Looking forward to retirement or worried about your finances? Let’s see how adjusting the retirement age impacts your personal finances. 

Thinking about your retirement might be keeping you up at night. You worry about whether you have enough for your golden years, and whether your children are going to be okay when you retire.

Retirement is a tough topic. And it’s about to get harder with the Malaysian government considering whether to raise the retirement age. For some, it could be beneficial. For some, it won’t be.

This article will explore the positive and negative impacts on your personal finances if the retirement age in Malaysia is raised. It will cover the perspective of an older worker nearing retirement, and a younger worker who still has some ways to go before retiring.

What’s Happening?

Before we dive right in, let’s set the context for what is happening in Malaysia so that we can better understand where the government is coming from. In May 2025, the Ministry of Human Resources told the public that the government is studying the proposal to increase the retirement age from 60 to 65 years old.

There are three factors to why this is being discussed.

  1. Malaysia is an ageing nation now
    The percentage of Malaysians aged 65 and above is at 7.4% in 2023. The Department of Statistics Malaysia (DOSM) estimates that Malaysia will become an ‘aged nation’ by 2040, with 17% of the population being above the age of 60. More older people means less working people.
  2. Malaysians are living longer, which means they need more retirement funds to support themselves.
    According to data from DOSM, life expectancy of Malaysians have increased from 72.2 years old in 2000 to 75.2 years old in 2024. In the future, Database.earth estimates that Malaysians’ life expectancy could increase to 79 years old by 2040, and 81 years old by 2050.
  3. Malaysians are having less children.
    Birth rates have fallen from 2.93 children in 2020 to only 1.73 children in 2023. This means that there could be a lower percentage of Malaysians working in the future.

However, there is an elephant in the room here. This coincided also with the government’s consideration to change the withdrawal policy of Employee Provident Fund (EPF). Currently, EPF allows its retirees to withdraw in a lump-sum. The government could be changing it to a monthly pension payout.

For some perspective, let’s take a look at the US where the situation is more critical. Their Social Security is at risk of not having enough money to pay out to its retirees. Therefore, there are two things that the US plans on to avoid this.

  1. Raise the retirement age. The US is already doing this in 2025.
  2. Give monthly payouts and encourage American retirees to collect retirement benefits later (if you delay your benefits until you are 70 years old, the benefit amount will be higher).

While we are not at the stage the US is at and we have different concerns, let’s look into more details as to how the change in retirement age impacts us.

Retirees can Support Themselves and Family for Longer

Good news. If the retirement age is raised, Malaysian retirees can work for longer, meaning they have more time to accumulate more income. For a retiree, he or she might need to support:

  1. Themselves and partner
  2. Parents
  3. Children
  4. Siblings/relatives

It depends on what are the circumstances. For people who have worked for a long time and have kids that are already grown-up, this might be a good time to rest and enjoy their retirement life.

However, for some others, an increase in the retirement age could provide a much-needed buffer for them to get their finances in check. They might have married and have children later. So, their children are still in school and might need a couple more years of education. Or, they might need to support their parents, siblings or relatives that are in need.

In any case, a higher retirement age provides retirees with a few more years of stable income.

However, some companies might have policies or preferences to let (or ‘encourage’) workers retire when they hit the retirement age. Oftentimes because folks who are near retirement age are at the top of their industries and their salaries are costing their employers plenty.

Healthcare Spending Could be Lower with Company Insurance

More good news. Most companies in Malaysia provide group health insurance coverage to their employees. If the retirement age increases, you could have a few more years of being covered under your employer-provided insurance coverage.

And this matters to retirees in their old age. Healthcare spending is projected to increase as older Malaysians are more at risk of diseases such as

  • Diabetes
  • Hypertension
  • High cholesterol
  • Cancer
  • Stroke
  • Cardiovascular diseases

With employer-provided insurance coverage, a retiree could reduce their healthcare spending for surgeries, hospital stay, treatment, medication and others. Typically, an older person will need to pay a high premium for healthcare insurance coverage on their own.

In recent years, healthcare costs have increased sharply. In 2024, medical cost inflation was at 15%. Medical cost is expected to increase at an average of 10% to 15% every year.

Stressful Working Could Increase Retirees’ Healthcare Spending

However, not all is good. Working longer could ensure more income, but also comes at a cost to your health. This is especially true if you work in a high-stress working environment.

Many workers who are nearing retirement typically hold high managerial and management positions. And they come with huge responsibilities and stress.

While you might be covered by company healthcare insurance, your physical and mental health might deteriorate further before and after your retire. This puts retirees at a higher risk of having more health problems, which increases healthcare spending.

Help for Younger Workers’ Finances

Raising the retirement age could be good for younger workers too.

On the personal front, many Malaysians take up the responsibilities of supporting their parents who are retired or unable to work, including healthcare and housing.  The “sandwich generation” are not only supporting their parents, but their own young families as well. With cost of living increasing every year too, it’s getting harder to manage their finances. If the retirement age is raised, parents lessen the burden on their adult children for a few more years at least.

From a societal perspective, raising the retirement age is also good for younger workers because these older members of society continue to contribute to SOCSO and EPF, keeping those funds stocked.

Less Promotion Opportunities for Younger Workers

However, with more older workers still working, promotion opportunities could be limited for younger workers. Companies normally promote as the position becomes vacant due to the person

  1. Getting promoted
  2. Leaving for another company
  3. Retiring

Younger workers might face a slower increase in their salary and more competition for a promotion. This could mean a slower career progression and possibly, more frustration from a young worker’s perspective.

Conclusion

While the government is still considering whether to raise the retirement age, it’s best to prepare for it now. As the world gets older and people have less children, it’s inevitable that the retirement age would go up.

Not all is bad. There are some pros and cons to it. If you are still fit and eager to work, why retire? You get to earn a stable income for longer, and build a better retirement life for yourself and support your family in the process.

However, be careful not to overwork yourself. Health is always the most important.

 

Let us know in the comments below when do you want to retire!

 

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