MoneySENSE 6: Retirement Planning

20 06 2009

There is an increasing lack of concern amongst pre-retirees as to how they will cope financially after retirement, and this is problematic. Olivia Mitchell, Wharton professor of insurance and risk management, and chaired professor at Singapore Management University said, ‘My research shows that many workers are underestimating retirement challenges including the risk of outliving their assets, the future cost of healthcare and the erosive power of inflation in retirement’. As a result, Boomers live with a ‘false sense of security’, and may face a ‘rude awakening’ when it is too late to do much about it (

Mitchell suggested several ways to cope with costs of living after retirement. One way is to mitigate risk by making positive lifestyle choices, such as by having a proper diet and exercising. Another way is to finance risk through savings, investing and buying insurance on the other. Mitchell also strongly supports staying in the workforce longer so that one can earn and save more.

Do you agree that the lack of concern for retirement planning is worrying? What are the possible consequences of not planning for your retirement? Besides the measures mentioned by Mitchell, how else can retirees avoid outliving their assets?

Suggested Readings:
– ‘Managing Retirement Risk in an Ageing World: The Global Picture’. Knowledge@SMU. 2 July 2007. <>.
– ‘Retirement Planning: Most People Don’t Know How Nor Even Think About It’. Knowledge@SMU. 3 April 2008. <>.
– ‘CPF Retirement Planner – Interactive Journey’. Central Provident Fund Board. <>.
– ‘MoneySENSE Worksheet to Managing Your Retirement Funds’. MoneySENSE. 31 December 2007. <>.




47 responses

20 06 2009
Leonard / DHS / DHS06 (Invisible Hand)

Pre-retirees do have this lack of concern for retirement planning and this is definitely worrying. The obvious consequence of a lack of retirement planning is a lack of funds to fulfil one’s needs during retirement! Every optimists’ dream is to have the financial capability to lead a luxurious retirement. As reported in studies by America’s Employee Benefit Research Institute, retirees in the year 2030 would not even have the funds to sustain their basic needs such as healthcare, housing rentals, etc.

Fortunately for Singapore, there are several government measures such as Medisave and CPF (Central Provident Fund) that will help pre-retirees save for future use during their retirement. However, in the face of rising standards of living and the erosion of these savings by the resultant rising inflation, these measures might be rendered futile. Pre-retirees should not simply rely on the government for their welfare during retirement but think of ways to lead out a well-funded retirement. All that starts with retirement planning.

Besides the measures that Mitchell mentioned, one way is to plan out a good location for your retirement. Certain countries/locations enable one to enjoy low cost healthcare, entertainment, etc. (things that suit one’s needs, vary from individual to individual). While Mitchell did mention that the key to attain a well-funded retirement is through investment, saving and the like, pre-retirees should pay attention to diversifying retirement investments, invest both locally and overseas and most importantly review one’s investment plan regularly. Utilising a mixture of equities, unit trusts, mutual funds and guaranteed investment certificates from local and overseas agencies is a safe approach which minimises risk and does not compromise return to a large extent. A regular review (preferably monthly!) on your investment plan is also imperative as economic conditions do undergo drastic changes (as illustrated by the numerous recessions in the past two decades).

20 06 2009
Wei Cheng/ DHS/ DHS06 (Invisible Hand)

With continually increasing healthcare and living costs brought about by inflation, as well as improvements in living standards leading to higher life expectancies, the working population, particularly the young and middle-aged post-65ers, now run a big risk of outliving their retirement funds. As such, retirement planning has now become a paramount feature of our lives, and its importance can only grow in the future as many developed nations, incuding Singapore, face a rapidly greying population.

The consequences of a lack of retirement planning are dire, particularly for small developed economies like Singapore. On a personal level, a lack of retirement savings will adversely affect the quality of life of retirees and prevent them from enjoying the fruit of their labour in their younger days. More importantly, though, on a national level, retirees with a lack of retirement funds will most likely require social welfare handouts and place a strain on limited Government resources. This problem will be exacerbated by a dwindling labour force and a growing retiree segment of the population, and will result in other more severe consequences, such as the tightening of budget position (most likely leading to increased taxes and reduced competitiveness of labour force) as well as a reduction of capital funds for future development.

Fortunately for us, there are two causes for optimism. Firstly, due to the advent of financial programmes and articles such as the MoneySense programme and the weekly Invest column in the Sunday Times, the labour force is generally becoming more financially literate these days, hence an increased awareness of the importance of retirement planning. Secondly, the Singapore Government has put in place a wholesome retirement scheme that secures a steady income for future retirees. This well-established framework for retirement planning is based on the Central Provident Fund (CPF), which actually forces workers to save a fixed proportion of their monthly income for retirement purposes. In addition, Singaporeans are required to keep a Minimum Sum of $134 000 in their CPF accounts as a basic secured retirement nest egg and can earn an interest of 2.5-4% on their savings (which is better than bank deposits, most unit trusts and government bonds) as a hedge against inflation. Furthermore, all citizens born after 1959 are subject to CPFLife, an annuity scheme which provides a constant monthly income, which is enough for subsistance, to the CPF account holder.

However, in spite of these, we should not rely excessively on the government for our retirement plans. One of the most effective strategies of retirement planning would be to start accumulating compound interest on savings over a long period of time. As far as possible, we should set aside additional retirement funds through diversified long-term investments and savings from young, so as to increase our long-run risk appetite and increase the rates of return for the retirement fund.

20 06 2009
Leonard / DHS / DHS06 (Invisible Hand)

I agree with Wei Cheng that retirement planning is now a paramount feature of our lives and its importance will only be on the uprise in the future. However, there are several factors as to why the importance of such planning is not realised by many. (This might be out of point with regards to the questions posed in the blogpost)

1. To plan for one’s retirement is to set aside funds for savings, investment, etc. This poses an opportunity cost of having to spend/consume less.

2. People are having high levels of optimism for their retirement years and believe that the onus is on the government or their family to support them during their retirement years as ‘payback’ for what they have contributed to society and their family during their working years.

3. They do not realise the daunting statistics of a greying population in the future.

Nevertheless, we cannot dismiss the fact that there are many people who work their whole life just to secure enough money to enjoy their retirement years.

Oh by the way, the lack of concern for retirement planning is worrying, but not as worrying as other macroeconomic and microeconomic problems that are plaguing current economies. Many governments do recognize this problem as a long term one and have implemented several measures to try to solve this problem (e.g CPF). However, I feel that such measures are insufficient at best. Although this might sound cliche, education of the public on retirement planning methods is imperative to solving the root of the problem. Perhaps campaigns could be held. However, such campaigns would require enormous subsidies from the government and this in fact ideaslistic in this era where governments require huge amounts of funds to solve other economic problems such as the current recession.

Just my 2 cents worth. =)

20 06 2009
Wong Yew Hung / SAJC / SLIFF

Believe it or not. People are actually over-saving in the United States as a recent American study has shown and this might not be a good sign because people are constantly saving and living below their means. They adopt the conservative approach that they would rather err on the side of having extra money left at death than risk running out before then.

A conundrum it is, the problem of over-saving all stems from the lack of retirement planning. People are saving blindly because they do not consider the factors that will affect them when they are going to retire. Therefore, both their current Standard of Living (due to over-spending) and future Standard of Living (due to inevitable inflation) are drastically compromised.

In Singapore, we are relatively safe due to the CPF system set up by the govenment. However, these savings have virtually zero liquidity and are hence also relatively fixed due to mostly fixed salaries in our population. Thus, one of the twin devils of the economy-inflation- might deem our CPF savings of little significance when it is finally liquid.

