Savings Adequacy Assessment: The Case of Malaysian Employees Provident Fund Members

78 Pages Posted: 5 Aug 2016

See all articles by Evangelos Koutronas

Evangelos Koutronas

West Virginia University - Department of Mathematics

Noor Azina Binti Ismail

University of Malaya

Date Written: May 1, 2016

Abstract

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

Suggested Citation

Koutronas, Evangelos and Binti Ismail, Noor Azina, Savings Adequacy Assessment: The Case of Malaysian Employees Provident Fund Members (May 1, 2016). Available at SSRN: https://ssrn.com/abstract=2817700 or http://dx.doi.org/10.2139/ssrn.2817700

Evangelos Koutronas (Contact Author)

West Virginia University - Department of Mathematics ( email )

PO Box 6201
Morgantown, WV 26506
United States

Noor Azina Binti Ismail

University of Malaya ( email )

University of Malaya
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

HOME PAGE: http://www.fep.um.edu.my

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
166
Abstract Views
894
rank
227,990
PlumX Metrics