Published by The Capital Post | April 21, 2025 – As Malaysia edges closer to becoming an ageing society, concerns over the financial security of retirees are escalating. The rising trend of early withdrawals among Employees Provident Fund (EPF) members has sparked serious questions about the long-term sustainability of retirement savings. Experts warn that these premature withdrawals not only deplete critical retirement funds but may also force many Malaysians to work longer and delay their retirement.
The EPF, Malaysia’s primary retirement savings scheme, is facing unprecedented challenges. Recent studies reveal that a significant number of members aged 55 to 59 have savings of less than RM100,000—well below the RM240,000 benchmark recommended for a modest retirement. Even more worrying is the surge in withdrawals among members with balances under RM25,000, leaving them financially vulnerable in their later years (Awang et al., 2020).
EPF policies do permit early withdrawals for essential needs such as housing, education, and healthcare. However, many members with already low balances are depleting their funds for home purchases, significantly undermining their future financial stability (Awang et al., 2020).
In 2024, EPF introduced Account 3, a flexible account allowing easier withdrawals for emergencies like medical expenses and home repairs. While it provides immediate financial relief, the frequent use of Account 3 for everyday needs raises serious concerns about the erosion of long-term retirement security.
The Driving Forces Behind Early Withdrawals
In just the first five months of 2024, EPF approved 3.04 million applications for withdrawals from Account 3, totaling RM5.52 billion (The Star, 2024). This dramatic trend is being fueled by several critical factors:
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Financial Emergencies: Rising medical costs, job losses, and mounting personal debt are pushing many Malaysians to tap into their retirement savings prematurely.
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Low Financial Literacy: A widespread lack of understanding about how much is needed for retirement is leading to shortsighted financial decisions.
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Housing and Education Costs: Early withdrawals for property purchases and children’s education continue to take precedence over long-term savings goals.
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Government Policies: Flexible withdrawal schemes introduced during the COVID-19 pandemic, such as i-Lestari and i-Sinar, have normalized early access to retirement funds.
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Cultural Pressures: Familial obligations and the aspiration to retire early often lead to premature depletion of EPF accounts.
Urgent Need for Government Action and Financial Education
To stem the tide of early EPF withdrawals, immediate government intervention is critical. One key measure would be launching a national financial literacy campaign to educate Malaysians about the long-term impacts of premature withdrawals, especially from Account 3. Many members are unaware of how their current decisions could jeopardize their ability to retire with dignity.
Moreover, introducing incentive programs—such as interest rate bonuses or rewards for members who avoid early withdrawals—could encourage better saving habits. By promoting the preservation of retirement savings and highlighting the benefits of long-term financial planning, Malaysia can better secure the future well-being of its ageing population.
Safeguarding retirement security is not just an individual concern; it is a national priority. Strengthening financial literacy, reinforcing saving incentives, and minimizing premature withdrawals will protect not only retirees but also the broader social security system from future strain.
As Malaysia stands at the crossroads of demographic change, decisive action today will determine whether tomorrow’s retirees can enjoy the financial security they deserve.
About the Author
Associate Professor Dr. Chong Wei Ying is a member of the Active Ageing Impact Lab at Taylor’s University. She is also an academician at the School of Marketing and Management at Taylor’s Business School, Faculty of Business and Law.
References
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Awang, H., Rashid, N. F. A., Peng, T. N., & Mansor, N. (2020). Factors associated with savings and withdrawals among Employees Provident Fund members. UPM PERTANIKA Journals, 28(3), 2239-2263. Retrieved from Pertanika UPM
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Department of Statistics Malaysia. “Population Projection.” (2024). Retrieved from DOSM
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The Star. (2024). EPF Account 3 withdrawals have no influence on EPF’s investment strategy. Retrieved from The Star