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Why Relying On Your Health For Your Retirement Is A Terrible Idea

It’s great if you can work at an older age (if you want to) but don’t count on it.

You can work longer and even past your retirement age if you wish to achieve a more comfortable retirement portfolio. That’s what most people think, especially in Singapore, where our government constantly encourages us to remain productive even in our old age.

In many parts of the world, especially countries with an ageing population or shortage of labour, workers are expected to increase their retirement age. The idea is that these developed nations tend to have better healthcare, thus allowing individuals to remain healthy enough to continue working.

Singapore’s official retirement age currently stands at age 62 with employment rates for those between the ages of 55 to 64 standing at 68.4%. In that regards, it also means that 31.6% of the people from age 55 to 64 are not working. This number declines to 25% for those age 65 years and above.

When people do not work, it usually means one of two things…

1. People can safely retire after having saved enough for retirement and are now financially independent. Or perhaps, they are fortunate enough to have financial support provided by someone else, which could include their spouse (who are still working) or their children.

2. People have insufficient funds to retire, but are no longer able to work due to health reasons. This doesn’t mean they are completely immobile (though some might be), but it could mean that they have health issues that hinder them from being able to perform in a job which they previously was good at. Alternatively, they might just be unable to find a job.

The first scenario is the optimal situation that we would ideally want to be in, whereas the second scenario is the one we hope to avoid.

17 Years To Live Vs 9 Years Worth Of Retirement To Live On

Graph 1

Graph showing relationship between years one is expected to live after retirement vs how long their retirement savings are expected to last

Source: The Future of Retirement: A New Reality (February 2013)

A report carried out in year 2013, surveyed a sample size of more than 15,000 people across 15 countries revealed a rather worrying result.

As shown in the graph above, Singaporeans are expected to live for up to 17 years after retirement, but retirement savings are expected to run out within 9 years. We will call it a “retirement coverage ratio” (RC) of 0.52

To be fair, every other country also has the same problem. Malaysia’s RC is 0.7, Hong Kong is at 0.65 while Taiwan and China are at 0.5. Asia’s average is at 0.56.

Learning From The US

To add on to this woe, a recent study done on the workforce in the United States also came up with a few interesting observations.

1. Despite expectations to work past the age of 65, median retirement age have remained stuck at 62 years old since 1991. This suggests that health conditions, rather than an employers/employees willingness to hire/work is the key issue. Many are hindered from returning to the workforce to earn additional income despite this being encouraged.

2. Most people do not take into account medical expenses in their retirement. For welfare state, this may not matter so much. However in Singapore, we need to make sure we have enough insurance coverage and savings to help mitigate medical cost.


Here are the two main conclusions that we can derive from the above data.

1. Even when you want to continue working and you have a great boss who is keen to hire you, your health may not agree with both your intentions.

2. Just because the government raises the retirement age doesn’t necessarily mean that you will continue to have a job if you want till that age. Health declines at different ages for different people. Some people are fortunate enough to still be able to work at 70 or above (if they want to), while others may struggle even in their 50s or 60s.

Financial planning is important precisely because we do not know when our health would start declining. Insurance can help take care of us to a certain extent (when we are still young and able to afford relatively lower insurance premiums). However, as you start entering your 50s, relying on your continuous ability to work no longer starts being a sure thing as it used to be in the past.