In a survey called the DBS-Manulife Retirement Wellness Study released on 5 January 2016, it was found that:
- 2 in 5 Singapore residents are not confident about their retirement preparations.
- 56 per cent of those who have started retirement planning have not sought any form of advice.
- Only 36 per cent believe they can retire comfortably with their current savings and investments.
- 30 per cent expect to downgrade their current lifestyle and habits when they retire.
Once again, another survey shows that Singaporeans are ill prepared for retirement.
Why is planning for retirement so important?
First, there will be a time which you cannot work due to physical disability or illness. Unless scientists invent a way to halt aging, your body will eventually age to a level which you will no longer be able to work. Aging can include mental aging too.
Second, as the younger generation grows up, you will need to step aside for them to take over your place. Unless employment rate goes up by double digital every year, you need to step aside for the younger generation otherwise they have no job.
Third, your retirement years can be as long as your working years. This is made worst by the fact that the life expectancy is getting longer. If you have started work at 25 years old and retire at 65, you would have worked 40 years. But what will happen if you live for another 40 years?
Fourth, if you are the sole breadwinner supporting a stay-at-home spouse and school going children, you will have no savings until your kids grow up. Your spouse is unlikely to be able to go back to the workforce to earn a meaningful salary when your children are old enough. So you end up with very little savings for retirement. Unlike the older generation, you cannot rely on your children to support you. They will have their own financial problem. In fact, it is likely they will ask you to help to buy their first home.
The survey by DBS-Manulife Retirement Wellness Study also found that 30% expect to downgrade their current lifestyle and habits when they retire. Based on my experience dealing with those who wish to retire, I have found downgrading lifestyle to be inappropriate. This is because if you have lived a life of certain lifestyle throughout your life, what makes you think you will be happy with a reduced lifestyle? For example, if you have driven a car throughout your working life, you will not be able take the Bus and MRT and compete with the crowd for space to stand. The “priority seats” will always be occupied by passengers pretending to sleep. In fact, expenditure goes up when you retire. It does not go down. Reason? When you are working, you are preoccupied with work. When you are retired, you will spend money to entertain yourself. Even you decide to stay at home, you will end up spending your time trading stocks and eventually losing it all. So regardless of what ‘entertainment’ you engage in, it will cost a lot of money. Besides, medical expenses goes up in an exponential fashion. Insurance premiums also go up. Everything goes up except your salary because you will have none.
Retirement planning is the hardest part of financial planning because the problen cannot be solved overnight. Retirement planning is a lifelong plan which requires discipline and monitoring.
I have to turn away many people when they seek to do retirement planning because it's too late for them to do so. The age which is too late to do retirement planning is after 50 years old.
If your salary is just average, it's too late to do retirement planning after 40.
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