The Employees Provident Fund (EPF) may already be losing its place as a trusted nest egg for Malaysians as a result of a legacy of low wages.
Recent data shows that nearly 74% of active EPF contributors have less than RM100,000 in their accounts upon retirement — a sum that will last just over five years for a single person or only three to four years for a couple.
That amounts to RM1,500 per month for a single person or RM2,500 for a couple — even lower than the current minimum wage of RM1,700 per individual.
It has been estimated that 85% of the Malaysian labour force do not earn enough to fall within the income tax paying bracket. With low wages, contributions to retirement funds such as EPF also remain low among a vast majority of the labour force.
For many, approaching retirement age is like staring into a chasm. With little money to support themselves, retirement means low quality of life at best, and too little money to get by at worst.
The EPF has estimated that one needs a basic savings of RM390,000 upon retirement to meet Retirement Income Adequacy level, but this only highlights the gap between ideal and reality.
Projected over a 20-year retirement period, it generates a modest monthly income of around RM1,300 to RM1,625, still short of minimum wage. According to the retirement fund, this is enough only to cover basic needs, but far from a comfortable lifestyle.
As the cost of essentials such as food, healthcare and utilities rise in tandem with inflation and cost of living, the RM390,000 may not even last the 20-year estimate.
Longer life expectancy will just pile on the pressure. As they are now expected to live longer post-retirement, retirees will need even more money in their savings to last longer than two decades.
Without proper planning, even decades of contributions may not be enough for retirement needs.
At the next level, EPF’s own framework defines retirement savings of at least RM650,000 as “adequate”, given that it is sufficient to support a “reasonable” standard of living.
To ensure stronger financial security, one will have to ensure savings in retirement funds will come up to at least RM1.3 million, defined as the “enhanced” level.
Who are most at risk?
This issue is not just about those who have already clocked out for the last time.
Future generations of retirees, many of whom are now engaged in informal employment or gig work, also face the possibility of being heavily dependent on their EPF savings, especially if they are no longer gainfully employed.
Gig workers such as e-hailing or p-hailing drivers may now contribute to EPF voluntarily through the i-Saraan Plus scheme.
They may contribute any amount they wish, and under a new scheme in Budget 2026, the government offers a grant of up to RM600 a year to match their contributions.
But given the quantum of their contributions, the government’s matching grant is not expected to take them very far. Like everyone else, they will face the challenges posed by inflation, rising cost of living, and extended lifespan with little or no money left in their old age.
For seniors who do not have medical insurance, failing health will mean more out-of-pocket expenses.
Several elderly Malaysians who have spoken to FMT about their fears of running out of money just a few years after retirement were undoubtedly airing the concerns of the majority.
Indeed, many of them are already covering their own medical expenses while a few have delayed treatment to avoid the cost.
As the proportion of the elderly in Malaysia rises, so does the urgency to strengthen social protection systems and rethink how we approach retirement.
The EPF truth is a gentle wake-up call, reminding Malaysians that preparing for retirement today is the only way to ensure dignity and peace of mind tomorrow.
