45 y/o man achieved RM1 million in EPF. How did he do it?

1) Have a stable, high paying job.

He is currently working in the IT sector in Kuala Lumpur.

2) Increase contributions to EPF.

Initially, he began his mandatory contributions at 11% before increasing it to 13%.

3) Let the funds grow.

He did not touch any of his EPF funds.

4) Job-hopping.

This man job-hopped eight times, with each subsequent job earning a higher pay.

With EPF’s Shariah savings of 5.4%, he would receive about RM54,000 (or RM4,500 per month) in dividends.

That’s more than enough to retire in major cities today, according to the Belanjawanku Study.

Ok, but how much did he contribute to EPF every month anyway?

In the post, he stated that he started work at the age of 23, so he has 22 years for his funds to compound.

EPF’s 5-year annualized return was 5.65%. We’ll use 5.50% just to be a little more conservative.

In this case, he (and his employer) would need to contribute a total of RM1,948 per month to hit RM1 mil in 22 years, starting from zero.

Assuming that the mandatory EPF contributions make up 24% of his salary (11% employee, 13% employer), his average salary is:

RM1,948/0.24 = RM8,116.67

We can’t find out what his current or starting pay is, but it should give you a good idea of how much you need to contribute every month to achieve this goal.

So how do I know if I’m on track?

As of December 2023, the median savings of all race groups in EPF rose by 30% y-o-y.

Bumiputeras saw their savings jump by 65%, a steep increase compared to other races (Chinese: +8.13%, Indian: +14.50%).

Despite the encouraging observations, Bumiputeras have the most worrying level of savings of the three main races.

This is mainly due to the four emergency EPF withdrawals approved by the government during the Covid pandemic, which saw over RM145 billion siphoned from the retirement fund.

What about savings by age group?

Though the savings are still not near enough to retire today, it has increased significantly compared to last year.

Those who are aged 25-29 saw their average savings rise by 18.1%.

With these figures in mind, we could actually project how much you need to contribute every month to retire with RM600,000 or RM1 million:

Let’s say you’re 27 this year and you have about RM16,505 in EPF.

You’ll need to contribute somewhere between RM996-RM1,343 to achieve RM1 million by the age of 55.

The calculations include mandatory contributions from you and your employer, so you would only need to top up the difference.

If your EPF savings are higher than the average, congratulations! You’re well on track to achieving both goals.

For those who are closer to retirement (ie. 40-49), you may want to prioritize hitting RM600,000 first.

What will RM1 million be worth in the future?

From 2002 to 2022, Malaysia’s inflation ranged from a high of 5.43% to a low of -1.14%, averaging 2.15% every year.

Using the average inflation and the present value calculator, we can find out how much RM1 million will be worth in:

• 5 years: RM899,100.31 (10% less)

• 10 years: RM808,381.36 (19.1% less)

• 15 years: RM726,815.93 (27.3% less)

• 20 years: RM653,480.42 (34.7% less)

• 25 years: RM587,544.45 (41.2% less)

Retirees require at least RM2,520 per month to survive in the Klang Valley today.

With RM600,000 in EPF, you’ll receive RM30,000 in dividends every year or RM2,500 per month, which is just enough to retire now.

But in 20-30 years, the monthly costs will inflate to RM3,750-RM4,638.

To receive this amount in monthly dividends, you need to have at least RM900,000-RM1,100,000 in your EPF account.

So yes, in the near future, all of us will need to be millionaires to survive.

DISCLAIMER: The information contained in this article is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.

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