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Commentary: Saving too little, starting too late, do we have enough for retirement?

Many of us put off planning for our retirement until we’re in our forties but it doesn’t have to be an onerous chore, says one financial advisor.

Commentary: Saving too little, starting too late, do we have enough for retirement?

File photo of an old man drinking out of a bottle of water. (Photo: Christy Yip)

SINGAPORE: John Ng, aged 40, plans to retire at 65 with S$3,000 monthly to spend in real terms. He hopes to enjoy such an income in his old age for 20 years.

By the time he retires, he must set aside a retirement sum of almost S$1.15 million, assuming a long-term inflation rate of 3 per cent. 

What can John do now?


John is a member of the CPF LIFE scheme, which is a compulsory annuity plan that pays out lifelong income. He is confident he can meet the full retirement sum of S$181,000 when he retires. 

Depending on CPF Board’s pending projections, that probably provides a lifelong guaranteed monthly payout of slightly over S$1,500. But this is still short of his ideal S$3,000.

To reach a payout of S$3,000 a month, John must invest S$10,100 a year assuming an annualised return of 8 per cent. If he had started his retirement investment five years earlier, he would have only needed to invest S$6,510 annually with the same annualised returns.

But if the annualised returns is only 6 per cent, then he has to invest slightly more than S$13,600 every year to achieve his retirement financial goal.

Another option for John is a retirement income plan which insurance companies offer but these usually do not provide lifelong income. Although they come with lower risks, they may also have lower returns compared to other investment options.

A third option would be the Supplementary Retirement Scheme, which provides an account that allows for investment gains to accumulate tax-free and tax relief for contributions to the account.


John’s example highlights the arduous challenges most people must confront as we plan for our retirement.

File picture of Singapore currency. (Photo: AFP/Roslan Rahman)

READ: Save for retirement? But we hate making financial decisions

A 2014 survey by DBS Bank showed that many Singaporeans aged 18 to 29 are saving late and not enough.

73 per cent of respondents polled said they plan to retire between 55 and 65, yet 85 per cent also expect to live on retirement income of S$3,500 per month.

The same survey also found that while providing for retirement is a priority for 76 per cent of respondents, only 49 per cent have a financial plan.

When so many of us put off planning for our retirement, we give ourselves a shorter runway to grow our retirement fund. Most of us only think about retirement after 40.

Surveys have also shown most Singapore workers have only their CPF savings to depend on for their retirement. Yet, as we have seen from John’s case, the payout from the CPF LIFE scheme may not be sufficient to meet your retirement income needs, unless you are prepared to review your lifestyle. 

To overcome these issues, one option is to invest more aggressively. But this is a risky move if we start too late, as it gives little time to regroup our portfolios and recoup losses, if the investment tide turns.

The best time to begin retirement planning is when you get your first salary. But few individuals do that because retirement planning is not a priority – funding a home, paying for the kids’ education or going away on holiday might be more acute financial imperatives for many of us.

Yet many of us recognise that we ignore our retirement needs at our own peril. A survey done in 2015, found that two thirds of surveyed retirees wished they have started their retirement plans earlier.


Even after we start planning, most of us may save too little. Attitudes to retirement study by BlackRock found more than half are still unsure how much they truly require for their retirement.

Without the necessary knowledge and tools, they will either guess or apply heuristics, such as using current expenses to estimate their retirement needs.

Are we saving too little, and starting too late? (Photo: Pixabay/stevepb)

But any sum estimated is likely to be insufficient, as they negate external factors, such as the impact of inflation. In 20 years, today’s S$100 would only be worth S$54, assuming an annual 3 per cent inflation.

John may have assumed that he only needs S$720,000 (S$3,000 monthly x 20 years) for his retirement. But in real terms with inflation, it means he actually needs to set aside an additional S$430,000.

Many also tend to be overly optimistic about their physical and mental well-being, and overlook making provisions for additional medical expenses incurred in old age.


It is better to start earlier but it’s never too late to begin. We can all take the first step by adopting a mindset change and make retirement planning one of our top priorities necessary to ensure we retire comfortably, instead of seeing it as something we do only after our other financial obligations have been squared away.

I often tell people that we need to apply the Law of the Farm when thinking about retirement adequacy. Like the planting of trees and harvesting of apples, investment needs time to grow. 

The earlier we begin, the more we might have for retirement. Time is investment’s best friend, as compound returns over time will grow your investment many folds.       

Some level of discipline can introduce greater consciousness and thoughtfulness into how much we set aside for our retirement. Perhaps think of having different bank accounts. 

One blunt but systematic way is to funnel your income into different bank accounts for savings, expenses, investment, children education funds, retirement funds, and so forth.

Like the planting of trees and harvesting of apples, investment needs time to grow, says financial advisor Patrick Chang. (Photo: Pixabay/Couleur)

Each account then has a clear purpose and specific objectives. You also must not withdraw from other accounts, if one has been depleted. Applying some system discipline can help us all manage our finances more effectively. 

Even the most financially savvy of us can benefit from seeking independent and professional financial advice, to better understand our current financial position, our future financial needs and the best options that provide payouts at critical junctures in our lives.

The mapping of a comprehensive financial road map, and pinpointing with finer precision of how much we need after retirement, with regular reviews of that amount, can help us gain control over our retirement finances.


Retirement is an important phase of our lives often overlooked for several decades because of a lack of an urgency to plan. Immediate needs, such as building one’s career and grooming children, take centre-stage but it need not be a zero-sum game.

Let’s not miss the forest for the trees. We can all start today to plant the seeds for the fruits we need in our old age.

Patrick Chang is senior consultant at Financial Alliance, an independent financial advisory firm.

Source: CNA/nr(sl)