Endowus Singapore Retirement Report 2021: Almost 50% of Singaporeans have not started retirement planning

Singapore residents crossing the road

Do you know that though CPF members’ total balance has increased from roughly S$125 billion in 2006 to S$474 billion in March 2021, only 63.6% of active CPF members who turned 55 could set aside their Full Retirement Sum (FRS) or Basic Retirement Sum last year?

Hence, to better understand Singaporeans’ attitudes towards retirement, Endowus has worked with YouGov Singapore to develop the Endowus Singapore Retirement Report 2021. The survey took place in May this year with a sample size of 1099 adults, reflecting our tiny red dot’s adult profile population.

Here are its findings.

39% of Singaporeans are worried about retirement inadequacy

The survey revealed that about 1 in 3 Singaporeans are worried about retirement inadequacy. However, the results varied between the genders. Twice as many men than women confidently agreed that they hold sufficient money for retirement.

Almost 50% of people have not started planning for retirement

While 53% of Singaporeans are planning to use or are currently using CPF to fund their retirement, almost 50% of people have not started retirement planning. This is especially true for the younger age group under 35.

Lower-incomers are less likely to plan for their retirement with CPF
younger Singapore residents

Image Credits: The Jakarta Post

Another worrying factor is that those earning below S$3,000 are less likely to plan for their retirement with CPF when compared to those with incomes above S$6,000 per month. This thus also means that lower-incomers are not making full use of their CPF. It also lowers their chances of achieving the FRS for financial stability at retirement.

Only 25% are currently investing their CPF

The report also showed that close to 70% lack confidence in investing their own CPF monies. That is why only 25% are currently investing their CPF. However, most Singaporeans seek higher returns and ranked it as the most critical criteria for CPF investing.

30% are asking for tools on CPF investing knowledge

There seems to be a gap in using CPF around financial decisions; as such, a third of Singaporeans are requesting tools to help them understand the impact of their financial decisions around their CPF. Some are also appealing for resources to aid them in estimating retirement income from their CPF.

To that, Samuel Rhee, Chairman and Chief Investment Officer of Endowus, agrees. He said, “Considering these shifting time horizons and other uncertainties, more education may be needed to help Singaporeans make better use of their CPF, especially earlier in life, when savers have more time to take advantage of asset growth.”

What about you? Have you started retirement planning? Ponder over these things if you want to be on track to building your retirement fund. For the full Endowus Singapore Retirement Report 2021, please head to endowus.com/insights/singapore-retirement-report-2021.

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Ponder over these things if you want to be on track to building your retirement fund

two elderly persons sitting on a swing

Whether you’re young or old, it’s never too early to start thinking about saving up for retirement. After all, it’s the best way to guarantee a comfortable life after you cross that critical stage.

However, you must start planning to make sure everything gets taken care of. Even though it might seem scary at first, have no fear. By reading this article alone, you’re already making that crucial first step.

It takes dedication and discipline to get where you want to be, including consistent savings and investments. You’re going to need to consider various factors specific to you and figure out how to handle risk best.

When jumping into retirement fund planning, it’s best to set a particular goal to build around it. Let’s dive right into the things to ponder over.

Your retirement goal

retirement savings in a coin jar

Image Credits: Mint

To get a basic idea of how much money you need to have after you retire, you must consider what age you want to retire and what you envision your lifestyle to be. After that, there are several methods to give you an estimate of what you might need.

Take advantage of the Central Provident Fund (CPF) Board’s tools to help you with your planning:

You can also do a quick computation to see how much you will need if you plan to retire for a certain number of years. For example, if your retirement will last 20 years and you require S$5,000 a month to get by, you will need S$5,000 x 12 months x 20 years = S$1.2 million.

Just keep in mind that this doesn’t include other factors like assets and liabilities. Those who want a more accurate number should seek a financial consultant’s assessment.

Things to think about

#1: Inflation rates
Singapore's inflation rate

Image Credits: Statista

Singapore’s inflation rates have averaged at around 2.51% from 1962 up to 2020 and have fluctuated recently within the last four years at percentages between -0.52% and -0.57%.

If you haven’t started investing already, consider doing so because your money will lose purchasing power if it sits in a savings account.

#2: Risks
a man reaching for an apple on stacked chairs

Image Credits: wsj.com

Risk can be defined as the degree of uncertainties in an investment decision and/or possible financial loss. The younger you are, the more risks you can afford to take. If you’re a little older, it might be riskier to invest a lot of money and potentially lose it all when the market is greatly affected.

Therefore, it depends on what point you are at in life. Be sure to consider how much risk you’re willing to take on and set up some plans accordingly.

#3: Diversification
never put all your eggs in one basket

Image Credits: news.warrington.ufl.edu

“Never put all your eggs in one basket” is a tactical move that makes perfect sense in several areas of our lives. This includes investments and fund management.

