Is saving for retirement a race against time?

·4-min read

This content was produced in partnership with AIA

For some, retirement planning can seem onerous. But as many as 70% of Singaporeans felt underprepared to retire, according to recent studies conducted by AIA. In fact, young families are spending at least 2.5 times more of their monthly expenses on their children’s needs, than on retirement planning. Those who face a retirement shortfall may be at risk of having to rely financially on their children, other family members or friends eventually.

There are in fact four very good reasons not to put off retirement planning.

1. The earlier you start building your retirement nest egg, the more it may grow

It’s called the compounding effect. It means your savings will earn interest, and that interest will earn interest, and that interest will earn interest, and so on, enabling your wealth to grow exponentially over time. If you don’t give your wealth enough time to grow, you’ll lose out.

Other investment vehicles like stocks, bonds and assets are risky because they are subject to market fluctuations, though some may provide higher returns too. In contrast, certain instruments provide a certain level of guaranteed returns, as well as some insurance savings plans that also offer protection coverage – 2 in 1!

2. Retirements are getting longer and longer

Life expectancy is rising, but people are still retiring at the same age. That means you’ll probably spend longer in retirement than earlier generations did. People who don’t plan well might find themselves running out of retirement funds sooner than they expect.

There are many things to look forward to during retirement, as long as you plan ahead. Many retirees finally have the chance to fulfil dreams of travelling the world or pursuing a hobby full time. Others take the opportunity to spend quality time with loved ones. But with life expectancies for Singaporeans around 84.8 years (the longest in the world!) and typical retirement age of 60, you will require at least 25 years of retirement income. Without a prudent retirement plan, your funds may not last you for long.

3. Your Central Provident Fund (CPF) and bank savings may not be enough

As many as 92% of Singaporeans over-rely on bank savings, so it’s important to find ways to beat both inflation and bank interest rates. Many retirees are also discovering that CPF pay-outs only cover a fraction of their retirement income. Singaporeans expect to spend at least S$2,000 per month during retirement, but as many as 66% are underestimating the actual amount. The AIA studies highlighted how many are underestimating on average by S$967, to S$1,020 for families with children – that’s a retirement shortfall of at least $290,100 if you need 25 years of retirement funds!

4. You might be underestimating your future medical expenses

Not only are people spending longer in retirement, they are doing so in ill health, draining retirement savings that they have painstakingly built. When it comes to getting protection coverage, there is such a thing as too late. Once a medical condition strikes, it will be hard to get coverage.

Planning smart for retirement means saving up a retirement nest egg that will allow you to continue living the lifestyle you prefer, combined with gapless protection and critical illness cover that will prevent your savings from getting drained by future medical and care expenses.

Some savings and investment plans like those offered by AIA can help you get started simply and conveniently. AIA Platinum Retirement Elite is an investment-linked plan that focuses on sustainable long-term wealth strategy, with access to the world's finest asset managers, to accelerate your wealth and build your target retirement income to meet your retirement needs, while AIA Guaranteed Protect Plus (III) is an affordable one-stop solution that offers both boosted protection of up to 5X coverage amount and stable cash value accumulation, as well as options to utilise the coverage amount to receive annual cash payouts which can supplement your retirement income.

Retirement planning doesn’t have to be complicated, and every little bit helps – as long as you start early to plan for a well-rounded retirement.

Visit the AIA website today to discover which of AIA’s customisable solutions best suit your needs and goals, or use the retirement calculator to find out what you will need based on your preferred lifestyle in the future.

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