Dr Paul Anthony Maria Das is a Senior Lecturer at the School of Accounting & Finance, Faculty of Business & Law, Taylor’s University.
Malaysia’s retirement challenge is becoming increasingly difficult to ignore. As life expectancy rises and the cost of living continues to climb, the way Malaysians save for and withdraw their retirement funds is no longer aligned with economic reality. One in four Malaysians exhaust their Employees Provident Fund (EPF) savings within five years of reaching withdrawal age. When this happens, retirees are left financially vulnerable in their later years, often relying on family support or limited public assistance.
Recognising this growing gap, EPF has begun reframing how retirement adequacy is defined and communicated. A key step in this shift is the introduction of the Retirement Income Adequacy (RIA) framework, which encourages Malaysians to think of EPF not as a one-time withdrawal to be spent at retirement, but as a source of monthly income that must last throughout old age. In essence, retirement savings should be drawn down gradually, over roughly 20 years from age 60 to around 80, in line with average life expectancy and the risk of outliving one’s savings.
To make this concept tangible, EPF introduced three savings benchmarks. Basic Savings of RM390,000 is intended to support essential living needs. Adequate Savings, set at RM650,000, reflects a more comfortable and sustainable standard of living. Enhanced Savings of RM1.3 million support a higher-quality retirement with greater financial security and flexibility. These benchmarks are not guarantees, but practical reference points to help members understand what their savings can realistically support.
What Income-Based Withdrawals Look Like in Practice
Under EPF’s illustrations, a retiree with RM390,000 at age 60 could withdraw about RM1,625 per month in the first year. With disciplined withdrawals and continued dividend returns, this amount could rise to roughly RM4,434 by age 80. Someone retiring with RM650,000 could start with a monthly income of about RM2,708, increasing to over RM7,389 later in retirement. At the Enhanced Savings level of RM1.3 million, monthly withdrawals could begin at around RM5,417 and increase to about RM14,779 by age 80.
While these figures are illustrative rather than promised outcomes, they show how income-based withdrawals can help retirement savings last significantly longer than one-time withdrawals.
To reinforce long-term adequacy, EPF has also revised policies for members with higher balances. Previously, savings above RM1 million could be accessed more freely. Under the new approach, this withdrawal threshold will gradually rise and align with the Enhanced Savings level of RM1.3 million by 2028. This means the first RM1.3 million is preserved to support long-term retirement income, while amounts above this level are considered surplus and can be accessed more flexibly.
EPF has also strengthened the Members Investment Scheme (MIS). Members whose savings exceed the Basic Savings level for their age may invest up to 30% of the excess with EPF-approved fund managers. This provides disciplined savers with greater diversification and potential returns, while safeguarding a minimum level of retirement savings within EPF.
Lessons and Limits from Singapore
Singapore’s Central Provident Fund (CPF) automatically converts part of retirement savings into regular monthly payouts, significantly reducing the risk of retirees outliving their savings. While this approach is worth studying, it cannot be transplanted wholesale. Many Malaysians retire with lower balances and still require flexibility to manage healthcare costs, debt obligations, or family responsibilities.
A more realistic path forward for Malaysia would be to make monthly payouts the default, while still allowing limited one-time withdrawals, especially for those with smaller balances. Defaults matter. Behavioural evidence shows that what is automatic often becomes what is chosen.
Rethinking the Withdrawal Age and the Missing Middle
Another sensitive but increasingly relevant issue is EPF’s withdrawal age. Many Malaysians now work until 60 or beyond, yet early withdrawals encourage spending retirement savings while they are still earning. Gradually raising the withdrawal age to at least 60 would keep savings invested longer and improve retirement outcomes.
However, such a change must be implemented carefully. Workers in physically demanding occupations or those facing health challenges still require flexibility. Any adjustment would need clear exemptions, phased implementation, and transparent communication to gain public acceptance.
Retirement adequacy is even more challenging for gig workers and housewives. Schemes such as i-Saraan Plus and i-Suri extend EPF coverage, but participation remains voluntary. Mandatory contributions may appear attractive, but income instability makes enforcement difficult without affecting basic needs such as food or rent. For now, flexible contributions supported by incentives and matching mechanisms are more practical than strict compulsion.
Many of these reforms would require amendments to the EPF Act, making political caution inevitable. Retirement savings are deeply personal, and any policy perceived as restricting access can face resistance. Yet delaying reform carries long-term risks. Without meaningful change, more Malaysians will enter old age with inadequate income and limited support.
Malaysia does not need radical overnight reform. What it needs is a shift in mindset. EPF should no longer be viewed as a retirement jackpot, but as a source of lifelong income. The RIA framework is an important first step. Whether Malaysia takes the next steps will determine whether future retirees age with dignity or with financial anxiety.
