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How Can Young Singaporeans Balance Their Retirement Planning With Other Financial Responsibilities?

retirement planning singapore

Mark Cheng

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This post was written in collaboration with Income. While we are financially compensated by them, we nonetheless strive to maintain our editorial integrity and review products with the same objective lens. We are committed to providing the best recommendations and advice in order for you to make personal financial decisions with confidence. You can view our Editorial Guidelines here.

It might be easy to say that you should start retirement planning early, and we’ve definitely heard more than our fair share of those messages over the past few years. While there is nothing wrong with the statement, most Singaporeans would agree that there is often a whole host of other financial concerns at varying life stages that need to be balanced with the money set aside for retirement planning.

We’ve spoken before about the financial challenges of taking care of parents who are not adequately prepared for retirement, and the supporting study by Income that has shed some light on both parents’ and children’s perspectives on how important early retirement planning is.

 

What is the challenge facing younger Singaporeans today?

In light of the findings from the study, where only 15% of youths surveyed believed their parents had adequately planned for retirement, young adults in Singapore have to juggle the costs of taking of their parents in their retirement years, as well as planning ahead for their own family as well.

70% of the youths surveyed foresaw downgrading their lifestyle to care for their parents in the future, and this included making personal sacrifices such as settling for a smaller home or giving up their car.

The question that faces them now is this: Should they take the same approach and devote a large part of their earnings towards investing in their children?

We’d like to think that it doesn’t have to be one or the other, where investing in your children’s lives comes at the expense of ensuring that you are financially independent in the years when you are not actively working to earn a steady income. Here are a few consideration points that can help young Singaporeans to not only get started early, but ensure that they are able to balance supporting both themselves in retirement as well as their families currently.

 

1. Ensure that your healthcare is adequately covered

Without going into a lecture on the importance of insurance coverage, it is an inescapable fact that healthcare expenses will likely form a significant part of your variable costs once you retire.

While there are various schemes from the Government to provide financial assistance for everything from hospitalisation to the costs of disability, some ailments require much longer care and treatment than others.

Ensuring that you have a good enough buffer to cover the costs of these treatments is critical in not eroding away the savings that you have built up over time leading up to your retirement. This is all the more important for younger adults because premiums are more affordable when you start at a younger age, so starting out early can also have some significant cost benefits as well.

 

2. Start building passive income streams early

Speaking of starting early, growing your money early so that you have a sizeable stream of passive income when you are no longer actively working is another key to ensuring that your kids don’t have to spend too much supporting you when you are older.

Income’s research revealed that the parents surveyed set aside only about 35% of their intended amount ($1,146) monthly, although they perceive to require $3,314 monthly when they retire.

Starting your investing journey early doesn’t have to involve putting in large sums of money in the hopes of growing that sum quickly. We’ve highlighted the benefits of starting with a Regular Savings Plan, which only requires a monthly investment of as low as $100. Coupling this with a suitable endowment plan that is able to provide you with a consistent monthly payout upon maturity can help to ensure that you are not left with less than what you need for your projected monthly expenditure.

You can consider products like Income’s VivoCash Prime, which provides you with a guaranteed yearly cash benefit after the first 5 policy years. On top of the cash payouts, a guaranteed special cash benefit equivalent to 4% of sum assured will be paid out after the 20th and 30th policy year.

Alternatively, their RevoRetire plan lets you shape your desired retirement lifestyle with monthly cash payouts. The plan also has an additional Disability Care Benefit, which covers you should you suffer the loss of any limbs or senses due to an accidental injury or sickness. This plan is accessible at a minimum sum of $200 per month, so you also don’t have to worry about having to fork out a big amount of cash at one go.

While it is certainly hard to figure out how much you are going to need on a monthly basis in 30 to 40 years’ time, having these passive income streams built up over time means that you don’t have to put in as much money as compared to if you had started all of this later on in life.

 

3. Be aware of what you are spending on your children

If you haven’t already seen the now-viral video of Income’s retirement campaign (or even if you have), it’s definitely worth the time to watch it to get a perspective that may not be often communicated.

We’re not saying that you should give up everything that you want to invest in your children just to keep it all for your retirement years, and neither is this video.

What is really the key message to all of this is that there can be a balance, and this is something that young Singaporeans need to consider at a point in their lives where they might not only have retired parents to take care of, but also a family to plan for as well.

What are your thoughts on retirement planning? Will you still choose to spend most of your money on your children? Share them with us here!

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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 [email protected]