Why the need to plan NOW?
Singaporeans are living longer, thanks to the advancement in medical science and the standards of medical care in Singapore. Life expectancy of women is now 83 years old and for men, it is 78 years old.
With this longevity comes a problem – we could outlive the resources that we have in our retirement years.
A startling result from a new survey by global financial services firm Russell Investments revealed that half the working Singaporean population has yet to make financial plans for retirement even though 3 in 5 wish to retire by age 60. This is just 2 years shy of the statutory retirement age of 62. This survey was done with 500 fully employed Singaporeans aged 35-55 for their views on security in retirement (Business Times 23 April 2010).
In another study by HSBC, it found that 91 per cent of Singaporeans do not have any idea what their retirement income would be and only 9 per cent are prepared for this phase of their life (The Sunday Times, 2 August 2009).
This reflects a lack of awareness of the importance of planning for retirement and the social, emotional and physical impact of working longer. The amount is bigger than you think!
To give you an idea how much one would need in their later years:
Take for example – Mr & Mrs Lim are age 35 now and they both wish to retire at age 55. Combined, they estimated they would need a monthly income of $3,000 (in today’s dollars). Using an inflation rate of 3%, the monthly income would swell to $5,418 in 20 years’ time. And with a retirement duration of 25 years, their retirement funding works out close to $1,100,000.
And, may I add, this is assuming a simple lifestyle with perhaps a regional vacation once a year, no spending on luxury items and eating at restaurants not more than 2-3 times a month. The amount needed in retirement is a lot bigger than we think! Like it or not, you got to be a millionaire to retire.
Another alarming finding from the survey showed that:
- The average age Singaporeans start to embark on retirement planning is 59
- Only 40 per cent plan to develop a comprehensive retirement plan
- 20 per cent plan to consult a professional financial adviser
- A majority of the respondents replied that their financial preparations include setting aside fixed savings, CPF and purchasing medical insurance.
In a report by Straits Times dated June 2007, it said that only 4 in 10 active CPF members – those earning an income and who turned 55 in 2005 – had the Minimum Sum of $90,000 in their CPF at end of 2006.
Some questions you need to ask yourself:
- Do you think savings & CPF are enough for one’s supposedly golden years (after showing you the calculation above)?
- Are you willing to compromise on your retirement lifestyle and live on a lower income?
- Do you intend to continue working beyond age 62?
If the answer is ‘no’, my friend, the key then is to start retirement planning early.
The 20 something’s think they’ve still got time to plan for retirement so they postpone this aspect of financial planning often to when they’re in their 30’s. In my observation, the mid 30’s is the time when most people, in the midst of paying for a property and saving for children’s education, start to give some thought to their own golden years.
Remember, time is your friend. The earlier you start, the higher the chance that you’ll be able to achieve your retirement goals.