Hence, instead of blind-saving, we should take a look at buying investment products to grow our savings. Factors to look at while buying investment products would include initial cash outlay, real net rate of return, risks involved, accessibility of earnings and most importantly whether the investments are truely passive. Also, planned retirement age and lifestyle will be of paramount importance.

As we are discussing about retirement, I render the risks involved and whether the investments are truely passive the most important factors.

Investment should be a habit, from young. When one is young, the risk tolerance is usually higher and it enables us to reap optimal profits if we adpot the suitable strategy. As busy working class citizens, we have to make sure that our investments do not require hourly monitoring. Hence, a viable investment product would be unit trusts, bonds and medium-risk stocks. We do not want to be too ambitious or too conservative. These investment products are also relatively passive and do not require alot of effort.

However, when one reaches retirement age, investments should be on low risk products. The collapse of the Lehman Brothers in the US has led to numerous elderly in Singapore stranded in a sticky situation where they fail to get their money back. Lesson learnt: Stick to low risk investments, or bank on the magical effect of compound interest till you kick the bucket.

Hence it is imperative that retirement planning involves both pre and post-retirement finance management. The increasing life expectancy of people in most parts of the world underscores the need for careful planning to avoid outliving one’s assets. After all, it does not harm if your investment profits outlives you.

20 06 2009

I agree that the lack of concern for retirement planning is worrying. The period that one has to plan for typically lasts 15-20 years for an average person in Singapore since the projected life expectancy is around 78 years for males and 82 years for females.

Humans are usually sometimes too confident for their own good. No one expects cancer, heart disease, lung problems, disability or any other medical condition prevalent among the elderly. Humans always think that they would be free from the condition. Thus, not many people purchase insurance when they’re young and they are not able to do so when they’re older. Thus, a lot of money has to be spent on healthcare and this money is often not added into one’s retirement’s savings.

Thus, one obvious consequence of not planning for one’s retirement is not having enough money to get by each day. One would then have to depend on his or her children to get by. Sometimes, this proves to be very inconvenient and one might just be sent to a nursing home.

Retirees can outlive their assets by not wasting money. Numerous news reports have shown the elderly getting cheated by conmen of their life savings, gambled their retirement savings away, and spending all their savings on 4D.

Instead, they should channel their remaining energy into keeping healthy and participate in community events, such as night classes, mass yoga, and other social interactions with other retirees. This can keep them busy, and not spending their savings on gambling.

21 06 2009
Jun Jie/HCI/Team 6

It’s almost indubitable, as established in the posts and previous comments, that the need to start retirement planning from your 20s in order to gain compound interests on savings and build a nice nest egg is paramount. But I think that even if the general populace recognises this fact (unlikely, given the financial illiteracy of a substantial percentage), it is still difficult to implement. It’s a worrying fact, but there’s not much we can do about it. Here’s why.

Most of the planning models as mentioned by Mitchell and the reports and their advice are targeted at educated young workers in their 20s, with a steady job and relatively high flow of income, of maybe over $1500 to $2500 a month. It’s easy for them to set aside 15% of their salary every month first and plan their investments carefully, taking time to research the various equities and ILPs etc. But a significant percentage of the population in Singapore (and far, far, more in developing countries) don’t have that luxury. Either they’re unemployed right now (a very real possibility, given the downturn), or they’re struggling to make ends meet on their limited income from odd jobs. Add on the possibility that they have children or elderly relatives to support, and you can be sure retirement planning is definitely very low on their list of priorities. Not for frivolous reasons like wanton spending, but because just getting by is hard enough. Any safeguards for retirement, an inconceivable concept to them, must inevitably be borne by the government, and any amount of proselytizing like this is just going to be pointless.

In any case, the government’s present method is more or less adequate to meet the situation, in my opinion. Admittedly it will not allow for retirees to pursue all their expectations, but it should at least allow for them to live without worry. It’s probably a correlation that those who expect a more costly post-retirement lifestyle should have the savings to back it up, whereas those who have only modest savings have tailored their expectations accordingly. In Singapore, the government ensures the interest rate you get on CPF savings at least stays ahead of the prevailing inflation rate, so there is no danger of those savings being eroded by inflation…at least till one turns 55. That should be of some comfort at least. Most importantly, they are aware that the government will provide some sort of safety net at least in the worst-case scenario that they run out of retirement funds, whether it be in the form of social security payouts or subsidised rental housing, and are reconciled to the idea of that spartan, but still liveable way of life. One-room HDB flat occupants in Singapore, for example, embody that very spirit.

Thus, in the context of the aforementioned population I’ve described and their mitigating circumstances, we should not be overly preoccupied with their lack of concern with retirement planning. If anything, the government should resign itself to the fact that the more affluent groups will have to bear their burden and adjust taxes accordingly. But of course, for the well-educated, financially secure (for now) generation, there is no excuse for them not to begin retirement planning now. The stakes are higher in that what they will experience and what they expect will vary a lot more.

21 06 2009
Jun Jie/HCI/Team 07

Apologies! I entered my team name wrongly, it’s supposed to be team 7 not 6! Sorry x)

21 06 2009

Noted =)

21 06 2009
Leonard / DHS / DHS06 (Invisible Hand)

Thanks jun jie, your post did provide me with some insights on the situation in underdeveloped countries.

Well, I’d just like to talk about that a bit.

It is true that underdeveloped countries are not planning for their retirement simply because this raises an opportunity cost of a lack of funds to equip themselves with daily needs which they are already having trouble with. While this is the one of the most dominant reasons, there are other reasons.

1. What is retirement to them? Most people in such UDCs (underdeveloped countries) work till they pass away.

2. Their healthcare, sanitation, etc services are just not advanced for them to lead a long life. Life expectancy rates are low and to put it crudely, they just do not live long enough to reach the age which we term as “retirement age”.

3. They strongly believe in the culture that the young should bear most of the responsibility of supporting the old (filial piety).

4. Well, the young IS supporting the elderly. In most UDCs such as that of the underdeveloped parts of India, the population tree is that of a pyramid. This illustrates that there is a large number of the young and a small number of the old. While supporting the small group of elderly might seem to be a pretty easy feat for the large group of the young now, this might be a problem in the future when this large group of the young become the old.

Well, like what many of the previous comments have mentioned, planning for retirement is paramount and there are many ways to do so. A rational government should provide certain schemes that would fund retirees. An equilibrium between satisficing current needs and future needs have to be met, and the future needs (funds pumped into retirement planning for citizens) should not be done with a large compromise of the current needs. Like what I have mentioned in my previous post, education is the way to go.

21 06 2009
Lu Boon Ping/ SAJC/ SLIFF

For a starter, a recent study by Guardian shows with only six to 15 years before retirement, leading edge boomers – those age 50 to 59 – are in the homestretch yet 50% of those who are not retired somewhat or mostly agree that they don’t know how much they need to save for retirement. An even more shocking 60% of all leading-edge boomers somewhat or mostly agree that they intend to save more than they do, but don’t always get around to it.

The lack of financial planning for investments can be classified into 3 ways – over-saving blindly, under-saving and poor investment. I shall not talk about the causes of such, but note that it is mainly due to ignorance and lack of will.

The consequence of under-saving is easy to grasp – the lack of cash disrupts retirement; not having enough cash to indulge in goods and services, or to simply meet everyday bread and butter. It would be worrying to live not knowing whether there is enough food for tomorrow.

The act of over-saving blindly is not a phenomenon, as it is committed by many, ignorant savers. Such foolishness usually arises from ignorance, where one believes saving will never lead to something bad or is risk-free. On the contrary, it wouldn’t take an economist to figure out the risk behind putting all your eggs into a basket – inflation. In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. Therefore, there lies a danger of just leaving your money to grow by interest as it is, as it is unprotected by the eroding factor of inflation.

