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Determinants of Retirement Wealth Adequacy: A Case Study in Malaysia

Author

Listed:
  • Ros Idayuwati Alaudin

    (School of Quantitative Sciences, College of Arts and Sciences, Universiti Utara Malaysia)

  • Noriszura Ismail

    (School of Mathematical Sciences, Faculty of Science and Technology, Universiti Kebangsaan Malaysia)

  • Zaidi Isa

    (School of Mathematical Sciences, Faculty of Science and Technology, Universiti Kebangsaan Malaysia)

Abstract

This paper aims to study the demographic and socioeconomic determinants of retirement wealth adequacy in Malaysia, and further investigates the effects of Employees Provident Fund (EPF) contribution rate and income replacement ratio on the retirement wealth adequacy. The retirement wealth adequacy is estimated using the Malaysian Household Income Survey (HIS) 2009 data which is based on 5881 sample households that contains information on income, demographic and socioeconomic characteristics of each household. The adequacy of retirement income is assessed by comparing the accumulated projected wealth of an individual’s work life at retirement age with his/her total consumption (needs) during retirement. The Ordinary Least Squares (OLS) and logistic regression models are then performed to determine the demographic and socioeconomic determinants of retirement wealth adequacy. The results from the projection of wealth-need ratio showed that 69% of households in the sample have adequate retirement income. The OLS model showed that Region 4 (P. Pinang, Selangor, Kuala Lumpur, Putrajaya), urban strata, married status, college graduate, government servant, younger respondent (age 30-34), and average annual income (RM25,000 - RM40,000) were positively associated with retirement wealth adequacy. On the contrary, the results from the logistic model show that only strata (urban) and marital status (single-female) were positively associated with retirement wealth adequacy. This paper further discusses the study implications.

Suggested Citation

  • Ros Idayuwati Alaudin & Noriszura Ismail & Zaidi Isa, 2017. "Determinants of Retirement Wealth Adequacy: A Case Study in Malaysia," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 9(1), pages 81-98, January.
    • Handle: RePEc:umk:journl:v:9:y:2017:i:1:p:81-98
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    Citations

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    Cited by:

    1. Marhanum Che Mohd Salleh & Mohammad Abdul Matin Chowdhury & Siti Salwani Razali & Nan Nurhidayu Megat Laksana, 2020. "Retirement Schemes, its Challenges and Ways of Reformation: A Cross-Border Study," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 10(9), pages 507-520, September.
    2. Chung Shin Fung, 2022. "The impact of Socio-Demographic variables on the Retirement Environment ," GATR Journals gjbssr625, Global Academy of Training and Research (GATR) Enterprise.

    More about this item

    Keywords

    Consumption; regression; retirement adequacy; wealth;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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