A Consumption-Based Evaluation of Retirement Savings Adequacy in Malaysia

Abstract

This study employs a consumption-based evaluation framework grounded in the World Bank’s Five Pillar Model to assess the adequacy of retirement savings in Malaysia, considering all major sources of retirement income. The study applies two key indicators, projected consumption level and consumption shortfall compared to a minimum adequacy benchmark. Using nationally representative data from the Malaysian Ageing and Retirement Survey (MARS) for individuals aged 40 and above, this study estimates consumption by aggregating income from mandatory contributions, voluntary contributions, non-contributory support, informal support, and other assets. Each individual’s projected consumption is compared against nationally adjusted adequacy thresholds, enabling us to calculate the proportion of individuals likely to experience a shortfall. The findings reveal that a significant proportion of respondents, particularly those in rural areas, are at risk of falling below minimum retirement consumption standards, even under the most inclusive projection. These results highlight the need for strengthened social protection mechanisms, increased participation in voluntary savings schemes, and targeted support for vulnerable groups. This research contributes to the field of retirement economics by providing a practical, data-driven evaluation tool for policymakers.