KUCHING: RM390,000 should not be viewed as a comfortable retirement target, but rather as a minimum safety buffer, said Swinburne University of Technology Sarawak lecturer Dr Nivakan Sritharan.
“Crucially, RM390,000, the ‘Basic’ tier, should not be misunderstood as a comfortable target,” he told Sarawak Tribune.
Nivakan said the three Retirement Income Adequacy (RIA) tiers — RM390,000, RM650,000 and RM1.3 million — reflect how longer life expectancy and rising living and healthcare costs have reshaped retirement needs.
“These thresholds show that EPF now believes people need much more savings for retirement because Malaysians are living longer.
“Everyday costs, healthcare, and city living have all become more expensive.”
He said RM390,000 functions more as a safety cushion than a retirement goal, leaving retirees vulnerable to unexpected shocks and inflation.
“Spread over 20 to 25 years of retirement, it translates into a modest monthly income that may cover basic food and utilities.
“It leaves little buffer for healthcare shocks, housing repairs, or inflation-driven price increases.”
By contrast, Nivakan said RM650,000 represents a more realistic benchmark for a modest middle-income lifestyle, while RM1.3 million signals resilience against key retirement risks.
“The ‘Adequate’ tier of RM650,000 signals a more realistic benchmark for maintaining a modest middle-income lifestyle.
“The RM1.3 million ‘Enhanced’ tier reflects resilience, which is the ability to cope with longevity risk, medical inflation, and economic volatility.”
He said the tiered framework marks a shift away from a single retirement figure and instead presents retirement as a spectrum of risks.
“EPF is moving away from a single, politically comfortable retirement number and instead framing retirement as a risk spectrum.
“This implicitly acknowledges growing inequality in savings outcomes and recognises that statutory contribution rates on their own may not fully meet the retirement needs of all workers.”
According to Nivakan, the tiers could prompt difficult decisions across different age groups.
“For employees, especially younger Malaysians and gigadjacent workers, the RIA tiers should function as a reality check, not an abstract policy figure.
“For those nearing retirement, the tiers may force difficult reassessments of retirement timing, post-retirement work, or expected living standards.”
He added that many workers are structurally unlikely to reach even the Basic tier without stronger wage growth or higher voluntary contributions.
“Many private-sector workers earning below RM4,000 a month are structurally unlikely to reach even the Basic tier without higher voluntary contributions or sustained wage growth.”
For employers, Nivakan said minimum EPF contributions may no longer be sufficient in an increasingly competitive labour market.
“The RIA tiers are a clear sign that simply meeting the minimum EPF contribution requirements is no longer enough.
“As it becomes harder to find good workers and people can easily move to better jobs, companies that only offer the basic EPF contribution might lose out to competitors who provide better benefits.”
He said the benchmarks could increase pressure on firms to enhance retirement offerings.
“In practice, the RIA benchmarks may increase pressure on employers to consider enhanced contribution schemes, structured financial education, or hybrid retirement benefits as part of total compensation.
“So basically, the RIA tiers redefine adequacy and expose the growing gap between policy intent and lived retirement outcomes in Malaysia.”
On early access to savings above RM1 million, Nivakan said the move introduces flexibility while preserving the system’s long-term focus.
“Allowing members below age 55 to withdraw savings above RM1 million, with the threshold gradually rising to RM1.1 million in 2026, represents a subtle shift in EPF’s approach.
“The system remains primarily focused on long-term preservation, but the new rule introduces an element of flexibility for members with larger balances.”
He cautioned that outcomes would depend on how the funds are used.
“For members who manage their finances well, early access to part of their savings may support better portfolio diversification, business investments, or more efficient debt management, particularly in a higher interest-rate environment.
“At the same time, Malaysia’s consumption patterns suggest that some withdrawals may be channelled into lifestyle improvements, property upgrades, or higher-risk investments, which may not always align with longterm retirement goals.”
He said that what appears to be surplus savings today may not remain so in future.
“What looks like ‘excess’ today could become more valuable in the future once healthcare costs, longer lifespans, and rising urban living expenses are considered.”
At the system level, Nivakan said the policy affects a small group of members who nonetheless hold a significant share of total EPF assets.
“Although only a small proportion of EPF members hold over RM1 million, they represent a significant share of total EPF assets.
“Even moderate withdrawals from this group could slightly reduce net inflows and gradually influence EPF’s ability to commit capital to longer-term or less liquid investments such as infrastructure or private-market projects.”
He said safeguards in the policy design help limit liquidity risks.
“The high threshold, phased rollout, and narrow eligibility criteria limit the possibility of sudden liquidity pressure.” However, he said the more meaningful shift lies in the increased responsibility placed on individuals.
“The more meaningful shift relates to responsibility: as flexibility increases, individuals may need to take a more active role in managing their retirement planning.
“In this context, financial literacy and disciplined saving behaviour will become increasingly important areas where Malaysia continues to make steady progress.”
