If there is one thing that foreign friends remark on when they visit Singapore, it is not the shiny skyscrapers or sprawling malls. Instead, they express surprise, and sometimes shock, at the large numbers of elderly Singaporeans working as cleaners, dishwashers, and other low-skilled (and hence low-wage) jobs. There are many dimensions to the problem – sociological, political, and financial. In this article, we will explore the latter aspect to debunk some retirement myths and encourage you to begin retirement planning in earnest if you have not already done so.
Here are some retirement myths we may be guilty of indulging in (they are common, after all):
“I have CPF, that will provide for my retirement.”
“My children will support me in my retirement.”
“I have saved conscientiously over the years.”
“If I restrict my spending to $____ a month, I have enough to get by.”
These myths are as nice to believe in as the myth of Santa Clause or the tooth fairy, but they also have as much basis in fact as well. In other words, don’t count on them.
“I have CPF, that will provide for my retirement.”
As you can read in our series on the CPF system, many programmes have been tacked on to the CPF. It can be (and is often) used to pay for HOUSING (all-caps emphasise what a big ticket item it is), tertiary education, investments, healthcare. Oh, before we forget, it is a retirement fund too. And while some restrictions exist to ensure some funds earmarked for retirement are untouched, you end up with much less monies than you would think. And with the requirement to maintain a Minimum Sum, the actual amount of cash you can withdraw (and use) when you reach retirement age is even lesser.
“My children will support me in my retirement.”
Putting aside the sad but real occurrence of children refusing to provide for their parents and kicking them out, we should remember that children could be themselves struggling to put food on the table, pay the bills, and send their own kids to school; not to mention setting aside money for their own retirement. So while our children may be obliged or even glad to give us an allowance in our old age, from a financial standpoint, it is irresponsible and risky to count on it.
“I have saved conscientiously over the years.”
Saving money in a bank account conscientiously is laudable, however, the effects of inflation and rocketing standards (ahem, cost) of living will decrease the power of your money pile. At 5% inflation, it is as if we took a loan at that rate and are steadily ‘paying’ interest for it. As for cost of living, do you remember a time when a meal cost 50 cents? I don’t, but many older folks sure do. By the time it comes to our retirement, hawker centre fare may set us back 10 bucks. Crazy? So is $90,000 for COE.
“If I restrict my spending to $____ a month, I have enough to get by.”
We applaud the stoic determination to live a spartan life, but you have to remember: you are no longer a young, ripped warrior in the movie 300. You may need to visit the doctor for this ailment or that. Or perhaps to maintain a healthier lifestyle, you need to pay a premium for organic produce. Perhaps your refrigerator broke down and you have to fork out money for a new, Wi-Fi enabled touchscreen dual core green label fridge. The point is, unforeseen things happen and to maintain a healthy financial buffer is essential.
So, with the myths debunked, are you ready for a fact? Here you go:
Fact: You’re on your own.
The Singapore government has always maintained an abhorrence to any form of ‘welfare‘. Barring a change of government into a socialist state, retirement planning is not just for those who need to decide if they want to lounge on the beach in the Bahamas or in a mountain resort spa. It is a necessity for us in Singapore so we can get by at an age when we may not be as financially productive as we are today. Stay tuned for subsequent articles on retirement planning. In the meantime, work hard!
Original photo by Benjamin Lim. Used with permission.
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