Retirement. Everyone has something to say about it. Colleagues lament over lunch how expensive their houses and children are. Taxi drivers dream of moving to Kuching for a slower pace of life, or Australia to be near the grandchildren. Then there are motivational workshops promising participants their first million to retire on.
But this fixation with retirement also means a lot of myths have been passed down, usually from good intentions. And the longer we consume them, the tougher our own retirements will be.
There is a saying that we will spend only 80% of our last-drawn salary upon retirement. Peak-hour travel prices will be a distant memory, and lunches will be much more affordable. Not having to chip in for birthday presents or play Santa to colleagues can mean saving $200-$300.
But retiring is more than staying home, tending the plants and watching the grandchildren. Retiring means having all the time to do what we want to do, whether it is playing tennis, line-dancing, or going on safari to see lions and giraffes on the African plains.
In a sense, retirement is like enjoying a weekend that never ends. Even before retirement, we fill our weekends with activities, most of which need money. What more when we retire.
Then there are the medical bills. Unless we have some elixir, growing older means creakier bones, more medical conditions, and more visits to the doctor. While a good insurance plan helps lower these costs, there is no denying the larger medical bill.
20 years sounds like a long time. Young couples wait six years for keys to their new flat. Students take around 10 years of studying to get their O-Level certificate. Punggol residents waited seven years before they could take a direct train to Dhoby Ghaut.
But two decades is not too long when it comes to retirement. A study we conducted with Nielsen shows most Singaporeans look forward to retiring at 58 years old, and enjoying at most 20 years of retirement. Thing is, advances in medicine and technology means we are living longer. The average Singapore male lives till 80.2, while the average female lives till 84.6.
Unless we are 90, and still sky-diving, bungee-jumping, skate-boarding, enjoying a devil may care lifestyle with copious amounts of alcohol and cigarettes - an unlikely scenario - we are still looking at retirement planning to last more than two decades.
Pick any 10 people off the street. Chances are, five of these have gathered a tidy sum for household emergencies, health issues and in the event of retrenchment, according to research by AC Nielsen.
In addition, only 4 of 10 Singaporeans have started to squirrel away for retirement, the rest have more immediate necessities. Those in their 20s are worrying about the house, wedding and babies. Those in their 30s are looking at upgrading, enrichment classes for the children, luxury items and holidays. It is usually only in the 40s that retirement starts becoming more real. Nearly half of our working lives are spent thinking about things other than retiring.
The problem with saving only for rainy days: only 15% of Singaporeans being confident they will have enough to meet their financial goals. Over a third of Singaporeans - 35% to be exact - have no confidence they will have enough to retire on or pay for their children's education.
Planning for the future can be daunting. There are budgets to work out, financial products to understand, and thousands of products to choose from. The barrier can be so great that 6 out of 10 Singaporeans delay saving for retirement.
And so the money lies in savings accounts, earning interest rates so meagre it is just a little better than when our grandparents hid their savings under the pillow or in biscuit tins.
Meanwhile, inflation eats away at our savings. Inflation is the same reason why Grandpa paid 50 cents for his coffee, and we now pay $2. The dollar we save today will be worth much less by the time we retire. Keeping money in the bank will not be enough.
And so, financial advisors say it is necessary to invest. But before buying, make sure your investments are helping you beat inflation that has averaged 2.8% in the last 10 years.
The thing about investing is we reap what we sow. Leaving our money in our CPF accounts is very safe as they offer a guaranteed return. But this return is low, at 2.5% for the ordinary account and 4% for the special account. Once inflation comes into the picture, the gains fritter away.
A wiser way of investing is dividing the monies up among a variety of safe and risky assets. Safer assets (like our CPF and bonds) can help to offset losses from the riskier assets like stocks.
Some rules of thumb: