Your Employees Provident Fund (EPF) savings alone may not be enough to support your golden years. Insufficient retirement savings can be due to several reasons, among them longer lifespan, low salary and early retirement. More often than not, the money will be exhausted in a short period of time.
Since the establishment of the EPF on the 1st of October 1951, the full withdrawal age has remained at age 55, while the life expectancy of Malaysians has increased to age 75. This means that your EPF savings needs to last for 20 years after you retire.
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The 2013 EPF statistics for members aged 54 revealed that:
- 69% of members have less than RM50,000 in their account
- 54% of members have less than RM20,000 in their account
- only 31% of members still work at age 54
This amount of savings is not sufficient to support you for 20 years after your retirement.
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You must diversify your source of retirement income so that:
- you will not fully rely on your EPF savings alone
- you can receive a continuous flow of income
- you can avoid depleting your retirement income within a short period of time
You can diversify your retirement income through these sources:
- EPF Savings
All private sector workers are mandated to contribute a certain percentage of their salary to their EPF account. This is in addition to the contribution made by their employer on their behalf.
- Conventional Savings and Protection
Other than saving your money in banks or Tabung Haji, ASB or ASW, you are also encouraged to have other forms of financial protection such as insurance policies that covers health, education, accidents, permanent disability or death. (You can get free insurance by investing in certain investment vehicles. We do this through Uli Protect.)
- Voluntary Contribution
Apart from the EPF mandatory contribution, you can also contribute a certain amount of your income into voluntary schemes such as the Private Retirement Scheme (PRS).
- Senior Citizen Fund/Scheme
This scheme, or “Skim Bantuan Orang Tua”, is introduced by the Department of Social Welfare for senior citizens with a household income of less than RM1,500 per month and who meet the required terms. Other forms of assistance can also be obtained from Baitulmal, Lembaga Zakat, etc.
- Informal Support
Other than seeking support and assistance from families and friends, there are other forms of informal support such as free medical services from public clinics and hospitals, income from rental of real estates, dividends from investments or unit trust, interests from fixed deposits, or financial assistance under the “Program Pembangunan Rakyat Termiskin (PPRT)”. The Money Tree tool can provide you a higher return with almost zero risk.
Of course, you can work part-time or operate a small business from home or turn your hobby into a source of income. You can also buy annuities from insurance companies, which will provide a fixed monthly income for the rest of your life.
Remember, it’s best to be prepared for your future! Having various sources of income can help to ensure a comfortable and sustainable retirement.
