Speaking to FMT, MyFP Services Sdn Bhd founder Robert Foo says people shouldn’t rely on EPF savings alone or hope that EPF dividend rates would remain high.
For some people, he pointed out, EPF funds wouldn’t last very long.
“There are retirees who use up their EPF money in three to five years due to low EPF savings and rising costs of living,” he said.
“People really need to start planning their for retirement. It doesn’t matter if they’ve just entered the workforce.
“A proper retirement plan is essentially a strategy that takes into account salaries and other projected incomes, education plans for the children, health and insurance plans, a home and so on.”
The problem with many people, he said, was that they lived only for the moment.
He said he knew of people earning more than RM20,000 who still had financial difficulties because they didn’t have the discipline to plan and manage their finances.
“There are many people who think they are financially sound because they have a job and can pay bills, but the moment they get retrenched their whole world collapses. They don’t have a back up plan.”
To motivate oneself to plan for the future, he said, it might help if one imagined that peace was always under threat, that war was always imminent.
“If you go into war without enough bullets, you’re going to be in deep trouble.” Similarly, he said, if one didn’t keep enough money, one would be in trouble when hard times struck.
“Today you may be okay, but five years down the road you may not be okay. Or today you may not be okay, but if you plan your finances, then five years down the road you may be okay.”
Foo said he noticed that more Malaysians were starting to realise this and were looking for alternatives to EPF, such as private retirement schemes. However, he added, many still hadn’t developed the fear of not having enough money for their retirement.
Last Saturday, EPF announced a 5.7% dividend rate for 2016. In 2015, the dividend was 6.4%.
In recent times, some parties have voiced concern that many Malaysians wouldn’t be able to survive on their EPF savings.
According to EPF figures, there are 14.5 million working Malaysians in the country, of whom 89% earn less than RM5,000 a month. Only 6.7 million workers are active contributors to EPF. Of these, only 22% would have saved enough at retirement to sustain themselves for 20 years.
According to EPF, RM196,800 is the minimum amount needed for retirement, based on a monthly expenditure of RM820 for 20 years.