A 6.3% Dividend: Celebrate With Caution
A 6.3% dividend for EPF savings—welcome news for contributors of all ages! It’s the highest rate since 6.4% in 2017 and a significant jump from last year’s 5.4%.
But before you break out the confetti, pause for a reality check. Rising costs of essentials, medicine, and healthcare may well offset any gains in your retirement savings.
Understanding Your Budget
First things first: how much do you spend each month? EPF’s latest Belanjawanku 2024-2025 guide recommends a monthly budget of RM 2,690 for a senior living alone and RM 3,390 for a senior couple in higher-cost areas. Are your expenses anywhere near these figures? Or have you been spending without keeping track?
If you’re unsure, it’s time to create a simple budget. Allocate for essentials: food, utilities, transportation, healthcare, personal care, social activities, and miscellaneous expenses.
One critical item not on the list: loans or mortgages. Most retirees have paid off their housing loan, and being debt-free is crucial. Avoid new loans or unscrupulous money-lenders. Prudent money management is the backbone of financial security in retirement.
The Temptation of Lump-Sum Withdrawals
Some retirees withdraw all their EPF savings at 55, dreaming of indulgence, travel, or starting a business. Luxury watches, exotic trips, shopping sprees—suddenly, a lifetime of careful saving is in the palm of their hand.
Here’s the thing: EPF savings can remain invested until age 100, with options for structured monthly withdrawals. Thoughtful planning ensures your money lasts, even as you enjoy your retirement.
Think Carefully, Spend Wisely
Some retirees embrace a “YOLO” mindset—spending freely to seize the moment. While living life fully is appealing, emergencies like urgent surgeries can drain savings. Relying on children to cover unexpected costs is risky—they may have their own financial commitments, loans, or young families to support.
At the other extreme are retirees who hoard their savings, fearful of emergencies, even though they have a comfortable nest egg. Striking the right balance between prudence and enjoyment is key.
Mindful Spending Matters
Even small indulgences should be budgeted. Avoid wasteful spending on things that don’t enhance your wellbeing. Simple living, occasional treats, downsizing, and mindful choices allow you to spend on needs without guilt. Remember: less is often more.
Planning for Health and Longevity
One of the biggest concerns in retirement is medical costs—not just for yourself, but also for aging parents. A minor hospital stay can easily cost tens of thousands, and insurance coverage often expires by age 75.
Retirement housing is another major consideration. While aging in place is ideal, living alone carries risks—a fall or health crisis could require moving to a senior care facility, costing anywhere from RM5,000 to RM10,000 per month depending on the level of care needed.
Retirement Income Adequacy
EPF’s upcoming Retirement Income Adequacy (RIA) Framework, launching January 2026, sets benchmarks for savings:
- Basic: RM390,000 to cover essential retirement needs
- Adequate: RM650,000 for a reasonable standard of living
- Enhanced: RM1.3 million for greater financial security and independence
Compare this to current basic savings of RM240,000 at age 55. The increase reflects rising costs and the retirement age of 60.
Start Early, Save Wisely
Starting contributions early and making saving a lifelong habit is crucial. Wise investments and guidance from a reliable financial advisor can grow your wealth through compound interest, ensuring comfortable living for your retirement years.
Health Is Wealth
Longevity means retirees in their 60s and 70s may still be caring for elderly parents. Healthy lifestyle habits can prevent costly non-communicable diseases. Long-term care can easily consume all savings if health is neglected.
The Takeaway
Plan for the long term. Be prudent with spending. Avoid debt. Prioritize health. Save wisely and thoughtfully. Enjoy life, but always with an eye on the future. With careful planning, your retirement savings can sustain you, giving peace of mind and freedom to truly enjoy your golden years.