Having enough money when you retire.

Having enough money for your retirement.

The following blog is written by a senior guy in EPF. Quite knowledgeable. Interesting read if you're into the "heavier stuff".

http://econsmalaysia.blogspot.my

In his recent article in The Star, titled Challenges of a pension system, argued that despite having direct contribution pension fund like EPF, a lot of people are inadequate in their savings for retirement. Most people still rely on THEIR FAMILY to support them after retirement.

"ONE aspect of an ageing society is obvious to everyone – care for the elderly will take on greater importance. How adequate are Malaysia’s pension systems? 

In western societies, most countries have achieved universal coverage, with net income replacement values ranging from 29% in the United Kingdom, to 96% in the Netherlands (based on OECD data)…. 

…The challenge in these western economies is one of sustainability. The problem with DB schemes is that they are based on the principle of pay-go – current workers’ contributions pay for the pension entitlements of retirees. This is not an issue if the demographic profile of the country is relatively stable..."

In the comments section of his blog, he wrote: "Active EPF members in the 51-55 age group, who are on the brink of retirement and have careers’ worth of savings, have on average RM147,057 each. The richest 5,446 members however have on average RM1.56m in savings. 

If these members are excluded, then the average savings for the remaining EPF members would be RM127,460. But the bottom 13.5% have average savings of only RM3,580, and the next 7% an average of RM14,848."

The average has RM147k for retirement, so even if you spend a little more than RM1,000 your money will run our by age 65. What then?

Some of the withdrawal policies I would like to see changed at EPF are:

1. Amount from your 1st withdrawal from EPF for the purpose of buying a house should be returned to your EPF account (Plus interest) after you sold the house. That's what they do in Singapore. It will prevent the account holder to deplete their EPF savings by keeping the proceeds withdrawn earlier.
2. Stop allowing withdrawal for purchase of 2nd house!! If you want a 2nd house, it is a luxury and should not come from your EPF savings. If you can't afford to buy the 2nd house, then don't buy!