Extend working age to boost retirement savings, says economist

 

Economists say that people are living longer while not having enough in their savings for their retirement years. (Freepik pic)

PETALING JAYA: An economist has called for the retirement age to be raised, to help workers cope with inadequate savings while life expectancy is going up.

Sunway University professor of economics Yeah Kim Leng said most governments around the world had raised their retirement age as a policy response.

“It’s not a question of ‘should’ but ‘when’ Malaysia will follow suit given the high number of people faced with insufficient savings and rising living costs,” he told FMT.

The government has revealed that a total of about RM145 billion has been withdrawn from Employees Provident Fund members’ savings during the Covid-19 pandemic.

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Yeah said the government must include more financial literacy and education programmes as well as incentive schemes to raise the savings rate for those who are younger.

“For the older cohort facing imminent retirement without adequate savings, the government can provide incentives for job creation and income generation opportunities so that retirees can receive a source of income,” he said.

He said direct income support or cash transfer aid from the government would also be necessary.

However, Nazari Ismail of Universiti Malaya said it would be difficult for the government to tackle the problem due to its huge debt burden, describing Putrajaya as not being “in any position to help”.

“People should be smart in planning their future and not spend on expensive things. If the government overspends in an attempt to please the public, it will be forced to increase tax collections and this will eventually hurt the people in the long run,” he told FMT.

Last week, deputy finance minister Shahar Abdullah said Covid-19-related programmes over the past two years had affected EPF members’ savings by around RM155 billion.

About RM145 billion was withdrawn through several EPF withdrawal facilities, while EPF members suffered a loss of RM10 billion when the statutory EPF contribution was reduced between April 2020 and June 2022.

Financial consultant Logajothi Sivaras of Public Mutual Berhad said those thinking about retiring should perform a “financial health check”.

Logajothi said this would help provide a clear picture of an individual’s financial standings, adding that there were other alternative platforms such as Amanah Saham, unit trusts or private retirement schemes to help increase retirement savings.

“In addition, property investment, gold investment and equities will add more weight to an individual’s retirement income,” she told FMT. - FMT