The DBS Bank survey of 1,000 Singaporeans and Permanent Residents showed that:
- 75% are not following any financial plan for retirement needs
- Many do not even know where or how to start planning
- 24% of the respondents felt that financial products are barriers to financial planning
- 23% felt they do not have enough funds to start investing
- People underestimate the funds they need for retirement
Source: Majority of Singaporeans unprepared for retirement: Survey
My comments:
The DBS Bank survey is not surprising to me. But the underlying issue that people are not planning for retirement is not because they do not know how to start or their existing funds are too small to start investing. These are mere excuses. The following are reasons why people are not planning:
- Many people cannot be bothered and they procrastinate.
- Since financial planning is a long-term exercise, people are more keen to look at the immediate needs like finding the cheapest way to travel every year or purchase the latest gadgets like iPhone. There is a preference for “instant gratification”.
- Lack of access to expert advice because of refusal to pay professional fees. According to MAS survey, 80% are not prepared to pay for financial advice.
So, what is a financial plan? A financial plan is:
- A written plan.
- Usually written by a Certified Financial Planner or a Chartered Financial Consultant.
- The financial plan has to be updated periodically and whenever there are significant changes to one’s financial situation.
The following is not a financial plan:
- Purchasing products
- Attending seminars
- Reading newspaper articles on investments / financial matters
It must be noted that a financial plan is merely a means to an end. A medical report does not cure the patient’s illness. It is the effective medical treatment that will cure the patient. Similarly, the written financial plan does not solve one’s retirement problems. It is the effective implementation and monitoring of the implementation that is more important.
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I am not surprised by the result of the survey.
People think that they will spend less & need less money in retirement. This is only true if you intend & are prepared to drastically reduce your quality of life.
If you want to maintain your lifestyle, the expenses in retirement is actually similar to when you are working. This is especially true for longer-term retirement of 20-30 years or longer.
Based on personal observation of own parents, close relatives and parents of close friends. Social classes range from the lower-middle-income (4-rm HDB) to the filthy rich (can buy 200-yr old heritage manor homes in Europe).
How much to spend during retirement is quite unknown? For those healthy ones, they may want longer holiday trips. For those not really in the pink of health, they may have to spend more on medical expenses. Even if one has accumulated a tidy retirement nest-egg, he has no clue on how long he will live and thus unsure if his funds are sufficient to last that long.