This article is sponsored by DBS for RetireSavvy. Click here to learn more about how you can customise your retirement plans to your financial needs and retirement goals.With so many new things to buy (like a new smartphone and new sneakers) and places to go (since vaccinated travel arrangements have commenced), our salaries seem to just disappear like magic every month.However, for most of us (ready or not), tomorrow always comes, and the day after. So, if we spend all our savings now, what will we have for later? (Plus, we all want to retire comfortably, with a holiday thrown in now and again, right?)Well, financial security doesn’t just happen overnight – it takes a lot of planning and commitment.
It is never too early to start planning for retirement
Retirement might be the last thing on the mind of a 20-something-year-old, but the earlier you start saving, the more money you will have for later. Not starting early can hinder your ability to build enough funds for your future.
Let’s break down the figures. If you retire at 60 and live until 80 years old (
the average life expectancy in Singapore is 83.15 years), that means you are possibly looking at 20 years with no income. So, what you save now not only has to pay for those two decades, but the money you have accumulated has to withstand the ‘test’ of time – inflation. (Savings that seem enough for now will likely not be enough in the future. Meaning, you will have to save more!).
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But I don’t have enough money to put aside for retirement right now! I’ve got other priorities to think about.” You may think that you don’t have enough money to save, but a little really does go a long way. So why not start now?
Let’s face it – whatever our age, there will always be things to buy, trips to go on, loans to repay and other financial commitments. If we keep putting off saving for retirement, chances are when we finally get around to planning our retirement, it might be a little too late.
In fact, retirees or those nearing retirement age will tell you that saving for retirement becomes more difficult the later you start.
The stats on why we need to start retirement planning early
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Manulife survey published in March 2021 revealed that one in three retirees in Singapore continue to work after retiring, in order to increase their savings. This shows they aren’t confident that they’ll have enough savings to live out their retirement in comfort.
When survey respondents were asked how much they needed to retire comfortably, the answer given was S$1.1million. The current average retirement savings among pre-retirees is S$423,000. This means pre-retirees are short of S$677,000 to retire comfortably.
Sadly, two out of three respondents, aged between 40 and 59, regret not planning for retirement sooner, with almost half the number wishing they had invested in a retirement plan.
This is easier said than done. Many times, life gets in the way of our savings. From the high cost of living in Singapore (cited by 65% of respondents) to insufficient income (49%) and unexpected expenses (44%), there always seems to be something holding us back from saving money.
But things seem to be taking a turn for the younger generation. The poll, which surveyed 1,000 Singaporeans aged 21 to over 60, found that many of the young respondents started planning for retirement at age 33 – six years earlier than their predecessors.
It also found that many young participants supplement their CPF savings by investing in stocks, shares and funds, fixed deposits and insurance savings plans.
The word on the ground
So, does starting early give you a financial edge? Aaron believes it does. The 43-year-old has been planning for retirement since he was 28. “Back then, I was changing jobs often, and my line of work was very unstable. I had to think about retirement and look at building up my savings from early on.”
As someone who believes in investing his money rather than only saving money, Aaron diversified his investments to include property, unit trusts and a retirement savings plan. He is still financing property loans but hopes to have S$1.5 million by the time he reaches 60, in order to retire comfortably. For Aaron, that means “being able to do what I want to do without having to think about where the money is coming from”.
But not everyone starts as early as Aaron. When asked what she knew about retirement planning, 27-year-old Farah Anisa confessed that she hasn’t started saving for retirement, but hopes that her government retirement fund will be sufficient.
Elsie, on the other hand, is not taking any chances. “I only started saving for retirement at 33,” said the 36-year-old. “Before that, my salary was for spending.”
Elsie, who has a weakness for bags and shoes, would often buy branded apparel and dine at swanky restaurants. “A huge chunk of my salary was spent meeting friends, and on entertainment.”
It was only when she wanted to buy a house that she realised how little she had saved. There was not enough for a down payment. Elsie knew she had to make some changes and started reading up about finance and how to invest in the stock market, and is now investing to grow her wealth.
Although she is still unsure as to how much money she will need upon retirement, her motto is to “save as much as I can and grow my money as much as possible”.
Grow your returns!
If you haven’t already started planning for your retirement,
fret not. As American football coach Don Shula puts it: It’s the start that stops most people.
To make saving more manageable, begin by putting aside a small amount of money every month and increase that as your salary increases. Remember, the earlier you start, the more time your money has to grow.
How you save can also be as important as how much you save. Starting early allows you to benefit from the power of compound interest. This means that the money you make (from interest on the principal) is making more money for you.
Many financial planners advise people to diversify their investments to reduce risk and improve returns. Try that. But if something is not working for you, don’t be afraid to change your plans along the way.
Remember, retirement is expensive, so planning and budgeting for it is crucial. And it needs to start now.
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This advertisement has not been reviewed by the Monetary Authority of Singapore. Protected up to specified limits by SDIC. T&Cs apply. All information is correct as at 20/10/2021. To find out more, go to http://go.dbs.com/RetireSavvy
