Savings Adequacy Assessment: The Case of Malaysian Employees Provident Fund Members
78 Pages Posted: 5 Aug 2016
Date Written: May 1, 2016
This study examines the potential consequences of early withdrawals from the Malaysian Employees Provident Fund in patterns of savings adequacy by studying the impact of house purchase on household lifecycle consumption. The authors develop an overlapping generations model of a small open economy where investment is available to capital, housing, and financial instruments. Housing is modelled as an asset subject of transaction costs. In equilibrium setting, the empirical estimation of exogenous system parameters sets the optimal levels of consumption and savings. The authors perform empirical analysis by taking into consideration four different scenarios: different employment periods (18-55 vs. 25-55), different retirement periods (55-65 vs. 55-75 vs. 55-85), housing vs. non-housing consumption, and theoretical vs actual contribution rates. Actuarial evaluation shows that low-income employees can have sufficient income to meet their retirement needs in the absence of housing consumption. Policy directions are also discussed.
Keywords: Consumption, Housing, Overlapping Generations, Savings Adequacy, Retirement Income
JEL Classification: D13, E21, H31, J11, J14, I11, R21
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