Malaysia is currently reviewing a proposal to raise the mandatory retirement age from 60 to 65 years old. The matter is currently being examined by a special committee led by Dr Mohd Shaharin Umar, Deputy Secretary General (Policy and International), Ministry of Human Resources, as it involves labour laws. The proposal received various responses from the community, with both support and criticism expressed on this matter.
Let’s dive into this topic and get to know how raising the retirement age could affect you specifically and the community in general.
Why is this issue being addressed?
The retirement age in Malaysia has been revised several times over the past two decades through amendments to the Pensions Act 1980. It was raised from 55 to 56 years old in 2001, then raised again to 58 in 2008. Later, in 2012, the retirement age was further extended to 60.
Various factors could have led to this matter being discussed again recently, including:
1) Malaysia is projected to become and aged nation
According to the Department of Statistics Malaysia (DOSM), Malaysia is expected to become an aged nation by 2048, with 14% of the population aged 65 and above. The country’s population is expected to reach a maximum of 46 million in 2071, before shrinking the following year. This is further affected by a lower birth rate trend, which will be touched on in the next point.
2) Malaysians are having fewer children
Since 1957, the number of children per woman has decreased rapidly from 6.7 children to 2.1 in 2010. According to DOSM, in 2024, Malaysia recorded the lowest number of live births since 1980, with a total of 414,918 births, representing a 9% decrease from 455,761 births in 2023.
Additionally, Malaysia recorded a decrease from 1.7 children in 2023 to 1.6 children for every woman aged 15 to 49 years old in 2024. A declining birthrate could lead to a reduction in population, and a shrinking population will lead to a decline in the nation’s workforce.
3) Malaysians are living longer
On the other side of the spectrum, Malaysians’ life expectancy is also recorded to have increase from 72.2 years old in 2000 to 75.2 years old in 2024. Now, it is estimated that Malaysians’ life expectancy could increase to 79 in 2040 and 81 in 2050.
Golden Age vs Fresh Opportunities
Keeping the factors above in mind, let’s examine how raising the retirement age can impact our community.
Financial security for older Malaysians
Recent data from the Employee Provident Fund (EPF) shows that many older Malaysians have insufficient retirement savings. There are 6.3 million contributors under 55 who have less than RM10,000 in their savings. Additionally, a large percentage of Malaysians over 60 are still working, albeit informally, and 4 in 10 rely on the supplementary income provided by their children.
This data shows the fragile financial state of many older Malaysians. Increasing the retirement age will allow them extra years (5 years!) to contribute to their retirement savings, as well as give them a consistent income.
Less healthcare and insurance spending
As you get older, your healthcare spending typically increases, often more than you would like, compared to when you were younger. In addition to low retirement savings, spending too much on healthcare could hurt their wallet, especially with inconsistent income. On the other hand, if they are still employed, the company will usually provide healthcare insurance for its employees.
Stalling the career progression for younger employees
Raising the retirement age could create a potential bottleneck for youth employment and impact their career progression, particularly for those who have recently graduated and are seeking to launch their careers. In mid-2025, the youth unemployment rate stood at around 10.2%, which is higher than the overall national unemployment rate of approximately 3.0%. There are fewer job and promotion opportunities available for younger employees, as the older employees have yet to leave their roles.
Furthermore, with limited opportunities available in the market, competition will increase for the roles, and could potentially make the younger generation more susceptible to lower wages and fewer benefits. This could impact them in the long run as they struggle to establish themselves in the workforce and advance their careers.
Higher operational costs for employers
Extending the retirement age could potentially lead to a higher operational cost for employers. Older workers are more likely to get sick, which means higher costs (e.g., healthcare costs, reduced job performance, etc.). Additionally, organising training sessions for them, especially to adapt to new technology, will also incur additional costs, rather than hiring younger workers who mostly possess basic technical skills.
Finding the right spot as the middle ground
Raising the retirement age is not something new in Malaysia. From the points we have covered, there are pros and cons to this matter, which affect the financial stability of both older and younger generations.
The director of the Universiti Malaya Social Wellbeing Research Centre, Professor Emeritus Datuk Norma Mansor, advised against increasing the retirement age abruptly. It is better to gradually increase the retirement age to allow time for the industries to adjust. Alternatively, governments could create a voluntary re-employment program for those beyond the age of 60, to give them the power to choose.
For workers already in the workforce, regardless of whether to increase or maintain the retirement age, we can focus on things that we can control. One of them is to plan our financial security properly, especially while we are still young and healthy. With the shrinking population and lower birthrate, you might never have the chance to rely on your children when you retire. For students who are yet to join the workforce, give your effort in honing various skills while excelling in your studies, and strive to get a good job in the future.
Disclaimer: The information in our blog articles and provided by our brand ambassadors/KOLs is for general insights only and not legally binding. We strive for accuracy but cannot guarantee the information’s completeness or reliability. For legal matters, consult official documents or contact an authorised Ouch! representative.