Furthermore, But now that we’re finally saving more, savings account rates are close to record lows. Bank savings accounts and money market funds are yielding below 1 percent. Even a bank CD for one year pays only about a measly 1 percent. Unless you are investing big money, compound interest does not really make your money grow.

Finally worst of all, poor insight into investment is the greatest peril of all. One may have heard recounts of people’s lifesavings turning to dust overnight, simply because of poor investment or sly financial schemes that are determined to deceive the ignorant.

21 06 2009
Lu Boon Ping/ SAJC/ SLIFF

Banks interest rates are lowering worldwide, faith in banks weakening, investors are more conservative with their money.How do we ensure our savings and increase our returns and prevent outliving of assets? Here are some ways.

We need to consider risk-factor, liquidity and returns, and bear in mind that there is a trade-off for each.

(No Pain no Gain)
It is true that there is a positive relationship between yields and risk-factor; the higher the yields the higher the risk factor, vice versa. High risk investment bond funds for example, promise some 8 percent returns but come with high risk. These bonds enable investors to buy shares in a portfolio of bonds rated below investment grade to obtain their high yields.

To obtain higher returns, it is usually the case to invest in a longer term, however the risk associated is higher, with longer time horizon; one can expect bond funds to constantly fluctuate. Furthermore, one faces a penalty for early withdrawal.

(Playing Safe)
On the other side of the spectrum, low risk and high liquidity also implies low est returns. This is to be expected as when you are able to withdraw your money at almost any time, the banks face unstable assets, and hence low yields are expected for the investor, such an example would be the US treasury securities.

Instead of investing in banks that have low interest rates barely 1%, one can open an online savings account, with annual interest rates of 5%. However, one must be careful with the reputation and credibility of such banks, nobody likes being scammed with their money.

(Smart Shopping)
It is a simple profit-costs relationship: when costs go down, profits rise. Therefore whenever purchasing stocks or bonds or a similar type, always shop for the cheapest provider. For government bonds for example, the U.S. Treasury bonds can be obtained free of charge directly from their website, and provides mutual funds without any commission.

To sum it all up, smart investing requires much planning, analyzing of each of the associated 3 factors to which we are prepared to game in, and lastly being smart.

21 06 2009
Leonard / DHS / DHS06 (Invisible Hand)

I do completely agree with Lu Boon Ping’s methods on smart investment methods. I would just like to further elaborate.

Risk and return might not always possess an inverse relationship. Investments with low risk and high returns might be believed to be a scam but with proper research and patience, they are available. Let me just share a few examples of such investments.

1. Overpopulation is a pressing issue in both third and first world countries. Statistics have shown that the population is still growing at a rate that is faster than land expansion. This shows that we are about to face an age of increasing congestion. What does this imply? Invest in raw land development! With rising sea levels due to global warming and an accelerated population growth, land is gold. All one has to do is be diligent enough to find out which companies would be the leading ones in raw land development and invest in them. It might be a long term investment and returns are volatile, but you can be sure that the risk is minimal.

2. An ageing population is faced by many developed countries. Developing countries such as China are also not spared. Imagine China’s billion population moving into their old age. The revenue that can be generated from sales of elderly amenities, luxuries, equipments, specialised healthcare, etc. is an immense sum. Invest in such companies that intend to focus on developing technologies for the elderly!

3. Global warming. We neglected it. Then we started to become aware of it. Now we are suffering from it. Next time, it will be worse. Take a stroll to a coffee shop nearby and you will hear incessant mutterings of “the weather’s so hot”. We need to find ways to solve or at least cushion the effects of global warming and perhaps environment engineering can shed some light on our grave situation? Now you know where to place your investments.

As I have illustrated, besides the bonds, funds, treasury bills, unit trusts, etc.. that we have discussed so far where risk and return possess an inverse relationship, focusing and successfully identifying future needs is the key to high yield and low risk investment. Well, the pessimist would be telling me these cliche words, “The future is uncertain”.

21 06 2009
Lu Boon Ping/ SAJC/ SLIFF

Leonard: I think the key idea here is managing your money wisely, and most importantly, enabling a constant stream of income. The alternatives you have mentioned appear insightful, but they are too ambitious and certainly not risk free.

For example, I assume you are aware that investments in green technologies, raw land development require a HUGE amount of investment, not simply any investment a commoner is able to make. Besides, the returns from such investments are not secured and are very competitive, with companies investing in them, not to mention individuals. That aside, I think you are missing the key idea here, which is to ensure a constant and secure stream of income towards old age.

These investments may potentially, tripple your profits or might even reduce your profits to none, and all these require time. Time that the aged, although rich in material, but are unable to afford the time to do so. (Think about it, if the potential returns only come after 20 years, you would be dead by then.) Neither can the aged I believe commit to such the risks involved.

Risks. They are the most feared by any investor. Your point that China has a large, ageing population is correct. But are you aware that China is the 2nd largest investor in green tech behind Germany? Billions are already being poured into the green tech industry, and its showing no signs of rest. Therefore I believe, while the returns may be high, but it entails a long time horizon, as well as high risk that they certainly are not prepared to fork.

Should they are, at any rate, I wouldn’t consider that to be retirement.

21 06 2009
Leonard / DHS / DHS06 (Invisible Hand)

Then, there is this issue of savings/investment VS inflation.
In fact, inflation is not as monstrous as it seems. There are many ways to get around inflation.

1. Since inflation erodes away the value of our currency, invest in things that are not directly linked to currency. An example could be gold (or fixed deposits, etc.). Inflation would simply mean that an increased quantity of currency would now be required to purchase the same quantity of gold from before.

2. During an inflation, focus on short term deposits and debt funds. Avoid locking your money in long term bonds, funds, etc. This is because rising inflation will slowly erode away its value. Furthermore, rising inflation is often coupled with rising interest rates which would lower your net rate of return on investment. Short term deposits and funds would provide you with the liquidity you need while ensuring that you do not lose out.

3. During an inflation, invest in property as the value of property tends to rise with increasing construction costs. However, a rather substantial minimum sum is required for the purchase of property and this is usually out of reach many investors.

There are of course many other ways to counter or at least avoid the effects of inflation, such as dwelling into commodities, equities, etc.. It can thus be illustrated that inflation is not as scary as it seems. Yes, inflation is usually one of the last things on an investor’s mind. I am not saying that it is completely unimportant, but it is just that a smart investor would know numerous ways to get around it.

21 06 2009
Leonard / DHS / DHS06 (Invisible Hand)

Boon Ping, you are definitely right to say that my ideas still have risk involved, but they are at least rational and smart choices that a well-funded investor could take; Besides, they were simply examples off he back of my head! (: I was just trying to illustrate the point that high yield investments do not ALWAYS come with high risk.

The smart investor would quickly purchase sharess on medicine and sell off shares on flight or tourism agencies before signs of an epidemic such as the current H1N1. Yes, you get the idea. Well, of course one can say that the stock market is the biggest casino in the world and there is a high degree of uncertainty involved. (But then again, I’m just stating another possible example to illustrate smart investment decisions.)

Well, proper investment decisions can actually lead one to secure a safe and yet high yield investment to secure enough funds for one’s retirement. Therefore, I am still insisting on education! One can indeed propose many methods to secure funds for the elderly but this has to be taught to the masses for such methods to materialise.

21 06 2009
Lu Boon Ping/ SAJC/ SLIFF

I believe hypothetical examples (at the back of one’s head) alone can’t justify that high yields does not always mean high risk, for in theory, a high yield screams high risk.

