Why do I need to save more than my EPF contributions for retirement?

When you’re planning for retirement, the general rule of thumb is that you’ll need two-thirds of your last drawn income to maintain the same standard of living you have pre-retirement. Meaning if you earn RM7,500 a month during your last year of work, you’ll need RM5,000 a month when you retire – otherwise, you’ll have to downsize your lifestyle.

EPF’s “Belanjawanku” expenditure guide estimates that an elderly couple living in the Klang Valley (in 2019) will need RM3,090 a month for a “reasonable standard of living”.

So what does that mean for a young adult today?

Let’s take the example of Salmah, age 22. She currently earns a RM2,500 monthly salary and over her career earns a 3% salary increase until she reaches 60. She plans to retire at 60 and wants to have her retirement savings last 20 years.

• Requires RM1.095 mil (2/3 of last drawn salary) at 60 to last 20 years in retirement
• EPF accumulated at 60: RM974,641 (assuming none was used to fund housing, medical bills, Hajj or education. If amount was used, expect a greater shortfall … simply relying on it is just not enough)
• Shortfall at 60: RM997,919 or more

This goes to show that while EPF does its best to support your post-retirement life, simply relying on it just isn’t enough. That’s where solutions such as PRS can really help. And, the earlier you start – the better off you’ll be due to the power of compounding. 

How PRS compares to other retirement options

Here’s a quick chart to help compare PRS across other options you may have available to help you save more for retirement. 

Tax Incentive for the 1st RM3K, until year 2025.