In greying Singapore, it’s never too early to start saving for retirement


It’s never too soon to start saving.

By Thusitha de Silva

Singapore is a young nation with an ageing population. According to government data, by 2030, one in four Singaporeans will be over 65 years of age, from about one in eight now. In terms of numbers, this represents an increase in the number of people aged above 65 from about 440,000 to 900,000. This growing proportion of elderly in Singapore will increase the pressure on the social security net and healthcare infrastructure in the city-state.

The ageing situation is exacerbated by two key factors: A low fertility rate and rising longevity. This basically means there are fewer Singaporean births to offset citizens getting older, and that people are living longer than ever. According to 2016 statistics from Singapore’s Department of Statistics (DOS), Singaporean males were expected to live for 80.6 years, while Singaporean females were expected to live 85.1 years.

To get an idea of what this means for retirement financial needs, consider this simple but conservative example: Say a Singaporean woman retires at age 62. According to the longevity data, she could live for another 23 years. If she doesn’t have to pay for the roof over her head and can survive on a low monthly budget of S$500, she would still need S$138,000 to fund her retirement. Even now, surviving on S$500 a month in Singapore is a big challenge. It is likely to get tougher in the years to come.

Older generation holds most of the wealth

The data show that people need to be serious about saving for retirement, because they could be retired for longer than ever before and need a substantial amount of savings. They should start saving for retirement as soon as possible. This would apply most to millennials, because it looks like the baby boomers who rode the wave of Singapore’s progress since independence are in relatively better shape. For example, they were in a position to buy residential property when it was cheaper in Singapore and have benefited from asset price gains. DOS data show that household net worth in Singapore hit a massive S$1.61 trillion by the end of 2016.

While DOS does not break down this data point in terms of age tiers, it is safe to assume that the bulk of the household wealth in Singapore is held by the older generation, in assets that include their residential property, stocks, currencies and deposits, life insurance as well as life-long Central Provident Fund (CPF) contributions. Of course, there are those in the older generation who have fallen through the cracks, but they appear to be the exception rather than the rule.

Millennials: Start saving now

Meanwhile, millennials have also benefited from Singapore’s progress, from improving healthcare and education infrastructure, higher standards of living and longevity, among other positives. However, since they all entered the workforce in the new millennium, not many would have benefited from the asset price rises in Singapore. The pace of gains has slowed in recent years. If they have benefited, chances are they used debt to fund any big-ticket acquisitions. With this debt load, they have to work much harder to build their nest egg.

To make matters worse, it is not easy to say what the future economy will look like, in Singapore and elsewhere. What will be the leading jobs over the next few decades and how do the younger generation prepare for those jobs now? Against this backdrop, it will be ever more challenging for today’s younger generation to save for their retirement.

Thusitha de Silva is a financial journalist based in Johor Baru.


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