You might want to illustrate your point with some concrete examples:

(Diageo: less risk, more yield)
There are times where a higher than normal yield can be less risky. Take a look at Diageo (NYSE: DEO) and Cooper Tire & Rubber (NYSE: CTB), yielding 4.5% and 2.6%, respectively. Neither is lighting the world on fire with sales growth, but Diageo is able to easily fund its dividend with free cash flow. Cooper Tire & Rubber, on the other hand, failed to do so in 2004 and the first three quarters of 2005.

(GM: more risk, more yield)
Often a high yield accurately portrays higher risk, as is certainly the case with General Motors (NYSE: GM) and its 9.1% yield. GM has a balance sheet with plenty of cash, but it also lacks the free cash flow to adequately fund its dividend, and its sales and market share are declining.

21 06 2009
Lu Boon Ping/ SAJC/ SLIFF

Speaking of education, it is indeed both a smart way of ensuring prudent investments and a sustainable one in the long run. However, the tricky problem with education especially for the case of Singapore is, since the post-war baby boom period in the 60s and before, most retired and aged are less educated, compared to present times.

I foresee a problem in getting them to do math and money planning, and a language barrier for that purpose. Besides, only education coupled with action from them will materialize the plan. Education may be a long-term solution, but in trying economic times such as this, it isn’t anywhere near a quick-fix. I suppose that is what investment companies like Prudential is made for.

21 06 2009
Daryl/ SAJC/ $ensibilities

Firstly, I have to state that I’m definitely abstaining from suggesting CPF.

Come on, who doesn’t agree that the lack of concern for retirement planning is indeed worrying? As we all know, to fail to plan is to plan to fail. And the magnitude of this failure would be humongous. A cascade of possible consequences could unfold.

Put simply,
No retirement plans -> No $$ -> No purchasing power (in a society where there’s no free lunch) -> No activities in place -> Lose brain power -> Require more welfare benefits -> Burden to society

Or worse, the lack of brain stimulation decreases lifespan. A cruel society would just say “serve you right” and be glad that a burden had been removed earlier. There are solutions to this issue, basically to increase assets to match inflation or decrease dependence on anything related to spending.

The common topic of investing to increase asset value does not pose as a solution to all. Not everyone possesses the knowledge to invest in the stock market or properties. Instead, retirees should adopt a more reliable approach to maintain their income after retirement. For example, monthly revenue from rental (shops, flats or even bicycles!) or they could sign agreements with their children if they have, as a ‘Repayment Scheme’ after years of bringing them up. Signing a contract with your own flesh and blood may be extreme but in a world where only money rules, retirees need law protection for survival.

To decrease dependence on spending could be simple practices like stop all vices like gambling or smoking which is unnecessary expenditure, or placing priority on durability when buying products to cut down on the number of times required for replacement.

21 06 2009
Lu Boon Ping/ SAJC/ SLIFF

Daryl, I agree not everybody has the right knowledge to invest, I think that is what Leonard’s conviction on education is harping about. Besides, you have underestimated the effectiveness of CPF.

(Workings of the CPF)
The CPF requires employees and employers to contribute 30-40% of basic salary into fund to help them prepare for old age. These surpluses are placed as deposits with the Monetary Authority of Singapore (MAS), effectively withdrawing liquidity from the economy to the government. This mechanism allows the government to vary the injection of liquidity back to the economy, ensuring stability in Exchange Rates and Interest rates, that are important to the value of money concerned for retirement.

No retirement plans do not imply no $$, therefore does not lead to the chain of destruction you mentioned.

I believe you are talking about investment in real estate (rental, mortage etc.). Don’t be too quick to sing the praises of real estate, for they have their downsides too.

1)For starters, they are very costly.

2)For such businesses, banks usually require higher downpayment, and charge higher interest rates for rental property than they do for owner-occupied homes. (Im assuming you dont rent your house out and sleep in the streets)

3)Real estate in general, can be considered as illiquid asset, so if one meets cash flow problems mid-way, that would pose a problem.

4)Panick-Selling in desperate situations in a declining market (Check out the US real estate prices), selling it at reasonable prices would be an uphill task.

5)Consider the lack of demand for renters. Who would cover the mortage then? Duh, you.

Now, real estate doesn’t seem too alluring, right?

22 06 2009
Daryl/ SAJC/ $ensibilities

Boon Ping, I guess you have misunderstood my statement regarding CPF. I did not underestimate the effectiveness on CPF, but i chose not to repeat a similar point that you guys have been harping about. I mean it is like a ‘duh-point’ and in fact probably the most effective scheme ever implemented.

Regarding the chain of destruction, it is just a POSSIBLE and SIMPLIFIED idea that would appeal to most. The basis of the question stating ‘outliving assets’ clearly indicates that the main gist would be retirees running out of cash.

However, i do agree with your counter argument on real estate. But I must emphasize that everything has a downside and an upside. Compared to other investments such as shares or just playing around in the stock market, real estate is considered a less risky invesment that promises a more stable regular income that is immuned to financial risks such as depreciation. A bigger BUT, if you choose to invest, always be prepared to take up the risks to lose.

21 06 2009
Leonard / DHS / DHS06 (Invisible Hand)

Boon Ping, thanks for the interesting examples that you’ve pointed out! There you go! The real world really does have instances of high yield and high risk (which was simply what I was trying to point out) and this could be achieved, as illustrated in your example of Diageo. Now we wonder how they go about doing it.

Well, education is obviously not a quick-fix and it certainly has a long time lag. Although what you have mentioned about the language barrier is true, it is an unavoidable truth that the implementation on education could not effectively reach out to this group of people. However, implementing an integrated education system on investment decisions and retirement planning might very well solve this prevalent problem for future generations.

Like what I have mentioned earlier, we could suggest all the best methods of retirement planning in the world, but how are the masses going to learn about it? Often than not, the masses fall prey to biased retirement plans offered by private companies who are out for profit. How then can the government protect such victims and informate them on proper retirement planning skills? The answer is incredibly obvious.

That being said, education itself is not foolproof. Yes, you are right to mention that education coupled with action is the only way for such plans to materialise. Nonetheless, education is a worthy first step to take. Unless one can think of other better methods of propagating such good investment decisions to the masses, I believe education is the way to go.

21 06 2009
Lu Boon Ping/ SAJC/ SLIFF

Leonard: please remove the word ‘dear’, thanks.

I myself, am a supporter of education. Education is the way to go, education is an important long-term prospect, but do not focus entirely on education. I believe the retired can set aside a small sum of money consulting reputable and credible firms, to prevent deceit and sham.

(Its like how you have eat everyday, but do you eat all the food at once?)

Nevertheless, education sounds good to me.

21 06 2009
Leonard / DHS / DHS06 (Invisible Hand)

One cannot simply shun off the benefits of investment in real estate as history has proven such an investment highly beneficial. (With the exception of the Subprime crisis in USA where years of low interest rate and a lack of supervision on the market on the Federal Reserve’s part led to the bursting of the property bubble)

1. With population growth, the value of one’s property could only be on the uprise as the value of the land increases. Population growth also generates more demand for real estate, further boosting the value of one’s property.

2. History has proven that the value of landed property has increased many times in the past forty years and investors who have placed their eggs in this market have gained immense wealth. A possible reason might be because of that of appreciation of a country’s currency. I am however, making a slight assumption here that this trend of increasing value of one’s property will continue (simply because the future is uncertain);

2. Inflation is your friend. With inflation, increased construction costs will drive up the value of one’s property;

3. This applies to all investment decisions. If you happen to locate a value-priced property, why not grab it immediately?

