirement but their retirement funds would only sustain them for 12 years.

Most respondents were finding it difficult to save for retirement because of the costs attached to buying a house (48%) and paying for their children’s education (33%).

The survey also found that most people favoured the informal method of retirement financial planning (53%), and were comfortable relying on an approximate calculation of their retirement savings. It was however, unsurprising that, people who receive professional advice tend to save more (60%).

Similarly, the 2013 Manulife Investor Sentiment Index in Asia found less than half of Malaysians have started planning for retirement, while fewer than one in five consider such planning their first or second financial priority.

“The findings show a lower percentage of Malaysians view retirement planning as a financial priority than in any of the other Asian markets surveyed,” according to Manulife’s press release.

The Manulife survey collated results from 500 respondents in Hong Kong, China, Taiwan, Japan, Singapore, Malaysia and Indonesia.

According to the survey, 42% of Malaysians aged above 48 expect to rely on their children for financial support after retirement, as compared to an average of 18% in the region.

This leads us to the question, are the savings stored away in the Employees Provident Fund (EPF) enough for retirement?

According to the EPF’s annual report for 2011, the average savings for active members at the age of 54 stood at RM149,216 while the average savings in EPF for inactive members was RM23,389.

EPF Savings May Not Be Enough for Retirement

With the average life expectancy for Malaysians at 75 years, the average Malaysian’s retirement funds may not be enough to cover retirement expenses over 15 years (assuming a retirement age of 60 years old). With EPF savings amounting to RM149,216, a retiree will only have about RM827 a month to live on.

Can this amount sustain a comfortable lifestyle? Will it be enough for housing rental, utilities, food and medical expenses?

A person living a middle-income lifestyle with expenses amounting to RM5,000 a month, will need at least RM60,000 a year to sustain a comfortable lifestyle.

A retirement fund of about RM150,000 would last a previously middle-income retiree just over 2 years.

Even with this alarming statistic, many people still procrastinate on legacy planning. Little do they know that they may not have adequate time to save up for a comfortable retirement. Ideally, retirement planning needs to begin as early as possible, and solely relying on the funds accumulated in EPF may not be the best answer.

There are various options available to complement EPF savings, such as Private Retirement Schemes (PRS).

Ready to kick-start your retirement financial planning? Find out how much you need to save here.

Thinking of investing in PRS? Learn about PRS before taking the plunge.