For healthy risk management, diversification in your retirement portfolio is always crucial. Balancing your investments means that there won’t be a disaster for you if one industry crashes in the market.

The importance of diversification in investing is not to be taken lightly. For more details on the technique to reduce potential risks, click here.

#4: Time horizon
investment-horizon

Image Credits: corporatefinanceinstitute.com

Try to identify what time horizon your investments are geared towards, whether short, medium, or long-term.

If you’re leaning towards short-term, you can afford to go for riskier investments, potentially earning you higher expected returns. On the other hand, if you’re long-term, you will want to invest in lower-risk funds that provide stability and predictable returns.

In general, if you start your retirement journey when you’re young, you can invest with higher-risk investments and slowly transit to low-risk ones in the future.

#5: Payout mode
savings against time

Image Credits: policypal.com

Take your payout mode into account.

Sometimes, insurance savings plans, for example, will need you to lock in your amount for several years before you can even access it. If liquidity is important to you, pay attention to the fine details of your plans you’re considering and consult a financial planner for elaborate help along the way.

Search on the internet, and you will find a couple of retirement savings plans. We will list some here for your perusal:

Final thoughts
a women writing down something on her notebook

Image Credits: unsplash.com

You will already be way ahead of the curve if you start early and stop putting off retirement planning.

A study has shown that Singaporeans start planning for retirement at around 38 years old. That’s why within the age group, only two-fifths of Singaporeans feel confident with a comfortable retirement. See if you can look for little areas around your life where you can save some money to invest without affecting your current lifestyle or budget.

Oh yes, before we let you go, have you heard of CPF’s Matched Retirement Savings Scheme (MRSS) for senior Singaporeans?

MRSS is ideal for those aged 55 to 70. As the Singapore government will match every dollar of cash top-ups (annual cap at S$600) made to the Retirement Account, this is one way to increase monthly retirement payouts effortlessly.

Help your parents, aunts, and uncles check if they can tap on the scheme using the MRSS eligibility checker here!

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4 Retirement Myths That Singaporeans Should Scrap

A number of Singaporeans who are planning for their retirement tend to rely on myths without even realizing it! It can happen to you too. As believing in these retirement myths can be detrimental to your financial future, it is important to scrap these myths.

MYTH #1: THERE IS A CERTAIN PERCENTAGE TO QUANTIFY YOUR RETIREMENT FUND

Some financial gurus have set a rule of thumb regarding the percentage of income you need for your retirement. According to them, you need to have 80% of your current salary in retirement. This is utterly exaggerated! The actual amount of your retirement fund depends on your pre-retirement and post-retirement lifestyle choices.

For instance, if you choose to travel frequently during the early months of retirement, you will need to spend more. However, if you choose to live “kampong-style” for the rest of your life, you will spend less. The amount of retirement fund you need depends on what you want to do and how you want to live. It does not rely on a magical percentage!

MYTH #2: YOUR CPF SAVINGS IS ENOUGH

Contrary to the popular myth, your Central Provident Fund (CPF) savings may not be enough to sustain the lifestyle you desire during retirement. Keep in mind that your CPF savings depends on how much you earn during your working years. If your income is relatively low throughout the years then you can expect to receive lesser payouts than your “higher earning” friends. Thus, your CPF savings may not be enough. Also, if you exhaust your account earlier on to pay for your HDB flat then you shall expect to receive lesser payouts than those who bought flats within their “means”.

MYTH #3: RETIREMENT ONLY HAPPENS AT AGE 62

Do you know that some people retire as early as 30? Believing that 62 is the magical retirement age can harm your finances. If you limit yourself to 62 then you may procrastinate on growing your retirement fund, you may ignore the knowledge of bonds and stocks, and you may panic at the last-minute. Retirement actually happens when you have achieved financial freedom. Do not limit yourself to a magical number and regret planning too late.

MYTH #4: MY CHILDREN WILL SUPPORT ME IN THE LONG-RUN

According to the law, your adult child has the responsibility to support you in old age. Protected by the Maintenance of Parents Act, senior citizens who are unable to sustain their lifestyle can apply to the court in order for their children to provide a monthly allowance.

Here are the exact statements from the Maintenance of Parents Act:

“Any person domiciled and resident in Singapore who is of or above 60 years of age and who is unable to maintain himself adequately (referred to in this section as the parent) may apply to the Tribunal for an order that one or more of his children pay him a monthly allowance or any other periodical payment or a lump sum for his maintenance.”

However, the court will consider several factors including if your child is able to afford it. If your child has started a family of his or her own, you can only hope that your child is financially stable by then!