4. They are costly yes, but their profit margin is large too. They might not be within reach for many pre-retirees, but it is a wonderful and reliable investment once one has the financial capability of investing in it;

5. There is rarely a declining real estate market. The SubPrime crisis was a careless mistake of the Federal Reserve. Well, if one possesses such pessimism in investing, thinking that every market would eventually decline and this would pose problems for one, one could never go about finding a foolproof market that will never decline.

6. It will provide an extremely reliable income after the mortgage is fully paid off.

In my opinion, the benefits from investment in real estate greatly outweighs the costs. Well then, could this be another example of a type of investment with high yield and low risk?

21 06 2009
Leonard / DHS / DHS06 (Invisible Hand)

Dear organizers, is it possible if you could help me edit my post at (16:33:20) and remove the “dear” please?

Haha I’m apologetic for my lack of formality. I’m just pretty used to talking that way! Sorry again! (:


24 06 2009

Dear Leonard, done (: [Sorry for the late reply! I was caught up with settling the quiz day details.]

Please don’t be apologetic; there is nothing wrong with your writing style (: Also, I think that using the word ‘dear’ isn’t a big deal. I start my more ‘formal’ emails with ‘Dear AAA’. What’s more important is the message/idea that you are trying to bring across. Anyhow, no worries!

21 06 2009
Jolena/ SAJC/ $ensibilities

Hello everyone!

Well, apart from education as a long-term idea to emphasize on retirement planning, I also feel that family planning, together with close family ties and also good morals that one can apply in their lifestyle how they spend/ save/ invest etc. can also make things so much easier and simpler in retirement planning.

Well… I mean, thats easier said than done. But that was just a random thought. Haha.

21 06 2009
Hong Wen/DHS/DHS01

Besides the measures mentioned by Mitchell, how else can retirees avoid outliving their assets?

Life annuity is a good choice to avoid outliving your assets. Life annuity is a type insurance product which the issuer makes a regular payout to the annuitant from a certain age (about 60 yrs old or more depending on the policy) onwards for as long as the annuitant lives. If we were to regard outliving your assets as a form of risk, then this type of insurance will help to transfer the risk from you to the risk from you to the insurer. In this sense, you are protected against the risk of outliving your assets so to speak. And given the trend of increasing life expectancy (ie. we have an average life expectancy of 80 today, Singaporeans had an average life expectancy of 73 years old thirty years ago), it is advisable to buy life annuities early to minimise premium cost. This is because premium may expect to increase in the future given the high possibility that our generation’s projected life expectancy will increase. As a whole, I would say that life annuity is the final touch to a comprehensive and risk-minimised retirement planning as it insures your full retired life, which something other insurance or financial products cannot provide (even long term bond has a fixed payout period).

All in all, there is no one-size-fits-all method to avoid outliving your assets for everyone. Plans for retirement have to be catered to the special needs of individuals i.e. medical conditions and personal lifestyles. Hence, for different individuals, the route that is taken to formulate an enduring retirement plans to avoid outliving your assets may vary. That said, consulting professional advisories will be an essential measure for everyone to formulate his or her own retirement plans. It seems that the previous comments have not touched on this aspect. I guess most have overlooked it as they assumed that it is something obvious and it will definitely come into the picture when one plans for the future. But what is important here is the effective communication between the individuals and the financial planner, and the utilisation of their advices. Keeping in contact with your financial planner with regular updates of your personal financial status with regards to your retirement plans is definitely important. Doing so helps you to keep yourself aligned to your retirement plans as closely as possible. Regular updates may help to reduce the risks of outliving your assets as actions could be taken in advance to address them. The utilisation of professional advices from these financial planners is the most pressing issue. Some individuals perceive financial planners as buggers who always try to earn commission from selling insurances hence try to keep a distance from. As a result, these individuals do not give the planners full picture of their retirement plans or keep them updated. This is undesirable as these individuals may not have sufficient understanding of insurance products which may causes poor retirement plannings. This can lead to outliving their assets in the future. I would advice them to fully utilise the wealth of knowledge these financial planners have. Even though some of their advices may be tilted towards the benefit of themselves or their companies, but they are still worth considering because they are probably the most informed people in the insurance and finance industry.

21 06 2009

Wow at the numerous long soporific (lol! just joking!) posts above!

Besides the measures mentioned by Mitchell, how else can retirees avoid outliving their assets?

Invest in CHILDREN! 😀

The more kids you have, (assuming they are capable people who earns a salary) ceteris paribus, the more money you will have to live you life through the eighties, nineties and hundreds!

Besides, as more and more kids are born, the government will have an increase in tax revenue and will also naturally give out more social benefits to retirees who are poor!

Two birds in one stone! Wait make that three, as this can also increase the dismal birth rate at most developing countries!

Hip Hip Hurray! 😀

Hopefully this has been a concise, refreshing and thought-provoking post.

22 06 2009

the lack of concern for the retirement planning is indeed worrying.

Planning for our old age is important as it helps us to be ready in time of emergency as we are more vulnerable to illness. Also, it enables us to enjoy the rest of lives after years of working. More importantly, we will not become a burden to our family and the society.

Many people suggest to go for some investments like buying bonds,unit trusts and even investing overseas. This is indeed a faster way to earn higher return than normal savings account. For those who have capital to invest,their worrries is to choose the best and right investment for them. Well, this is the tricky part. Even the college-educated baby boomers cannot correctly calculate compound interest for two years, a survey conducted professor of economics, Annamaria Lusardi. Yes, we can always consult the professional fund manager. However, we know that many of them would offer us investments that also benefit them, in term of commision. Furthermore, we need to pay high fee for consulting professional managers and analysts.

Investing overseas is a big no for commoner like us. Besides the language barrier, we may not be familier with the investment’s system. Also, we need to concern with the fluctuation of exchange rate which, again we as commoners do not know how to predict. Goverment intervention, sudden political unrest or natural disaster may cause our investments in the country suffer.

Hence, i suggest that people who do not understand investment world not to invest in high-risks investments. Instead, they should work really hard when they are young, earn as much as they can without compromising their health, spend wisely and start saving early. They should regurlarly do medical check-up and live healthyly. No matter how much money we have, it is useless if we always spend it in hospital.

To add on, they can use their skill to earn some extra money. Making handmade accessories or snacks can help to earn extra money. They can also rent out their empty rooms to foreign students and be their guardians(Singapore case). They can earn quite a lot from it. ( one room can cost $500-$800/month ^^)

Hence, investments may not be suitable for everybody.

22 06 2009

Do you agree that the lack of concern for retirement planning is worrying?

I concur that lack of concern for retirement planning is upsetting because as one get older, it becomes relatively more difficult for one to seek jobs, whether in the manufacturing, service or trade sectors. While it is easier for the higher-educated to become more employable, employers may not be very willing to hire them despite their expertise due to their difficulty in movements, higher risks of illness (resulting in taking more medical sick leave, thus affecting production level). Talk about practicality, alas older people are no longer highly sought after in the job sectors, probably due to sectoral or technological unemployment due to a change in the pattern of demand and cost competitiveness and introduction of new technology respectively, but older workers do not have the necessary skills needed to work in the new sunrise industry. While they may be great for the teaching sectors, not many of them are actually teachers. Hence, this results in the need to save while you’re young, even at age 20 is never too young to save. People our generation have been taught to save even back in primary school, where school teachers encourage us to save, say 50cents a day, in times of emergency. Unfortunately, as we get older, our teachers’ advices fall on deaf ears. Even if we do save, most young adolescents nowadays would use their savings on shopping, technological gadgets etc.

