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Retiring in Singapore won't be as easy for you as it was for your folks

Depending on your savings, you may have to continue working past 62.
Depending on your savings, you may have to continue working past 62.

By Thusitha de Silva

In previous articles in this retirement series, it has been highlighted that people in Singapore have to start saving for retirement as early as possible because they are living longer and have to fund longer periods of retirement.

The need to do this becomes all too clear when retirement age looms large. Singapore’s official retirement age is 62 years. It is a major crossroads in people’s lives and they potentially have to face one of several scenarios going forward. However, all scenarios would be underpinned by a single attribute: Have they saved enough to last the next 20 to 25 years?

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If they think they have saved enough, people will choose to retire. They will have to factor in the high cost of living in Singapore and the impact of inflation on the purchasing power of their savings, as well as having enough money set aside for unexpected expenses, especially unforeseen medical bills. If their savings are adequate, the decision about whether to work or not is in their own hands. That is a good place to be and is perhaps the result of making more good investments than bad ones through a lifetime, and also having a bit of luck at being around at the right time to catch positive economic cycles.

Working voluntarily past retirement age

If such people choose to continue working or to re-enter the workforce, it helps to keep them engaged with the community through interactions at their workplace. They can also offer insights from their years of experience to younger generations. In the movie “The Intern”, Robert De Niro’s character, a widower, quickly ran of out things to do and decided to re-enter the workforce. His experience and insights helped the founder of a start-up through some difficult times.

You would suspect that, like De Niro’s character in the movie, old people in Singapore soon run out of things to do and they may itch to get back into the workforce so they can interact more with people. There are arguably only so many overseas trips you can make, so many golf games you can play, and so many brunches, lunches, high teas and dinners with friends and family that you can attend before it all becomes tedious or a chore.

No choice but to keep at it

Meanwhile, many elderly people in Singapore may not be fortunate enough to be able to choose whether they want to work or not – they have no choice. How did they arrive at that state? Perhaps they started saving for their retirement too late, or could not save as much as they wanted to because they were in relatively low-paying jobs all their lives, or they lost money when markets turned against their investments.

The most prominent case of the latter in the last 10 years was the Lehman Minibonds disaster. Many older Singaporeans bought these securities without understanding what they were because their banks recommended the products to them. More recent cases of bad investments involve corporate bonds from companies in the sluggish oil & gas industry.

There are two lessons that can be learnt from this from an investment perspective: First, nest-eggs can be vulnerable if there is no diversification of assets; and second, if an investment sounds too good to be true, it probably is.

The luckier among this category of older folks may have a family network that can help them out. However, many older Singaporeans do not want to be burdens to their families and decide that they have to keep on working. Others simply don’t have a support network of family and friends to provide a safety net. So, they end up having to work long into their retirement years or until they die.

A global issue

The rising cost of living, stagnant wages, ageing populations and a lack of retirement savings are challenges that governments and people around the world are facing today. Singapore is no exception. Efforts are being made by all stakeholders, including government bodies, regulators and financial educators, to create awareness about the need to save for retirement.

However, even if people are convinced, the investment climate is not conducive at present. Interest rates are low and assets that deliver healthy returns are relatively scarce but in high demand. The spectre of having no choice but to work deep into what used to be called the retirement years is becoming ever-menacing.

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