Workers in Malaysia save for their retirement through EPF, a government-managed fund that provides a minimum guaranteed dividend of 2.5% to its members. The fund has consistently delivered more than 5% dividends over the last decade.
A type of automated saving scheme, members contribute a percentage of their salary to their EPF every month through salary deductions. Employers also contribute a separate percentage to the employees’ funds.
With decent annual dividends, some people are able to accumulate sizeable savings in their EPF. According to EPF’s annual report, around 75,000 members have more than RM1 million in their accounts as of December 2022.
How Much Do You Need To Save To Reach RM1 Million In Your EPF?
According to EPF’s Retirement Savings calculator, an individual who contributes with a salary of RM4,500 per month at the age of 32 with an annual dividend of 5%, will have an estimated EPF savings of around RM1 million by retirement. This is provided that the individual does not make withdrawals from EPF until retirement at the age of 55.
The calculation is made according to the contribution rate of 11% by the employee and contribution rate of 13% by the employer.
With RM1 million in savings, you will have a retirement income of around RM4,000 per month up till the age of 80.
Make Voluntary Contributions To Your EPF
As mentioned, workers in Malaysia contribute to their EPF every month with a fixed portion of their salary going to the fund. However, this means that your EPF savings amount are dependent on how much you earn at a time.
Instead of waiting for your salary to grow, you can take a more proactive approach and make voluntary contributions. The more you contribute, the more dividends you get to earn and the faster you reach your retirement financial goal. On top of the mandatory contributions, members can make voluntary contributions of any amount up to RM100,000 a year. You can contribute online directly to your EPF through the KWSP i-Akaun app.
Opt For Voluntary Excess
Another option is voluntary excess, when you or your employer opt to contribute more than the statutory rates. You can inform your employer of your decision to contribute above the statutory rate of 11% to EPF and your employer will deduct a portion of your salary to your EPF directly. This also eases your saving process as you don’t have to manually transfer funds to your EPF.
For example, an individual who earns a monthly salary of RM4,500 decides to contribute higher than the statutory rate by 2%, which equals RM90 a month through voluntary excess. This leads to a total contribution of RM1,170 a month, including employer’s contributions.
Employee’s contribution + Employer’s contribution = Total contributions
((11%+2%) x RM4,500) + (13% X RM4,500)
= RM585 + RM585
= RM1,170
Within a year, the employee will accumulate total savings of RM14,040. Should the annual dividend be 3%, the individual will earn RM421.20 in dividends, which brings his or her total savings to RM14,461.20.
Throughout the individual’s career of 30 years, he or she will have accumulated RM433,836 in EPF savings.
What Happens When You Have More Than RM1 Million In EPF Savings?
EPF members can only access their full savings once they reach the age of 55. However, there’s a special withdrawal known as the More Than RM1 million Savings Withdrawal that allows members to manage their excess savings before retirement. Members below the age of 55 who have accumulated more than RM1 million in EPF savings are allowed to withdraw any amount in excess of the RM1 million savings at any time.
The excess amounts will first be withdrawn from the Flexible Account. If there are no sufficient funds in the Flexible Account, then the excess savings will be taken from the Wellbeing Account and Retirement Account.
In December 2024, EPF revised its recommended savings levels, with a three-tier savings benchmark consisting of Adequate Savings, Basic Savings and Enhanced Savings. The three-tier savings benchmark is computed based on the Adequate Retirement Income as determined by EPF from time to time. According to EPF, a single elderly person requires approximately RM2,690 monthly to adequately maintain a reasonable standard of living in retirement for 2024.
Based on the Adequate Retirement Income of RM2,690, the following recommended savings levels were calculated.
- Adequate Savings: RM650,000 (set at 240 times the Adequate Retirement Income rounded down to the nearest RM10,000.
- Basic Savings: RM390,000 (60% of Adequate Savings amount)
- Enhanced Savings: RM1.3 million (two times of Adequate Savings amount)
With that, the threshold for the More Than RM1 million Savings Withdrawals is expected to be adjusted to align with the Enhanced Savings benchmark. The threshold for this withdrawal will increase gradually by RM100,000 annually over three years. EPF members will be able to take out any excess savings of RM1.1 million from January 2026, RM1.2 million from January 2027 and RM1.3 million from January 2028.
EPF members can apply for withdrawal of excess savings online through the KWSP i-Akaun app. Alternatively, they can submit an application over the counter at an EPF office branch. If you’re submitting an application manually, make sure that you get your documents certified and check the EPF panel banks to ensure smooth crediting of payment into your account.
Read More: Guide To EPF’s Voluntary Self-Contribution For Growing Your Retirement Savings
Follow Us On Telegram & Instagram!
Join our Malaysia Telegram channel (@dollarsandsensemy) and follow our Malaysia Instagram Page (@dnsmalaysia) as we bring you the latest finance content in Malaysia!