Nevertheless, even one have zero knowledge on retirement planning, in Singapore, MOST of us here are relatively shielded from the good government policies that our Singapore government has in place for us, which ranges from basic healthcare to home ownership and Asset enhancements. To ensure that every Singaporeans have access to basic healthcare, our medical services at public hospitals and polyclinics are heavily subsidised. Home ownership in Singapore (more than 90% of our population own at least 1 house and housing contributes about 20% of consumption) gives Singaporeans a sense of security. In the extreme scenario, suppose Singaporeans really have no money at all, they can still sell their house and migrate to some less developed nations to buy a flat there (which is much lower) and retire peacefully. Otherwise, they could sell their bigger house and get a one-room flat in Singapore. Fortunately, inflation is quite stable and low in Singapore as the government has introduced effective policies to dampen the effects of inflation. Hence, one need not worry about their higher cost of living in the future. Moreover, Singapore economy will most probably experience asset-based inflation (example in 1995 and 2007) which occurs as a result of property appreciation. One thing to note, our Singapore government will not let property prices go down as part of the government policies entail enhancing the wealth of the people through their preservation of the value of their assets to allow them to raise their purchasing power when they retire, enabling them to overcome the effects of rising prices.

What are the possible consequences of not planning for your retirement?

The possible detriments for not planning for retirement are countless. For one, their material and non-material aspect of standard of living (SOL) would decline.

We shall first look at the non-material aspect of SOL on the individual. Without jobs and assets or sufficient savings for retirement, an older person might feel useless and lost their sense of identity if they suddenly have no job and income, and may even results in depression. Coupled with society’s attitude towards the aged, the older person may just decide to live in isolation with the rest of the world. In many developed countries, as we become more self-reliant and probably as a result of Westernisation, many of us tend to prefer to set up our own families and decide to leave our parents to fend for themselves. While depression may be part of ageing, if not carefully managed, it could have disastrous impact on society.

The material aspect of SOL is apparent. Loss in income equates to the lowering of purchasing power and means not being able to get the same basket of goods as before. While CPF may cover some of our expenses, they may be used up even before one’s death. Based on human psychology, a sudden windfall at age 55 may result in one choosing to spend excessively and unwisely. One possible solution to this problem could be a compulsory workshop or seminar to educate everyone after they receive their CPF. However, it may be difficult to implement possibly as a result of the high costs associated.

Ways to avoid outliving your assets

1) Younger family members, who are usually better educated, should educate their older parents on how to manage their “sudden windfall” lest they get cheated.
2) Consume less, understand that one no longer have the same income as before, hence saving becomes more imperative. They should use the money more wisely on simple food fare.
3) Filial piety is very important. Children should take the responsibility to financially care for their parents. Our SG government understands this significance and thus have implemented certain policies to encourage family bonding such as giving more housing subsidies for buying a flat near their parents.
4) Read books on “how to become a millionaire”
5) The best way is to start saving from young, latest being the moment you start working. Invest at a young age also lower your risk as it is easier for a younger generation to start all over again that for the older generation.
6) Seek finance experts for help on ways to manage your assets
7) Just as how a diversified economy is imperative for economic growth, the best way to lower the risk of investment is to diversify your assets so as to spread the risk. As the old adage goes, “don’t put all your eggs in one basket”. Invest based on your ability and savings. For example, if your CPF saving is $200K, calculate how much you would need to live a reasonable SOL. If 40% is all you need, invest 40% in bonds and 60% in stocks. Hence, even if the stocks fail you, you know that you still have your bonds (unless of course luck is not with you).
8) If possible, get a part time job.

22 06 2009

Tommy, I must say that you have gotten an interesting idea there. It is true that if we have more children ( who are capable of supporting us and are fillial ), more people can support us. As u have mentioned, it can happen IF other things remain unchanged.

However, we should face the fact that not all children are fillial to their parents. Even if they are fillial, we still have to realise the fact that they have their own families to support plus the rising cost of living. Also, our son and daughter in-laws may not be happy with the idea of supporting us for the rest of our lives.

Furthermore, more children means we have to pay for more. Children’s education is enough to make a whole on our wallets. Not to forget food, clothing, and entertainment we have to provide them. I think we wont have the means to set aside some saving for our old age when we have problems providing for our kids.

Last but not least, suppose everybody has the same mind set : “having more children means we can retire peacefully”. It means that adults have to work EXTRA HARD to support their children and their parents, isnt it?

22 06 2009
Yan Ting/NYJC/Nyjc0823

The lack of retirement planning is of a big worry as it eventually becomes a country’s problem if the pre-retirees are spending their money unwisely during young and do not inculcate the habit of saving, being thrifty – it will eventually be a trend that can drag the economy down, maybe in the very near future that more government spending needs to be spent in this area, heavily “supporting” them and causing great pressure to the working population as more revenue needed may be in form of higher income taxes. This problem is also present in singapore and i believed is due to the ‘over-complacent’ mindset on the value of money viewed by pre-retirees, refering mainly teenagers and children.

my suggestion to avoid retirees from outliving their assests is that they should first identify their on-going ‘debts’ and actual assets that they possess and accumulate over the years and discuss with family the way to repay debts or to transfer their assets to or give their children the authority to ‘grow’ more money from fixed assets, although nothing is certain but it may hopefully benefit the retirees, with my assumption that there is strong moral values in children towards their parents.

22 06 2009
Wu Hong/HCI/Team2

Information on how many new malls are opening soon and how Singapore’s shopping ambiance will be improved is not enough to evaluate Singapore’s future as a shopping paradise. We should also consider Singapore’s relative standing with its other regional competitors such as Hong Kong and Tokyo.

We should compare the price and discount level, variety and quality of goods across the different competing places, rather than just across time within Singapore only. Also, the recent recession could possibly alter the distribution of consumer population and their consumption patterns. The place which can fastest and best adapt to these changes and cater to the newly emerged needs will have an advantage over the rest and get a larger slice in the market.

Moreover, there are complementing service sectors that these shopping paradises can compete on to increase their attractiveness. Easy transport for tourists and superb food are but two of the value-adds that can distinct Singapore from other shopping places.

22 06 2009
Heng Jia/ACJC

I strongly agree that the lack of concern for retirement planning is a troubling phenomenon not only in Singapore, but even globally.
By not planning ahead, retirees are in for trouble as they find their savings insufficient to cope with escalating living costs.
The main idea is to save up and keep one’s self mortgage-free. One should not bite off more than one can chew and instead, plan one’s expenses accordingly. Once debts accumulate, it will be easy to succumb to debt consolidation and predatory lending. Either way, one will be trapped in a vicious cycle. Retirees should have the correct mindset about their financial situation and adjust their lifestyles accordingly, weighing the necessities against luxuries before spending.
Seeking for financial consultation to draw personalised budgets and wise investments, albeit with calculated risks may pay off in long term. By diversifying usage of funds, any uncalculated losses can be eased off since the amount in question is relatively small. Business ventures and SMEs may be a good idea; with smart allocation of resources, one can ensure a sustainable enterprise and stable income.
Investments do not guarantee profit. Retirees or even retirees-to-be should practice vigilance while opting for the best investment plans. The Senior Citizen Savings Scheme by the government, for instance, may be a good choice since it is initiated by the government; the scheme will be more inclined to consider retirees’ welfare on top of profit gain, unlike profit driven companies. It is most important to monitor these investments meticulously and dig into the asset’s overall profile and background, as we want to see stability and security in our investments.
The government can aid retirees by providing greater tax rebates and subsidised healthcare, but more importantly, if the government can ensure the stability of our currency and economy, the potential problems on retirees may be alleviated.

