Do young Singaporeans have the wrong perspective on retirement planning?

Do young Singaporeans have the wrong perspective on retirement planning?

I'm not Amos Yee, or Dr Mahathir, but today I'm going to say something so controversial, you might be tempted to make a police report. You have been warned. Here goes: Rebecca Lim did us all a favour.

No, I'm not endorsing the ridiculously poor "I am retiring" PR stunt that the Mediacorp actress pulled. I'm definitely not endorsing the lie that sponsor NTUC Income made her say. I think it's absolutely embarrassing that NTUC Income's Chief Marketing Officer still doesn't think the whole campaign was a mistake and is actually trying to push the oxymoronic phrase "retirement is a journey".

So… what kind of favour did Rebecca Lim do for us?

She got us talking about retirement as a truly national conversation. For the first time, mainstream media, online media and coffeeshop talk all revolved around something that wasn't local politics. Sure, most of the conversation is one of outrage and contains words that I shouldn't be republishing here. But, people are talking about it.

In fact, NTUC Income has gone so far as to start a site called Start Retiring. The sheer arrogance of their web address - www.retiring.com.sg - aside, you've got to admit that they've earned it - for the remainder of the average Singaporean attention span, everyone's now going to associate the word with Rebecca Lim and NTUC Income. That's something other insurance companies and even the CPF Board has tried but not been able to do successfully.

Because the truth is, as Singaporeans, we need to talk about retirement. Especially if we're below 35.

But aren't most Singaporeans already extremely concerned with retirement planning?

Yes, but usually when it's too late. In a survey NTUC Income did leading up to the launch of their Start Retiring website, the majority of those aged 36 and above considered saving for retirement as their top priority. In contrast, only 14 per cent of those between 25 and 35 years of age considered retirement planning as a top priority.

Instead, 20 per cent of them focused on saving for their first property as a priority, while 14 per cent focused on providing for their daily needs.

Hmmmm…. But isn't saving to buy a house a valid priority?

Look, we know property prices in Singapore have been pretty crazy over the past several years. But you really shouldn't be setting aside ridiculous amounts of your income in order to buy a property. If you do your calculations and discover that the monthly payment on your dream house is more than 15 per cent to 20 per cent of your current income, then you're probably being a little unrealistic. Also, there's that little thing called CPF that many people forget about, but if you actually did the math, public housing in Singapore is actually quite affordable.

Speaking of being unrealistic, why stop at buying a house? I'll bet many of us young Singaporeans are spending most of our income on ridiculously expensive overseas trips, or shopping for branded items, or worse - an extravagant wedding celebration that neither you nor your partner can truly afford.

Is it any surprise then, that according to NTUC Income's survey, 45 per cent of Singaporeans between 25 and 35 years old have not even started planning for retirement?

But isn't it too early to plan for retirement? We're not earning that much now…

The key wisdom here is that retirement planning when you're in your twenties or early thirties means you don't need to set aside ridiculously large sums of money. This is because of the power of compound interest, which proves that time really is money. The earlier you start setting aside and investing money for your retirement, the more you grow your money to use in the future.

The real problem is that there are so many investment tools out there which claim to help you grow that money, and that's the real reason that many young Singaporeans find ourselves unable to take that first step. Sadly, there's no easy solution to this problem. In the real world, you can't just put $300 each month into a single investment-linked policy and expect to be a million dollars richer when you retire.

So what should we younger Singaporeans do to plan for retirement?

There are essentially 3 fundamental steps.

1. Be fully aware of what your financial goals are.

Start by cleansing your brain of some age-old myths about retirement - for example, that it's about one overseas holiday after another, basking in the sun. Trust me, at that age, it's probably not a great idea to be expose your body to so much sunlight. These days, retirement doesn't mean you stop working altogether. Instead you could be following your dreams, with no financial stress, taking photographs, creating gorgeous artwork or writing the next bestseller.

By setting realistic financial goals, you may even realise you don't need to be a millionaire when you retire to be happy. This takes a lot of stress off the decision-making process, since you won't feel like you need to set aside huge amounts of money. Of course, don't go to the other extreme and assume you can retire on a few hundred dollars a month. Save too little and it'll just take a single illness to wipe out your retirement fund.

2. Be better educated about the financial tools you can use.

Yes, there are many experienced and well-meaning financial advisors out there. But even the most dedicated and altruistic person shouldn't be making the decisions for you. You owe it to yourself to find out exactly what you're getting yourself into. Even if the thought of it turns you off, find out exactly how tools like ETFs and regular savings plans, or stocks and shares, or an investment-linked policy will help you grow your money.

For example, relying on an endowment plan to grow your money isn't much use if it can only guarantee returns of 2 per cent. Not only is your money shrinking due to inflation, but you're probably better off putting that money in your CPF, which gives you guaranteed returns of 2.5 per cent at least!

3. Remember that our lifespans are getting longer

We have good reason to be unhappy about the fact that Singaporeans are now being actively encouraged to keep working into our late 60s and 70s. Just because many of us are perfectly capable of continuing to work and therefore don't need to retire completely, doesn't mean that we should. Unfortunately, our lifespans are getting longer and longer - we are now living well into our 80s. That means the earlier we retire, the longer we spend retired, and we need to make sure that we have enough in our retirement fund to last us more than 10 years.

Hopefully, by that time, we'd have forgotten about this Rebecca Lim fiasco.

This article first appeared on MoneySmart


MoneySmart.sg is Singapore’s leading personal finance portal, and aims to help people maximise their money with powerful tools and engaging content.

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