For years, having RM1 million in retirement savings was widely seen as the ultimate financial safety net. However, with Malaysians living longer and the cost of everyday necessities continuing to rise, financial experts warn that even a seven-figure retirement fund may no longer guarantee a comfortable life.
According to The Star, economists and financial planners are calling for changes to Malaysia’s retirement system, including encouraging higher voluntary Employees Provident Fund (EPF) contributions, improving financial literacy and creating more options for retirees to receive a steady income after leaving the workforce.
The changing value of RM1 million reflects the growing cost of living in Malaysia, said Universiti Teknologi MARA economist Dr Mohamad Idham Md Razak. While overall inflation may appear relatively moderate, retirees can face significantly higher expenses for healthcare, housing and basic necessities.
Another major concern is that Malaysians are living longer. As retirement periods extend, savings that may once have appeared sufficient now need to support individuals for many more years. This creates what financial experts describe as “longevity risk”, where retirees potentially outlive their savings.
Retirement wealth is also unevenly distributed among EPF members. Data cited by The Star showed that 108,701 active EPF members had accumulated at least RM1 million, representing just 1.2% of the 8.78 million active members.
Despite making up a small proportion of active members, the group collectively held around RM190.05 billion, equivalent to 19.7% of the RM962.4 billion in total EPF savings.
Women accounted for 39,358 of those members with at least RM1 million in savings, representing 36.2% of the group.
Coreplus Advisory Sdn Bhd co-founder Lim Hooi Hooi said the RM1 million benchmark needs to be reconsidered as retirement costs continue to rise.
If spread across a retirement period of 20 to 30 years, RM1 million would provide roughly RM5,000 to RM6,000 a month, which she said may only be enough to support a middle-class lifestyle in an urban area.
Inflation has also steadily reduced the purchasing power of retirement savings, meaning the same RM1 million does not provide the level of financial security it once did.
Certified financial planner Jarvic Lau said inflation remains one of the biggest factors affecting the adequacy of retirement funds. Based on an assumed annual inflation rate of 3% and investment returns of 6%, he estimated that RM1 million could last around 23 years if a retiree spends RM5,000 a month.
However, the picture changes significantly as monthly expenses increase. Spending RM10,000 a month could see the same amount last only around 10 years, while monthly expenses of RM15,000 could reduce the period to roughly seven years.
These estimates also exclude unexpected expenses such as major medical bills or significant changes in lifestyle, which could place further pressure on retirement savings.
Lau suggested that RM1.3 million to RM1.5 million may now be a more realistic retirement savings target for some Malaysians, although even that amount may not be sufficient depending on an individual’s lifestyle, health needs and financial commitments.
With more Malaysians expected to live into their 80s, experts say retirement planning may need to move beyond simply targeting a large lump sum.
Instead, greater attention could be placed on building retirement savings that can generate a sustainable monthly income throughout a person’s retirement years, helping reduce the risk of running out of money later in life.