23 06 2009
Marcus Ow/ SRJC / M3

One way to increase the chances of one outliving his assets, besides long term investments and insurance, is to directly change how one lives his life. For example, before one retires, he may be enjoying many forms of luxuries such as expensive cars and houses, but when he is retired he should change all that. A smaller car and a smaller house will significantly reduce the burden that it bears on the owner. Living expenses will decrease and hence ensuring that the returns from assets can last longer in retirement life. Furthermore, as one get older and less active, such luxuries will not be one’s goal in life. Hence releasing these luxuries and the burdens that come with it, earlier in retirement life ,will increase one chances of not outliving his assets’ returns.

23 06 2009
Heng Jia

ACJC Team 2

23 06 2009
Glen Tan/ACJC/Team Fiducia

I categorically agree that the lack of concern for retirement planning is undeniably disturbing. Much has to be rectified. I would like to discuss not why I feel the deficiency in concern is troubling but instead, retirement planning suggestions applicable in the aftermath of the crisis.

An important issue facing investors as the economy emerges from the current financial crisis is what they should do with their retirement accounts. Going forward , investors should not drastically reduce the fractions of stock holdings (direct holdings plus holdings such as equity mutual funds for e.g) in their retirement accounts. Typically, during periods of poor economic growth and after large stock market declines, future stock returns on average are higher than at other times in the business cycle. They certainly are not lower than at other times.

Since expected future equity returns right now are the same or higher than at other times, investors are better off if they invest larger fractions of their retirement portfolios in equity than at other times in the business cycle. The one caveat to this advice is that the current crisis may signal a period of high volatility for equity returns which would provide investors with a motive for reducing the fractions of their retirement accounts invested in equity. However, it is unlikely that this channel outweighs investors’ desires to hold higher fractions of their portfolios in stock because expected future stock returns are higher than average.

It may seem counterintuitive that after a sharp stock market decline, investors need to increase the fractions of stock that they hold in their portfolios. The massive declines in equity prices mean that the equity fractions in portfolios have declined so investors need to buy stocks just to return their portfolio equity fractions back to the levels these fractions were at before the declines occurred. Thus, investors need to increase their stock holdings in the aftermath of the crisis, and this reason remains in play even if the expected return on equity is not countercyclical as argued here but instead constant. Expected returns on equities are countercyclical, being high during recessions and low during expansions, since the stock market typically leads the real sector of the economy and so large stock market declines typically precede recessions.

When saving for retirement, investors are saving for the long-term, since retirement is decades away for young investors in their 20s and 30s. Hence, these investors care about the long-horizon returns on their retirement accounts, i.e., the returns over the next 20, 30 or 40 years. A long-horizon investor mainly cares about two things: the investor likes a higher expected long-horizon return on the portfolio and a lower volatility of that return. Investors are always trading expected return off again return volatility. When the expected return on stocks goes up, without a corresponding increase in stock return volatility, holding stocks become more attractive relative to holding cash and an investor can make him/herself better off by holding a larger fraction of her retirement account in stocks.

For people approaching retirement , say in the 60s, they should invest in annuities , endowment plans and insurance (medical+life), to protect one’s wealth and ensure stable monthly payouts.

Thus, people should stay invested. During uncertain times, it is naturally not easy to stay invested. History reassures us that while declines are common, markets have always recovered. Remember , Bull-Bear cycle. Don’t lock in your losses due to panic w/o waiting for the investments to recover so as to emerge from stormy crisis with positive returns.

23 06 2009
Narinderpal Singh Dhillon

i agree that the lack of retirement planning is very concerning to both the individual and the government. living after retirement may be ‘heaven’ or ‘hell’ depending on how well you have planned for it. when people do not plan for their retirement, it is worrying as it shows that the individual does not have the foresight to see the repercussions of their lack of planning. it is also worrying as this might imply that they do not foresee themselves living long enough to reach retirement age and this might affect their productivity in work and they might even stop working earlier than the retirement age (which would cause a smaller working population). and for a small country like singapore, this might be very detrimental for the economy. the lack of planning is also worrying for the government as it means that more funds and resources have to be channeled to help such people in their retirement age. this is a very big concern for a small economy like singapore where resources are already very scarce.

As such, we can see that the lack of planning for retirement by a country’s population may cause its growth goals to be hindered as resources have to shifted from its growth goals to supporting its retired population.

other ways for retirees to cope with retirement costs include an indepth analysis of the costs of retirement. retirees should cut down on unnecessary costs such as cable tv (if not needed). by cutting down costs, retirees should aim to be able live within the amount the retiree gets from cpf every month or perhaps slightly more. this helps them manage their savings more effectively and allows them to even enjoy their retirement through holidays etc. by using their personal savings (other than cpf).

investing in government bonds is also a good idea to help retirees earn extra cash even in their retirement age. government bonds are usually safe and they would receive a monthly cash till the bond expires (where they will get back their amount invested). this is a better way than investing in stocks or in private financial institutions as their money would be in ‘safer hands’

23 06 2009
Tea Hui Wen/DHS/DHS Team 4

Indeed, I agree that the lack of concern for retirement planning is worrying.

In this age of the 21st century, our culture is one more of “convenience” and “currency” rather than planning for the future. Especially in Singapore where a paternal government is present, majority of the people have the mindset that everything is taken care of. Such over-reliance has led to a severe lack of awareness and preparedness, especially for one’s retirement. Can the government really take care of everything?

Some people may perceive that their savings in the Central Provident Fund are sufficient for them to lead their lives after retirement. However, this is often not the case. As shown from research, 5 out of 10 people run the risk of living longer than their assets will last. This situation is exacerbated by the increasingly active lifestyle of senior citizens and their more ambitious lifestyle goals such as frequent travel.

At the micro level, this will lead to a group of retirees who are unable to maintain a basic standard of living. At the macro level, it will lead to social and economic instability as social problems arise due to an overwhelming ageing population and a worsening of the budget position as the government pumps in more funds to take care of the elderly.

In my opinion, the solution is for Singaporeans to gain awareness of the pressing need to plan for retirement, to understand that they have to be responsible for their own lives and draw up concrete goals and steps to advance towards them. Secondly, it’s the ‘how’. Financial literacy workshops should be held in the workplace to provide the current labor force with the necessary knowledge (the knowhow of investments, insurances and so on) to plan for their future. In the long term, such courses should be incorporated in the Singapore education system so that students are well-equipped before stepping into the labor force.

23 06 2009

hahah a lot of the later comments are repeative of the points mentioned in earlier posts. I wonder if the participants take note of the scoring system. Marks will not be allocated for repeated points!

24 06 2009

Thank you for your concern.

23 06 2009
Swee Cheng Wei/VJC/VJC010

Ya, the lack of concern for retirement planning is indeed worrying. People might feel that retirement is still a long way to go, but it is never too early to plan it to finance and love it. We are living in times where cost of living is always rising, prices of commodities are ever increasing, thus if we do not think about the future, how can we ensure that we will have a pleasant life after retirement. And if people cannot support themselves when they are old, do they expect the government to take care of them and incur huge expenses?

Other than depending on children to provide for their future needs, pre-retirees should of course plan how they want to live after retirement. They can create a financial plan with a certified financial planner that will help them figure out how much they should invest for retirement on a regular basis. They should also purchase insurance at an early stage to capitalise on the premiums.

23 06 2009
Jingyi/ ngee ann poly/ JAE

Firstly, i agree that the lack of concern over retirement planning is indeed worrying. Life expectancy is going to be extended with the advancement in the medical industry and the increasing cost of living would pose a threat to retirees. Without proper financial management, retirees may end up outliving their assets.

The possible consequences are that, you may not have enough money to live through your retirement and you may face financial problems and thus leads to a hard and arduous retirement life.

In addition, if you were to get a terminal disease or any illnesses, you may not be able to pay for the medical bills. As we all know, as one grows older, the tendency of falling sick is very high.