Image Credits: pixabay.com (CC0 Public Domain)

Image Credits: pixabay.com (CC0 Public Domain)

Sources: 1 & 2

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Plan For Your Retirement In These Upcoming CPF Roadshows

CPF Featured

Are you prepared for what the future holds?

Many of us who have just started joining the workforce have the notion that that saving for retirement can start in later years and the main priority is to focus on current needs and wants such as upgrading to a nicer home, getting a new car and travelling once a month.

The hard truth, however, will eventually catch up with us when we are in our 40s and 50s when we realised that our retirement savings is hardly enough to provide for our long term needs.

There is never a “good” time to start planning for our retirement. But there are advantages to starting early. If you start early, you will have a longer time horizon and that means more time to grow your savings. If you have made investments, a long term horizon will also help to ride out short-term price fluctuations on your investments.

But, if you start late, you will have to work harder at growing your retirement savings. If you cannot afford to lose money, you should avoid investments that come with higher risks. You may even need to think of delaying retirement provided you remain employable. – MoneySense.gov.sg

Unsure of how to plan for your retirement? Visit the upcoming roadshows organised by The Central Provident Fund Board (CPFB) to pick up insightful tips.

Event Date Event Time Venue
​28 to 30 August 2015 ​11:00AM to 06:00PM  Bedok Mall
13 September 2015 ​11:00AM to 06:00PM Toa Payoh HDB Hub
10 October 2015 ​11:00AM to 06:00PM ​Jurong Point
31 October 2015 ​11:00AM to 06:00PM ​Ang Mo Kio Center Stage
14 November 2015 ​11:00AM to 06:00PM ​Braddell Heights Community Hub

Hear from celebrity and entrepreneur Irene Ang and financial expert Christopher Tan, CEO of a financial advisory firm as they discuss retirement planning. Win prizes at various game booths when you test your financial knowledge too!

Visit www.cpf-bigrchat.sg to find out more

For enquiries on the roadshows, please email the organiser at [email protected]

CPF Roadshows

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Best Resources For Retirement Planning In Singapore (These Are Free Too)

In 2014, a survey by DBS bank showed that over 76% of the participants said that their key long-term financial goal is to have sufficient for retirement. Why are these people not ready? Perhaps time and awareness are the factors.

Majority of people think that saving for retirement can wait until you are more stable later on in life. Some may get caught up with their spending patterns and life events such as celebrating weddings and raising children.

There is never a “great” time to start planning for your retirement. But, there are good advantages if you started early. However, if you are starting late today then, you will have to work harder to grow your retirement fund. Moreover, you cannot afford to lose money anymore so; you must avoid investments with higher risks.

After shedding a light into the importance of retirement planning earlier on, here are the best yet free resources for retiring in Singapore (aside from the fantastic Money Digest) :

1. RETIREMENT CALCULATOR BY AVIVA

Aviva is a British multinational insurance company that provides services across 16 countries. Since they have a branch in Singapore, their website features a retirement calculator that tells you how much money you need to live comfortably in your golden years. Also, it takes expected inflation into account. Personally, I found Aviva’s Retirement Calculator as easy and user-friendly but I still want to get more information out of it.

Get it here.

2. CPF RETIREMENT SAVINGS INTERACTIVE CALCULATOR

As I said, I seek more functionality from the above retirement calculator. Which is why I continued my search. In my conquest I found a comprehensive retirement calculator that is validated and created by Central Provident Fund (CPF).

CPF is a social security savings plan that has provided the working Singaporeans with confidence and a sense of security for their retirement years. A part from this, they offer online guides and resources such as the Retirement Savings Interactive Calculator. This calculator allows you to assign values for your current age, desired retirement age, desired retirement income, return of investment, and so on. The results will show the number of years you need to save and the cumulative savings necessary to age gracefully. Furthermore, it provides charts and graphs to enable you to understand the numbers more.

Get it here.

3. VANGUARD RETIREMENT INSIGHTS

A premier international website for retirement information is owned by the Vanguard Group – an American investment company. Vanguard’s retirement resources are divided into three categories namely: saving for retirement, nearing retirement, and living in retirement. They provide tips, guidance, and advice using simple terms that would not require a genius to understand. Additionally, it offers retirement planning tools such as creating a realistic retirement budget.

Browse it here. 

4. HSBC SINGAPORE RETIREMENT PLANNING

Going local, you may browse through the articles by HSBC Singapore. These articles feature detailed information about the future retirees in Singapore, 8 steps to have a confident retirement, and a guide to retirement planning. Also, it includes localized researched statistics, charts, tables, and graphs. But, I cannot deny the fact that it advertises HSBC’s own retirement services too.

Browse it here.

 

Image Credits: pixabay.com (License: CC0 Public Domain)

Image Credits: pixabay.com (License: CC0 Public Domain)

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