Cover image via Bernama & KWSP
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The Employees Provident Fund's (EPF) new RM1.3 million 'enhanced savings' benchmark under the Retirement Income Adequacy (RIA) framework has raised a big question for many Malaysians: Is that amount even realistic?
According to financial planners and retirement specialists interviewed by The Star, the answer is yes, but only if savings start early and remain consistent.
Financial planner Jarvic Lau told the English daily that accumulating RM1.3 million in retirement savings is achievable under a stable career path.
He outlined a scenario where a fresh graduate starts working at 25 years old, earns RM2,500 a month, receives a 5% annual increment, and retires at 60 with a final salary of RM15,000.
With continuous EPF contributions at the statutory 23% combined rate (11% employee and 12% employer) and a 6% annual dividend return, Lau said:
"Under these assumptions, 35 years of continuous EPF contributions coupled with a consistent annual return would generate an accumulated balance exceeding RM1.5mil, assuming no withdrawals throughout the entire employment period."
Even after accounting for a 30% leakage over the accumulation period, he added that achieving "a balance of about RM1 million remains plausible, provided contributions begin early and remain uninterrupted".
However, Lau warned that most Malaysians do not reach this level of savings by retirement.
"Many rely on EPF and find that their money runs out much sooner than expected. This shows that while EPF remains a strong foundation, it is unlikely to be enough on its own for younger generations who will live longer and face higher costs in future," he said.
Starting early makes all the difference
Financial literacy advocate Amy Seok told The Star that for Malaysians under 40, the most effective approach is simple but demanding.
"This includes maintaining continuous EPF contributions, making voluntary top-ups whenever possible, and avoiding premature withdrawals except in genuine emergencies," Seok said.
She added that retirement planning cannot rely on EPF alone.
"Just as important, managing lifestyle inflation, reducing unnecessary debt and improving financial literacy are critical foundations for sustainable retirement planning," she said.
Seok noted that inadequate retirement savings often stem not only from income levels, but also from poor financial behaviour, career interruptions, informal employment and early withdrawals.
"The RIA framework is therefore an important policy signal to prompt earlier intervention, better education, and shared responsibility between individuals, employers and policymakers," she said.
But what about those who are already in their 40s? You still have time, but the window is narrower.
Lau explained that a 40-year-old who continues working another 25 years could still achieve the "adequate savings" tier of RM650,000 by age 65 under similar contribution assumptions.
That level, he told The Star, could support monthly withdrawals of RM2,708 in the first year of retirement, potentially rising to RM7,389 by the 20th year.
Work longer, save longer?
Some experts told The Star that achieving adequate retirement savings may also require working beyond 60.
Universiti Malaysia Kelantan's Prof Dr Balakrishnan Parasuraman suggested gradually raising the retirement age to 62, citing a study he conducted several years ago on longer life expectancy and improved health outcomes.
"From that study, we concluded that our lifestyle will be improved. So, 60 is too early to retire," he said.
To reiterate, under EPF's RIA framework:
Basic Savings: RM390,000 (covers essential needs)
Adequate Savings: RM650,000 (reasonable standard of living)
Enhanced Savings: RM1.3 million+ (comfortable retirement)
But as several experts told The Star, the real challenge isn't whether RM1.3 million is mathematically possible; it's whether Malaysians can maintain consistent employment, disciplined saving habits, and avoid early withdrawals across decades.
Because once retirement begins, there is no second chance to rebuild the pot.
