Connect with us

Investing

4 Retirement Trends We Can Observe From The OCBC Financial Wellness Index 2021

More are opting for simple retirement lifestyle, but it may still be too expensive.


Amidst the global pandemic, Singaporeans are paying more attention to financial management and are improving their financial health. This can be seen in the 2021 results from the OCBC Financial Wellness Index where our overall score improved to 62, up from 61 in 2020.

The OCBC Financial Wellness Index is a survey that aims to understand Singaporean’s state of financial health based on 10 pillars of financial wellness as defined by OCBC’s wealth management experts. The 10 pillars are: 1) savings habits, 2) spending beyond means, 3) manageable debts, 4) protection from financial emergencies, 5) regular reviews, 6) regular investing, 7) retirement planning, 8) excessive speculation, 9) borrowing money, and 10) gambling habit.

The Index results showed that Singaporeans are scoring better in retirement, improving by 5 points to 49 from 2020’s score of 44. Although retirement planning scored the third lowest on the overall scoreboard, it scored one of the strongest improvements amongst the 10 pillars. This suggests that while retirement planning has taken a backseat to more immediate priorities (such as having enough financial cushion to sustain for 6 months if jobless, having enough funds to overcome a crisis or being able to spend comfortably), people are paying more attention to retirement planning.

Here are 4 interesting trends we observe about Singaporeans’ mindset towards retirement from the OCBC Financial Wellness Index results.

Read Also: DollarsAndSense Took The OCBC Financial Wellness Index Survey – Here’s How Well We Scored And What We Learnt

#1 More Are Planning For Retirement

The uncertainties that the pandemic has caused are motivating more Singaporeans to plan for their silver years with 51% listing retirement planning as one of their top priorities. This is a 6% increment compared to 2020 where only 45% were planning for retirement. More women (52%, a 5% increase from 2020) and men (50%, a 7% increase from 2020) have also indicated planning for retirement as one of their top 3 priorities.

More respondents have started making retirement plans, 66% in 2021 compared to 63% in 2020. While we tend to associate retirement planning with the older age groups, the younger generations are also planning for retirement. 58% of those in their 20s and 67% of those in their 30s have started making retirement plans, showing the largest increase (7%) from last year. In fact, 33% of those in their 20s and 41% of those in their 30s report as being on track with their retirement plans.

On the other end of the age spectrum, 57% of those aged between 40 to 54 and 62% of those aged 55 to 65 report as being on track with their retirement plans. This suggests that there is a minority of those nearing retirement who are still unprepared for retirement.

#2 More Are Opting For Simpler Retirement Lifestyles

Another interesting observation is the change in preference for retirement lifestyles. In the survey, participants were asked to select their preferred retirement lifestyle. Amongst the surveyed Singaporeans, those who picked the simplest lifestyle made up the biggest group (40%) with 35% selecting lifestyle B, and 25% lifestyle C. This is a 4% overall increase in those who picked lifestyle A. Preference towards lifestyle A is more prominent as we grow older, with 59% of those aged 55 to 65 choosing this option, a 10% increase from last year.

This suggests that Singaporeans – regardless of maturity – are becoming more sensible and prudent after being hit with the realities of the pandemic.

Source: OCBC Financial Wellness Index

#3 We Underestimate Our Retirement Needs By Almost One-Third On Average

While retirement planning is back on Singaporeans’ radar, it is still a neglected area in their financial portfolio. According to OCBC’s survey findings, 81% of respondents are underestimating the amount needed for their chosen retirement lifestyle, compared to 78% in 2020. On average, they are underestimating their retirement needs by 31% (a slight improvement over 32% in 2020).

Source: OCBC Financial Wellness Index

Based on the findings, the younger the age group, the higher the tendency to underestimate their retirements needs. The youngest age group (20s), being the newest and freshest to join the workforce, underestimated their retirement funds by an average of 46% of the required amount for the lifestyle they’d chosen.

Those who are older tend to make more accurate retirement estimates, with the eldest age group (55-65), only underestimating their retirement funds by 23%, which might speak to their experience. However, at their age, they’re also nearing the minimum retirement age of 62 years old (or 63 years old come 2022). This underestimation is worrisome as they have a shorter runway to work with to generate enough income to set aside savings for their retirement. For them, making up a shortfall of 23% can range from anywhere between $541.65 to $1,224.75 per month, based on the 3 lifestyle scenarios mentioned above.

Read also: Is A Retirement Income Of $2,000 A Month Realistic For An Average Singaporean?

#4 Regular Contribution And Investing Is The Key To Having Enough For Retirement

Most Singaporeans are good at saving, which is the best scoring of the 10 financial pillars. 88% of respondents are setting aside at least 10% of their salary and saving regularly. However, even though more of us are better prepared for rainy days, it still may not be enough.

Singaporeans who have started making retirement plans tend to accumulate retirements funds through cash savings (55%), local stocks (39%), endowment (39%), regular investment plan (38%), CPF LIFE (32%) and foreign stocks (25%). While the high proportion of cash savings is a testament to our ability to save, it may actually hamper our retirement plans as inflation outpaces the interest we receive for our cash savings.

Source: OCBC Financial Wellness Index

In general, those who contribute regularly to their retirement plans and have investments are more on track in achieving their retirement goals. Thus, it is important not to neglect investing when planning for retirement.

Advertiser Message

Get The Latest Bite-sized Investment News, Ideas & Insights

Join FSMOne.com's Telegram channel ( FSMOne SG - Research Highlights ) to stay updated on the latest investment and personal finance news, idea and insights. Whether you're at home or on-the-go, this is a quick and convenient way to stay in-the-know.