THE Covid-19 outbreak is not only a health crisis but also an economic one as it has disrupted the lifestyles of people around the world. It has also impoverished many as economic and job losses mount.
Recently, the Department of Statistics Malaysia (DoSM) reported that around 600,000 Malaysians had lost their jobs in March with the unemployment rate at an all-time high of 3.9%. DoSM had also said that the unemployment figure could spike to 5.5% by the end of the year.
Malaysian Institute of Economic Research (MIER) in an earlier report had said that around 2.4 million Malaysians would lose their jobs by the end of the year.
The worsening economy and the huge job losses have resulted in many Malaysians digging into their retirement funds to survive. This would severely affect their retirement plans and their wishes of retiring at the mandatory retirement age of 60.
Institute of Democracy and Economic Affairs (Ideas) research manager, economics and business unit Lau Zheng Zhou told FocusM that Malaysians were ill-prepared for their retirement to begin with.
“According to the Employees Provident Fund (EPF) and World Bank, 70% of EPF members opt to withdraw all their savings between the age of 55 and 60, and 50% of them finish their savings in five years’ time. This means that they have to look out for active income after their EPF funds are depleted,” said Lau.
Lau added that even without the pandemic, Malaysians were ill-prepared for their retirement and the pandemic would exacerbate matters.
Malaysians are expected to have a life expectancy of 75 years, which would mean that if they go into mandatory retirement at 60 years, their retirement funds should last them at least 15 years.
Meanwhile, Bank Islam Bhd chief economist Dr Afzanizam Abdul Rashid said Malaysians should only dip into their retirement savings if it is absolutely necessary.
“To some degree, yes, it would affect their retirement funds as they would lose the compounding factor the moment they withdraw the money. This is the trade-off that one has to make - whether they would want to focus on their current consumption or for future spending.
“It's very subjective from one individual to another. If the current needs are so pressing that putting food on the table is being compromised, it makes sense for that individual to withdraw his/her savings. Perhaps one should make up for the slack once the economy is on firmer footing. So one would need to bump up their savings to make up the opportunity loss arising from their withdrawals,” said Afzanizam.
Sunway University professor Dr Yeah Kim Leng said economic dynamics would result in more Malaysians working post-retirement and the Covid-19 outbreak would be one of the factors contributing to the need.
“The effects will be two-sided as those with inadequate retirement savings will continue to work while those with sufficient savings might opt for early retirement due to workplace re-organisation and re-skilling requirements.
“Given the skewed distribution of employees towards those in the lower-income category as well as inadequate savings, we can expect more Malaysians to continue working full- or part-time after the mandatory retirement age of 60.
“There are also other motivations for Malaysians to prolong their working life such as increasing life expectancy, changing lifestyle and new attitudes towards working longer to remain active and productive,” said Yeah
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