In this issue we look at an all time "favorite" - retirement planning. But from a slightly different angle. Besides sources of income, is there something else that we can take note while planning for retirement?
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In April this year, the Government announced that the re-employment age for older workers will be raised to 67 on 1 July 2017. Prior to this, the statutory retirement age was 62 and re-employment was up to the age of 65. A legal provision allowing wage cuts when employees turn 60 will also be removed.
There has always been talk of raising the statutory retirement age. Finally after 23 years the decision has been made. At present, one in three persons in the labour force is aged 50 and above, and this is set to rise further.
The prevalent trend in Singapore sees most of us working well into our golden years. Rising cost of living coupled with low interest rates makes it all the more difficult to save enough for retirement. Most people would rely on one or more of these three sources for income during retirement. Are these enough and is there something else to consider?
1. Cash Savings
This remains the most popular nest egg for Singaporeans. In a recent Straits Times survey, it was found that seven out of ten people plan to rely mainly on cash savings for retirement. However, cash is the most liquid of instruments and easiest to spend. Bank deposits are at an all time low. Not to mention, interest from deposits are unable to even keep pace with inflation.
2. CPF Savings
CPF Savings continue to be a bulk component for retirement savings for most Singaporeans. However, the current CPF LIfe plan pays just $660 - $1920 per month. This is not guaranteed and is certainly not enough for retirement daily expenses.
3. Property
Most Singaporeans would have either a HDB flat or private property by the time they retire. Common methods of using property to supplement retirement income include 1) renting out a room, 2) renting out the entire house and staying with children, and 3) "right-sizing" to a smaller house. However, we might have to adjust emotionally to changes in living environment. Our children may also be inconvenienced, especially if they have their own families.
Conclusion
Working till the age of 67 is now more a reality than ever. In fact most of us might even work till we're older. It is also obvious that traditional sources of retirement income are not enough. What can we do then? Besides planning early for retirement, putting aside money in various financial instrument to grow it in our productive years, it may also be prudent to tamper our expectations of retirement.
A recent survey showed that Singaporeans spend almost $3,000 a year on things that they have not planned on getting. Imagine spending more on stuff not planned for, during retirement. Thus an extra consideration while planning for retirement (besides income) may be to monitor our expenses such that we're used to spending within our means.
