Are You Ready To Retire?
Are You Ready To Retire?
Have you been planning for your retirement? Statistics have shown that one in four Singaporeans will be aged 65 years and older by 2030. Are Singaporeans doing enough to prepare for their retirement? What else can we do to retire comfortably here in Singapore and how are banks helping out in planning for one’s retirement? On #TheBreakfastHuddle, we spoke to Adam Tan, Head of Branch Distribution, Maybank Singapore, and Christopher Tan, CEO of Providend and Executive Director of MoneyOwl to find out more.
- To have a comfortable retirement, one should have a fully paid house, a suitable medical expense insurance and enough money for a lifelong income stream.
- Saving money for retirement is the easiest aspect in retiring. The hardest part is finding a purpose to lead a meaningful life.
MONEY FM 89.3: Can you define retirement in Singapore’s context? Can we ever retire in Singapore?
Christopher Tan: Some people think [retirement is] the time when you no longer work. I don't think that's the case for many Singaporeans now. I think you work because you choose to, and not because you have to. I will define retirement in Singapore [as a time] when you don’t have to worry about money anymore, when you can slow down and do whatever you like.
Adam Tan: Singapore defined pretty clearly [that the retirement age is] 62 years old and re-employment can go [up to] 67 years old. With Singaporeans getting healthier, I think [the retirement age in Singapore] can go beyond . [Retirement is more likely] the time when you choose not to work.
MONEY FM 89.3: How can Singaporeans plan for their retirement? When should one start and does having a certain amount of money in our savings ensure that you [will] have a good retirement or are there other factors as well?
Christopher Tan: There are three things that one must have in retirement - a fully paid house, a suitable medical expense insurance and enough money for a lifelong income stream. When planning for retirement, you have to make sure that when you buy a house, you can pay it off as soon as possible. All Singaporeans have MediShield Life, which is a basic hospitalisation plan that allows us to stay in a B2 or C ward. But for the lifelong income stream part in Singapore, we have CPF life. That’s very important because, at the core of every retiree portfolio, there must be an annuity because [it] is one of the very few instruments that can hedge against longevity risk. So [when you are] planning for retirement, [Singaporeans should] start looking at your CPF. Make sure that you save enough so that you [have annuity when you retire]. Only after we do that, we can consider investing for retirement.
Adam Tan: One should start as early as [when he/she] starts working. [For instance,] if you need a million in 10 years time, you save 100,000, a year. But if you need it in 30 years time, you [only need] to save 33,000 yearly. That makes a lot of difference. The earlier one starts, the better you can prepare yourself for it and buy the suite of products and solutions that [is beneficial for you].
MONEY FM 89.3: How can banks help Singaporeans who are planning their retirement?
Christopher Tan: I think generally financial institutions in Singapore have done quite a bit over the past few years, especially in terms of products. There's been a lot of retirement income products that have been rolled out. But the thing about retirement is, it's not just about money. If it's just about money, [then] that is the easiest part. I'm not saying that everybody has money saved towards retirement, but [saving money is] the easier part in planning for retirement.
There are also other [factors] to have a good retirement - purpose, fostering relationships with people and being physically healthy. Having a purpose means having a meaningful life. You can have money, but if you don't have anything to live for [after you retire] then that’s going to be quite sad. If you have no one to retire with you, that’s quite sad too. If you are not healthy, that [will also be] a problem.
A lot has been spent on talking about products and planning the money aspect, but as a financial institution ourselves, we also need to focus on how [we can] link the money [aspect] to the meaning in life. We need to help people think through [what they really want to do when they retire] and that thinking shouldn’t start when you retire because it will be too late. The thinking should start as soon as possible.
I think that people plan everything, they delay everything until they retire. We can "expire" (die) before we retire, right? Finding that meaning in life starts today so that I live a meaningful life now. If I live [till my] retirement, I will continue my meaningful activities. But if I "expire" early, at least I have lived my meaningful life. So, as a financial institution, we can help clients understand and establish that.
MONEY FM 89.3: Are banks in Singapore, doing enough to help our ageing population to retire?
Christopher Tan: [Taking Maybank for instance,] banks have rolled out services and not just products, they're conducting talks and helping clients understand issues with end of life. We don't die when we're old, we can die anytime. When we are near retirement, when we are no longer as healthy as before, things such as estate planning becomes very important.
MONEY FM 89.3: Do you think most Singaporeans are prepared for retirement and have most Singaporeans done enough for their retirement?
Adam Tan: Based on statistics, only 55% of Singaporeans above 55 years old have set aside enough for the basic retirement sum back in 2013. If you look at the basic retirement sum today, it is about $88,000 and that's $790 a month [amount you have to set aside]. I personally do not feel $790 a month is enough 10 years down the road. So apart from what we have on the CPF scheme itself, Singaporeans need to cater for their own by looking into private savings, investment or insurance to make sure that they have enough for their retirement.
Christopher Tan: Unfortunately for the older generation, they earn a lower income and they don't have access to a lot of products from capital markets et cetera. Some years back, there is a study and they found that only five or 10 Singaporeans have what we call the basic retirement sum. By 2020, about seven out of 10 will have that amount. Today, a lot of young people are more aware, more educated, and more financially literate. There are [also] many courses available. I don't have statistics to say that most Singaporeans are ready for retirement but I think the situation has improved. More people have started to think about this whole issue of financial independence so things are improving although, of course, a lot can still be done.
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This interview was broadcasted on MONEY FM 89.3 on 24 June 2019.