Planning for retirement: Medical costs his key concern

PHOTO: Planning for retirement: Medical costs his key concern

Who: Winson Ow, 45, business owner Main considerations: Options for work, health-related costs for his family

"Work non-stop, that's my retirement plan!" Mr Ow jokes.

The owner of CS Autolab, a car workshop, has been developing side businesses that are less physically demanding than car repairs.

He has set up CS Racing, a motorsports consultancy focusing on event planning.

Mr Ow, who is deputy president of the Singapore Motor Sports Association (SMSA), is also starting a consultancy in Yangon, Myanmar with a few partners. He visits the city for five days every month.

Each business gives him about $3,000 to $3,500 a month. That, combined with the salary of his 42-year-old civil servant wife, gives the family a monthly income of about $12,000.

The couple has a 17-year-old daughter in polytechnic and a 16-year-old son in secondary school. School fees and allowances for both children come to $1,500 monthly.

Mr Ow has planned for their university education and puts money in their bank accounts whenever he has extra money for the month.

His main expenditure is his three-year-old Chrysler car, for which he pays $2,000 a month in instalments.

The family lives in a fully-paid four-room flat and only goes out on weekends, so expenditure on entertainment like watching movies and eating in restaurants comes to about $500 a month .

During the week, Mr Ow cooks, spending $200 to $300 a week on groceries.

The couple also have basic health insurance for critical illness. Mr Ow says he is concerned about medical costs, not just for himself and his family, but also for his mother and his wife's parents.

Mr Ow's investments are ploughed into growing his companies. He also does community work with SMSA, like giving road safety tips to the public.

Advice for Mr Ow: Mr Alfred Chia, chief executive of financial advisory firm SingCapital, asks clients what kind of income they want when they retire, factoring in inflation.

"For example, Mr Ow may want a monthly retirement income of $2,000 at age 60.

"Upon retirement in 16 years, with an inflation rate of 2.75 per cent - derived from the 10-year inflation average in Singapore - he will need about $3,104 to have the same purchasing power."

Mr Chia then considers a person's mortality, which is about 82 years for men and 86 for woman.

"To enjoy that monthly amount, (Mr Ow) will need a lump sum fund of about $627,690 when he retires to last throughout his retirement of 21 years, if his fund remains invested at a return of 5 per cent."

Mr Ow would have to start saving about $2,132 a month from today, at a return of 5 per cent, to accumulate this sum.

He recommends that businessmen like Mr Ow diversify their investments and segregate business and personal assets.

"Doing business is usually a big risk... He should make sure he has personal investments of lesser risk, for example, bond funds or a mixture of bonds and equity funds. He could even diversify into blue-chip stocks," Mr Chia says.

He added that as a self-employed CPF contributor, Mr Ow could make more voluntary contributions on top of the mandatory Medisave amount.

Advice for this age group: It is never too late to start planning for retirement but a person who starts late has to save more, says Mr Chia, who always asks clients how comfortable they are taking on risk.

"Ideally, if you are in your 40s, you hope you have reached a certain level in your career, have a reasonable investment amount and a second investment property, with tenants helping you pay off the loans."

At the same time, a person should do his sums right and ensure he is not overly exposed to loans.

"If you have not been doing much for your retirement, you may want to step it up.

"You can still afford to take on a bit of risk (compared with someone in his 50s), but this must still be in line with your risk profile," says Mr Chia.

This article was first published on July 20, 2014. Get a copy of The Straits Times or go to for more stories.