However, the reality for most Singaporeans paints a different picture.
According to a recent Manulife survey, a whopping 72 per cent of Singaporean retirees regret not saving up for retirement earlier. Appallingly, only one in four took up a retirement plan.
The consensus among those approaching retirement age does not fare any better, revealing an average retirement savings gap of $677,000.
What’s the retirement savings gap right now?
A retirement savings gap occurs when your actual savings for retirement does not match up to your ideal savings goal.
A gap is not ideal in retirement as that entails having to cut back significantly on your lifestyle and expenses during retirement. What’s worse, you might also need to continue working well into what is supposed to be your golden years to make ends meet.
With no stable stream of income to rely on, this is a financially precarious position to be in — particularly when unexpected events such as poor health and expensive medical bills leave you with a huge dent in your wallet.
Based on Manulife’s survey results, the average retirement savings among pre-retirees is $423,000.
However, this amount is far from their ideal savings of $1.1 million.
Therefore, the retirement savings gap is = $1,100,000 – $423,000 = $677,000
The retirement savings gap notwithstanding, this doesn’t mean that Singaporeans are not financially prepared for retirement. According to the Syfe Retirement Readiness Index (SRRI) 2021, the impact of the Covid-19 pandemic has spurred 72 per cent of respondents to take a hard look at their finances and take a more active role in their retirement planning.
Reasons why Singaporeans experience a retirement savings gap
1. High cost of living in Singapore
Tightening our belts in order to put aside more money is challenging when expenses are high to begin with. This might be the biggest reason why Singaporeans aren’t saving enough as they should, considering there’s been a rise in cost in food, healthcare and education.
2. Insufficient income
Another reason why it’s a challenge to save money could be due to the rise in Singapore’s unemployment rate as companies struggle amid the Covid-19 pandemic. Coupled with the rise in daily expenses that are needed to support yourself and your family, there might not be enough left to build up the savings needed for your golden years.
3. Unexpected expenses
It’s also important to take into account the inevitable bumps in the road. After all, life could throw you curveballs when you least expect it, causing you to fork out more in order to get it sorted. This could be in the form of falling ill, meeting with an accident, retrenchment and more.
Buying a retirement plan is a step in the right direction
Moral of the story? It’s high time we stop procrastinating on our retirement planning and take actionable steps to future-proof our finances and achieve our retirement goals.
1. Building up your CPF LIFE to match up with your dream retirement lifestyle
2. Shopping for a great retirement annuity plan
Some annuity plans to check out for a blissful retirement
Manulife SmartRetire (II)
Designed to help you achieve your retirement savings goal, this whole life, investment-linked plan from Manulife allows you to set your retirement age from as early as age 40 to when you hit 70 years old.
One of its biggest perks is that it is highly customisable as you’re able to choose their suite of curated funds premiums, which start at $200 a month. Coverage for policy holders includes death protection, total and permanent disability (TPD) plus premium waiver in the event of a cancer diagnosis.
NTUC Income Gro Retire Ease
A participating retirement annuity plan, NTUC Income Gro Retire Ease lets you save for up to 10 or 15 years or up to age 50, 55, 60 or 65 — depending on when you plan to retire.
Since it is a participating plan, you could potentially reap bonuses via the Life Participating Fund.
If closing that retirement gap is a priority on your list, you’ll be happy to know that this plan allows you to withdraw and spend the payouts, or you can park the money in savings where they’ll compound interest of up to 3.25 per cent p.a.
Aviva MyLifeIncome II
If you’re looking for a plan where you don’t need to worry about outliving the payout duration, this could be it. With guaranteed yearly income for life, you’ll retire knowing that you’ll always have a stream of income even if you live a particularly long life.
You can also enjoy high payouts of up to 6.35 per cent of the sum assured every year, in the form of cash bonus and guaranteed cash benefit. Best part? You can pay the premiums by using your SRS funds.
This article was first published in Singsaver.com.sg.