THE average Malaysian lifespan today is 75. It was 56 in 1957.
By 2020, which is a mere six years away, the number of Malaysians aged 60 and above will hit 4.46 million, up from the current 2.32 million.
The typical employee in the private sector who contributes to the Employees Provident Fund looks forward to turning 55, because that is the age when he can withdraw all his savings.
The trouble with retirement is that you never get a day off.
Although the retirement age is now 60, most of the contributors who reach 55 are likely to withdraw their savings, either as one lump sum, or by opting for a monthly withdrawal option.For those with substantial savings, and who continue to draw a decent salary post-55, they are likely to keep their money with the EPF, since the dividends are far more attractive than fixed deposit rates in the banks.
But this is where the divide is most apparent. Statistics revealed in the Dewan Rakyat on Thursday show that the number of high-net worth individuals is low.
Deputy Finance Minister Datuk Ahmad Maslan said of the 233,299 contributors who turn 55 next year, only 1,331 (or 0.6%) will have more than RM1mil in their accounts.
The harsh reality is that the bulk of those who can withdraw next year, comprising some 69% – or 161,263 contributors - will only take out less than RM50,000.
If we can imagine that, by today’s standards, even a million ringgit will not last for 20 years, what about RM50,000?
When a person retires, the ideal situation would be that his EPF savings see him through his life. But RM50,000 is not even enough to buy a decent car to celebrate one’s retirement.
Which is why we hear stories of individuals using up all their savings in a short time, although the more conservative calculations state that they should last at least 15 years after retirement.
The Government wants to help contributors preserve their EPF savings, but this is no easy task.
Retirement savings must take into account the effects of inflation, increasing life expectancy, changing family structures and geriatric healthcare costs.
One critical illness situation will leave you in dire straits if all you have is your EPF savings.
The key is to start young. Every person starting out in the workforce must be made aware that their EPF savings will not be enough if they do not learn how to manage their finances well.
They must learn to save, and also invest in financial plans, including insurance, where the premiums will be lower if they start young. Indulging in expensive gadgets and gizmos may be cool, but poor management of one’s salary will have long-term consequences which cannot be sustained by retirement savings.
Retirement may be a faraway notion for the young and carefree but they should start thinking about it from the day they step into the workforce.