Budget 2027: Can monthly EPF withdrawals keep retirees from running out of money?

KUALA LUMPUR, Nov 5 — For many Malaysians, retirement savings are built up over decades of working life, but the challenge does not end when they reach retirement age as they must then make that money last for the rest of their lives.

The government is encouraging Employees Provident Fund (EPF) members to consider taking their savings through monthly withdrawals instead of withdrawing the entire amount at once, with the aim of helping them manage their finances and preserve their retirement income for longer.

Under Budget 2027, Prime Minister Datuk Seri Anwar Ibrahim announced that EPF members aged 55 and 60 could opt for monthly withdrawals under the i-Emas scheme, allowing savings retained with the fund to continue earning annual dividends.

The arrangement offers an alternative to taking out the full balance at once, but economists and financial experts say the wider question is whether changing how retirees withdraw their money will be enough to address Malaysia’s retirement savings problem.

Lee Heng Guie, an economist, said a survey had found that about 97 per cent of Malaysians withdrew their EPF savings in a lump sum at age 55 or 60, with many depleting the money within three to five years.

He said monthly withdrawals could help reduce the risk of retirees exhausting their savings too quickly by encouraging more disciplined spending while allowing the unwithdrawn balance to continue earning dividends.

“Besides continuing to earn dividends on the unwithdrawn savings, a structured schedule of withdrawals instils disciplined spending to reduce the risk of mismanaging lump-sum withdrawals,” he said.

For retirees who depend on their EPF savings to cover daily expenses, the distinction could be significant: money withdrawn and spent no longer earns returns within the fund, while savings left invested can continue generating dividends.

Samsudin Kadir, an economist, similarly argued that most retirees did not need their entire retirement savings immediately, but instead required a regular stream of income to meet household expenses.

He said monthly payouts could be particularly useful for people who did not have substantial savings or the financial knowledge to manage a large sum independently.

“If you withdraw everything, because normally people do not know how to manage the money lump sum,” he said.

Samsudin added that a retirement income system should still allow access to additional funds when members faced illness or other exceptional circumstances.

However, Stewart Nixon, director of research at the Institute for Democracy and Economic Affairs (IDEAS), cautioned that monthly withdrawals alone would not necessarily solve the problem of inadequate retirement income.

He argued that the government must also consider whether EPF delivers sufficient investment returns and whether members have the flexibility to manage their savings according to their individual needs.

“The top consideration should be whether the new model actually improves retirement living standards,” he said.

Stewart said a structured withdrawal system could help people who struggled to manage their finances, but warned against making it harder for others to pursue better investment options.

“The single biggest impediment to Malaysians having enough money in retirement is that they are locked into EPF arrangements that deliver suboptimal long-term returns,” he said.

He argued that giving members more investment choice, improving financial literacy and ensuring EPF maximises risk-appropriate returns were important to improving retirement adequacy.

Stewart also said Malaysia should prioritise developing a competitive, properly regulated annuity market, which would allow retirees to convert some of their savings into a guaranteed income stream for life.

Such arrangements could help retirees manage the risk of outliving their savings, although he cautioned that annuity products would require careful regulation to protect consumers from predatory practices.

Flexibility remains crucial

While the three experts broadly recognised the potential benefits of regular withdrawals, they differed on how far the system should go in steering members away from lump-sum payments.

Samsudin supported a model that combined monthly income with limited lump-sum withdrawals at different stages of retirement, arguing that no single arrangement would suit everyone.

He said retirees should be able to access additional money when faced with significant medical expenses, while those with different income levels and financial commitments should have options suited to their circumstances.

Lee likewise acknowledged that regular withdrawals had limitations, particularly when retirees faced unexpected financial pressures, rising living costs, inflation or escalating healthcare expenses.

He pointed to EPF’s Flexible Account, or Akaun Fleksibel, which allows members to withdraw available savings for short-term needs, as one existing avenue for accessing money when required.

Stewart, meanwhile, argued that some retirees could be better served by taking a lump sum to settle high-interest debts, while financially capable individuals might be able to achieve better returns through other investments.

The challenge, therefore, is to ensure that a system designed to protect retirement savings does not leave members without sufficient access to their own money when circumstances demand it.

Monthly withdrawals may help retirees avoid spending too much too soon, but they cannot by themselves guarantee a comfortable retirement if the savings accumulated during their working years is inadequate.

Ultimately, the question facing policymakers is whether encouraging retirees to draw down their savings more gradually will be enough — or whether Malaysia needs a more fundamental overhaul of how retirement income is generated, invested and protected throughout old age.