Will You be Able to Retire at 65?

‘Go to school, get good grades, have a degree, land a job, save money, climb up the corporate ladder, cling onto it until ... you hit 65.’

Based on recent studies by the Society of Actuaries (SOA), 80% of its respondents who are working in Singapore has anticipated a gap in their retirement funds when they hit 60. It is possible for Singaporeans to continue working in their golden years for they are not able to afford a comfortable retirement.

The following are four truths on retirement to keep in mind that might encourage you to start your financial planning early.

1. Most CPF Payouts Are Insufficient to Sustain Retirement

With the absence of an active source of income (most likely a job), retirees may rely on CPF payouts, savings and passive income earned from their investments to fund their lifestyle. However, the stark reality is:

Let not that be you today. As such, if you are young, energetic and are driven to work long hours, it is prudent to set aside a portion of your income to invest for your financial future.

2. Healthcare Costs May Put a Huge Dent to Retirement Funds.

According to the Mercer Report, Singapore’s healthcare cost inflation is 10% for 2018. It expects this rate of inflation to maintain in 2019.

Based on this growth rate, our medical coverage today may not be sufficient in the future. There is a possibility that you may need to withdraw money from your savings or CPF account to pay for any shortfall in medical bills that are not covered by your CPF MediShield or by your insurer.

Thus, it is advisable for you to be in touch with our insurance agents regularly to adjust our medical coverage to keep up with medical inflation accordingly.

3. You Might Outlive Your CPF Balance

According to SingStat, the average lifespan of Singaporeans is 83.2 years. Based on the official retirement age of 65, it means that Singaporeans would need to prepare retirement fund where the amount is capable to sufficiently fund their living expenses for at least the next 20 years of their life after retirement.

Let’s assume you intend to retire at 65. Some questions you need to ask yourself in preparation are:

Needless to say, you may need to save more money for retirement because it is possible for you to live a longer life.

4. Are your children your retirement plan?

Perhaps, you are a parent and are doing your level best currently to provide the brightest possible future for your children. Apart from basic necessities, in most cases, you might be spending on their education (schooling, tuition, classes and colleges ... etc) until they reach their early 20s when they are ready to enter the workforce in Singapore.

When it happens, you could be nearing the retirement age of 65. Which of the two is a more likely scenario for you?

Are you expecting your children to be financially capable to support your living expenses upon your retirement?

Or, could it be that you might need to continue to care for your children even if they have reached adulthood?

Here is what we’ve gathered from the SOA of Singapore:

  • 66% of people are concerned their children may not take care of them after retirement.
  • 61% revealed that their children are in the NEETs* group.

Source: Society of Actuaries (SOA) of Singapore (Page 36)

Hence, there is a possibility that you may need to be not only self-sufficient but also to be financially prepared to care for your children after your retirement in the future.

So, will you retire at 65?

The above has raised some tough questions about one’s ability to retire at 65 in Singapore. It may be an eye-opener if you never considered the issues above. It is advisable for all of us to start having a financial plan and execute it in order to enhance our chances of a comfortable retirement at 65 in the future.

For a start, you may consider PruActive Retirement, a retirement product which pays out stable income which may potentially increase every year, thus, adding to your monthly income to support your desired retirement lifestyle.

You would have better control over your finances as it allows you to choose the premium payment term that works for you and when you should receive your payouts.

For more information, click here and visit Prudential’s website today.

Footnote:
*NEETs group refers to adults who neither attend college, work, and continue to be financially dependent on parents.