Lastly with inflation, the value of money will be eroded away. We need a required rate of return on investments which is higher than the inflation rate, in order to ensure that the value of the money is being retained.

I believed retirees can outlive their assets by probably buying those bonds which are not that risky. Probably “AAA” or “AA” bonds. Bonds can provide a fixed income for retirees. Every month or so, the retirees would be able to receive coupons. It bears a risk which is generally lower than stocks.

Secondly, retirees should cut down on their spending on depreciating assets, in example buying cars. Retirees should increase their passive income, by investing in stocks and shares that may result in potential capital gains

The last solution is to ensure that they have living childrens who are able to provide them with the needed monthly expenses to meet their needs. Having childrens is indeed important as it serves as a cushion for these retirees, they have someone to turn to when they have financial needs. However such act is not encouraged.

Most importantly, retirees must think of ways to make money work for them and not the other way round. It could be renting out your properties and receiving a fixed monthly rental income. This would ensure that you have a certain fixed sum of money to keep your life going on top of your savings. Even if your life expectancy got prolonged, you still have sufficient funds to keep you going.

23 06 2009
Langston Peh Song Yun/HCI/HCI08

I agree that it is important for the pre-retirees to start planning for their retirement. As Singaporean’s life expectancy is very high (80.2), many people will have to ensure they have enough savings to last them their retirement. Also, given Singapore’s low fertility rate of 1.28, it might be too taxing on the young to request them to support the cost of living of the elderly throughout their retirement. As such, pre-retirees should plan for their retirement so that they will be able to support themselves.
However, I feel that Singaporeans generally are aware of this fact and many do save up for their retirement. Also, Asians are known to be more prudent and most of the Singaporeans in the older generation do know it is hard to make money. Hence, most of the pre-retirees will most likely have plans for their retirement. According to data compiled by HSBC, Singapore has a relatively high gross savings ratio at 47.6%, higher than that of Japan and Hong Kong. (source: As such many do see the point in saving and planning for retirement.
However, the worrying fact is that many do not know where to put their money, in other words most people do not know how to invest their money so that it will be able to reap higher interests which will allow them to enjoy a better retirement life. Many Singaporeans only put their money in special deposits in banks which earn them little interest, and hence the value of their money is slowly eroded by inflation (though Singapore’s inflation is very low). This is because many do not have the financial literacy to do so. This is made further worse by the recent financial tsunami, which cause many to lose confidence in the banking system. Many will be further discouraged to put their money in investment products.

23 06 2009
Langston Peh Song Yun/HCI/HCI08

I agree that it is important for the pre-retirees to start planning for their retirement. As Singaporean’s life expectancy is very high (80.2), many people will have to ensure they have enough savings to last them their retirement. Also, given Singapore’s low fertility rate of 1.28, it might be too taxing on the young to request them to support the cost of living of the elderly throughout their retirement. As such, pre-retirees should plan for their retirement so that they will be able to support themselves.

However, I feel that Singaporeans generally are aware of this fact and many do save up for their retirement. Also, Asians are known to be more prudent and most of the Singaporeans in the older generation do know it is hard to make money. Hence, most of the pre-retirees will most likely have plans for their retirement. According to data compiled by HSBC, Singapore has a relatively high gross savings ratio at 47.6%, higher than that of Japan and Hong Kong. (source: As such many do see the point in saving and planning for retirement.

However, the worrying fact is that many do not know where to put their money, in other words most people do not know how to invest their money so that it will be able to reap higher interests which will allow them to enjoy a better retirement life. Many Singaporeans only put their money in special deposits in banks which earn them little interest, and hence the value of their money is slowly eroded by inflation (though Singapore’s inflation is very low). This is because many do not have the financial literacy to do so. This is made further worse by the recent financial tsunami, which cause many to lose confidence in the banking system. Many will be further discouraged to put their money in investment products.

23 06 2009
Langston Peh Song Yun/HCI/HCI08

sorry double post

18 07 2010
Zhang Gongbo/VJC/VJC Team1(P.G)

Lack of retirement planning is indeed a worrying phenomenon, given an imminent trend of ageing population around the globe. Besides risks of outliving their individual assets, government has also to bear the burden of supporting them financially.

Firstly, it results in sluggish growth because of fall in domestic consumption. There is always a stereotype perceiving the elderly as people with very low purchasing power and low productivity. Indeed, many of Singapore policies are based on this false assumption. The elderly in Singapore are “recommended” to take low value-added and thus low-paid jobs such as waiters at hawker centre. However, in other countries, for example Japan, the elderly are in fact contributing a lot to their economy. Silver industries, whereby goods and services are specially designed for the elderly, make them quite a large consumer group in Japan. Theoretically, there will be a fall in consumption and hence a loss in actual growth contributed by the elderly in Singapore if the elderly in Singapore do not plan for their retirement early and properly.

Indeed, we can argue that Singapore is a small country dependent on external trade instead of domestic consumption. The part of actual growth contributed by the elderly in Singapore is negligible as compared to the export sector of Singapore’s economy. However, this is going to a burden to Singapore government budget as the government will be the one providing support for the elderly. There is certainly allocative inefficiency associating with an increase in budget on supporting the elderly as resources in doing so can be used in other areas such as improving infrastructure and providing skill-upgrading, which generate higher returns than providing support for the elderly. The heavy spending on elder-care, such as healthcare, can be very stressful for government budget. Even for a big country like the States, uncontrolled spending on healthcare poses heavy burden on government budget. From Time Poll done among Americans, 36% demand cut in healthcare spending; and there’s famous example of National Health Service in Britain. After all, it is not economically viable to provide full support for every elderly in Singapore provided limited resources and increasing number of the elderly in Singapore. During recessions, not planning for retirement comes at a price of slow recovery as the government has to stimulate spending by the public while providing safety net for the elderly.

People may argue that, due to Singapore government’s “successful” CPF policies, most of the pre-elderly in Singapore currently have at least some numbers in their CPF account, rich enough to make sure that they will not become beggars when they retire. However, the image posed by poor elderly is definitely not tolerable as Singapore aims to develop its tourism industry. What will the Western Critics say when they see these? They are not going to say anything beneficial to Singapore. For a small country highly dependent on its reputation, credit and global profile, the government of Singapore probably will not let the problem of pre-elderly not planning for their retirement going on.

Mr. Mitchell has proposed very good ideas of how elderly can cope with cost of living. These ideas such as save more, invest more and exercise more are good, but too theoretical. The current elderly group in Singapore is generally very traditional and conservative. Investing their life saving means giving away their money to people they cannot trust. Most of them will not choose investing. As for saving, there is ironic fact that the elders indeed saved money when they were working but the money “disappeared” when they need it. Many elder people in Singapore, as conservative as traditional as their fathers, use their life savings on their children’s wedding and housing. The competitiveness of housing market in Singapore and government policies encourage (or force?) youngsters to buy flat as early as possible and to get their money from their parents.

Here the problem comes: will the young people support their parents?

Being a traditional and conservative society (as called by the government), Singaporeans ought to help support their parents, yet they do not. The key problems faced by Singapore are thus not only about elderly not planning for their retirement, but also young people abandoning their parents or leaving them in hands of the government. The government has no choice but to deal with this group of old people. To address the question of the elderly outliving their assets, one has to acknowledge that the source of financial support is family, not Singapore “garment”. We can see that the Singapore government has made some efforts in encouraging people living with their parent such as the “grandparents’ day” and “Senior Citizen’s week”. Etc. However, it is not enough as there is lack of education on traditional values of Singaporeans. The current measures to educate people to take care of their parents, if any, are rather superficial and do not focus on long-term actions—People may just act for one or two days in front of MPs and continue neglecting their parents for the entire year. This is, definitely , not the right thing to do.

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