How much do you really need to retire comfortably in Malaysia? RM1 million? RM2 million?
Many people assume there’s a fixed number, but in reality, it’s more complex. Different individuals have different definitions of what it means to retire comfortably. Your retirement needs depend on various factors, such as your lifestyle and the impact of inflation.
A comfortable retirement isn’t just about having a lump sum of money—it’s about ensuring your savings generate enough income to sustain your expenses. So now, let’s break it down with a structured approach to estimate your personal retirement number.
Understanding retirement needs
The Employees Provident Fund (EPF), also known as Kumpulan Wang Simpanan Pekerja (KWSP), has set a recommended minimum retirement savings of RM240,000 by the age of 55. However, with this amount, you would only be able to spend RM1,000 per month for 20 years. Is that really enough for you?
A common rule of thumb suggests that retirees need 70–80% of their pre-retirement income. However, this general guideline doesn’t take into account individual circumstances such as lifestyle preferences. Some retirees may plan to travel extensively, while others might anticipate higher healthcare expenses.
To build a more realistic estimate, we can examine actual income groups in Malaysia and project how much each group would need to sustain a 20–25 year retirement period.
How much you need
Below is an estimated retirement target based on different income groups, along with the national average household income for a general benchmark:
| Income Group | Average Monthly Income | Monthly Retirement Income (80% of average income) | Savings for 20 years | Savings for 25 years |
| B40 | RM3,401 | RM2,721 | RM652,992 | RM816,240 |
| M40 | RM7,971 | RM6,377 | RM1,530,432 | RM1,913,040 |
| T20 | RM19,652 | RM15,722 | RM3,773,184 | RM4,716,480 |
One of the biggest mistakes in retirement planning is ignoring inflation. For instance, if you need RM5,000 per month today, with an average inflation rate of 2% per year, this amount would increase to RM7,430 per month in 20 years. That’s nearly 50% more than your original requirement.
To reflect this reality, below is the estimated retirement savings needed, adjusted for 2% inflation over a 20-year period:
| Income Group | Savings for 20 years | Savings for 25 years |
| B40 | RM970,312 | RM1,212,890 |
| M40 | RM2,274,141 | RM2,842,677 |
| T20 | RM5,606,753 | RM7,008,441 |
This shows that you would need at least RM970,000, based on our extrapolation—significantly higher than the EPF’s recommended minimum of RM240,000.
Can EPF help?
Imagine this: You started working at 25, aiming to retire at 65, with a monthly salary of RM5,000. Assuming there are no withdrawals along the way, and that 24% of your salary goes into EPF (employer + employee contribution), and EPF yields an average annual dividend of 5.5%, you would have accumulated approximately RM1.04 million in your EPF account by retirement.
Of course, this is a simplified scenario that doesn’t take into account salary increments, bonuses, or employment gaps. So in reality, your savings could be higher, assuming all other factors remain constant.
But here’s the reality check:
Over 52% of EPF members under the age of 55 have savings of less than RM10,000. Many are tempted to withdraw early due to personal needs and the flexible withdrawal options available through EPF.
This raises a hard truth: depending solely on EPF is unrealistic and likely insufficient to sustain a comfortable retirement.
Acknowledging this, EPF has introduced the Retirement Income Adequacy (RIA) Framework—a simple guide to help Malaysians gauge their retirement readiness. The framework outlines three savings tiers:
- Basic savings: RM390,000
- Adequate savings: RM650,000
- Enhanced savings: RM1.3 million
These targets are significantly higher than the previously recommended RM240,000. EPF has also provided an age-based breakdown of recommended savings, which you can view here: Belanjawanku 2024/2025 & RIA Framework.
Building your retirement plan
So, how do you calculate your personal retirement number after understanding the average figures?
Here are some simple steps to guide you:
- Estimate your monthly retirement expenses – Typically, retirees will need about 80% of their pre-retirement income to maintain their standard of living. Still, you should also adjust the percentage based on your lifestyle goals.
- Account for other income sources – Consider other income sources like EPF, rental income, dividends, and more. These additional streams can supplement your retirement savings.
- Calculate your total retirement fund needed – You can also multiply your annual expenses by 25 to utilise the 4% rule, which suggests retirees can safely withdraw 4% of their portfolio annually over 30 years while accounting in inflation with each year of withdrawal.
- Adjust for inflation – Adjust your savings goal by considering an average inflation rate of 2% per year using the formula of 1.02^n where n is the number of years until retirement.
The fifth perspective
Retirement planning isn’t about chasing a fixed number, it’s about ensuring your savings can sustain your desired lifestyle while keeping inflation in mind. While EPF offers a solid foundation, the truth is that most Malaysians will need additional investments to secure financial stability for the 20–25 years that follow retirement. The number may seem distant—or even daunting—but the earlier you start, the better your chances of reaching your goals.
No matter your age, the best time to start planning for retirement is now.
