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Think the Rich Have Retirement Covered? DBS Survey Reveals A Different Story

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Mark Cheng

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You wouldn’t be faulted for completely ignoring any plight regarding retirement when it comes to the affluent in Singapore. They’ve got it all sorted out right? No money issues to worry about and they probably have a comprehensive and complicated financial plan to carry them through comfortably for their golden years. Well, a recent DBS survey shows this may not necessarily be the case:

 

DBS Survey on Emerging Affluent (EA) Individuals

The poll surveyed over 800 EAs in Singapore, with 73% of respondents reflecting that they planned to retire between 55-65 years old, with an average savings of SGD 571,715. Even more – over 85% – of EAs expect to live on a retirement income of SGD 3,500 per month for the next 15 to 20 years and more.

The slight problem here is that, given the average life expectancy, this retirement fund would only keep them afloat for 13 years, which falls short of how long they are expected to live. For residents born in the 1980s, the average life expectancy is 70-75 years, while those born in the 2000s have a life expectancy of 80-84 years.

In addition, while 76% of respondents said that providing for retirement is a priority, only 49% have a financial plan in place. But how early does one start planning? According to the study, early planners among the respondents typically start their financial planning at 28 years old while late starters only start planning when they are around 39 years old.

The study was designed using an integrated methodology combining quantitative and qualitative methodologies and had a sample size of 800 Singapore residents. The EAs are defined as:

  • Adults living in Singapore aged 18-29 with personal monthly income over SGD 2,500
  • Adults living in Singapore aged 30-59 with personal monthly income over SGD 5,000

The sub-segments are:

  • Climbers (Aged 18 to 34, Single, Working)
  • Established (Aged 35 to 49, Single, Working)
  • Family Focused (Aged 25 to 62, Married, Working or not working)

 

Why Do People Start Planning?

For those who do retirement planning, some of the drivers spurring them to action include major life changes, need for independence during old age and influence of family and friends. Barriers include other financial priorities such as children’s education or housing loan, unwillingness to compromise on lifestyle as well as a perceived lack of suitable retirement products. The uncertainty of investment is also a deterrent for consumers.

This may not come as a surprise, but it was the Climbers who were least likely to set aside enough for retirement. The survey found that this group set aside 44% of their income into savings and investments, but only 10% was into investments.

Family Focused EAs set aside 43%, or the least towards investment and savings, as a significant portion of their income goes into loans. Most EAs expect CPF, cash savings, insurance, investment and annuity plans to be their key sources of retirement income.

“With longer life expectancy and changing expectations of retirement living, it has become increasingly important for people to start investing for retirement early. An early head-start, even if it is with a small amount, will increase the probability of meeting your lifestyle needs when you retire,” said Jeremy Soo, Managing Director & Head, Consumer Banking Group, DBS Bank.

 

Here’s The Scary Part

Another recent study by Visa shows that eight in ten (82 percent) respondents from Singapore intend to spend the same or more this year than they did in 2013. The Visa Affluent Study 2014,which tracked attitudes to spending among affluent Visa cardholders in 11 markets,  also showed that respondents in Singapore were optimistic about economic growth with one in two respondents (52 percent) saying that they believe the local economic condition will improve in 2014.

This is all fine and dandy if the right measures are in place to ensure that your own personal growth is in line with the economy’s growth, but from a very simplistic approach, if spending remains the same (or worse, increases), and the proper financial planning is not in place, this is going to lead to a very desperate future for people used to living at a certain standard.

 

What Does This Mean For You?

While you may not think that either study pertains to you, or that you have better things to worry about than which BMW you’re going to buy next, it is certainly a good reminder to have a realistic grip of the future when assessing current financial situations.

We will probably never stop reiterating the need not only to save and budget well, but also to have a healthy perspective on investing as well (which is why you should follow us on Facebook), and this is certainly something I’m learning more about daily as well. While the pressures of society will always be there in Singapore to live up to a certain (and perhaps sometimes unhealthy) ideal, it’s important to also not lose patience and keep an eye on the prize as well.

If this doesn’t happen, we’re going to see a spike in visits to casinos in about 30 years or so.

What are your thoughts on this? Do YOU think you are well equipped for retirement now? Share your opinions with us here. We’d love to hear from you!

 

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Mark Cheng

I rant and rave a lot, but when I'm not busy doing that, I'm managing the content for MoneySmart. I love Singapore, but I also believe in helping it to improve bit by bit, and that's where MoneySmart comes in. Have some thoughts? Drop me an email at mark@moneysmart.sg.