The 5 Conversations About Retirement That Singaporeans Are Not Having

cpf big r chat retirement

The past year or so has seen some rather lengthy arguments revolving around different facets of retirement in Singapore, ranging from discussions on the role of CPF, to the debate about whether Singapore is truly the most expensive country in the world to live in.

Mash these 2 particular debates together and you’ll get what sticks in Singaporeans heads like a Taylor Swift ballad: Can you retire in Singapore and survive?

All these discussions are important in the general financial landscape of Singapore, on the condition that folks actually know what to discuss. You can’t jump into a conversation if you don’t understand what’s going on right? Right.

Here are 5 conversations about retirement that many Singaporeans are not having (but really should be):

 

1. Insurance

One of the most common issues when it comes to retirement planning, and one of the few things that actually make people physically run away, is insurance. It could be because of prevailing stigmas about insurance agents, or just the sheer complexity of the different products, that stops people from approaching the topic with an open mind.

Knowing how expensive it can be to fall sick in Singapore, and also facing the reality that each of us is bound to encounter some health obstacles in our later years, it makes sense to make sure that you’re adequately covered. This doesn’t have to come in the form of fancy policies that guarantee you some incredible amount at the end of x number of years, but can start from something as simple and affordable as a term policy.

Regardless of how bleeding rich you are, it just makes zero sense to potentially pay hundreds of thousands of dollars when you could be paying a fraction of that price.

 

What you should be talking about:

A simple assessment of your financial goals will lead you to decide whether or not you need anything more than a term plan. The world of Insurance is certainly one of the most diverse in nature, so start by figuring out what information you need. Speak to someone you trust who has more experience in the area, and consult a financial advisor if necessary.

Oh, and you can stop running away from them like they’re a pack of zombies. If you fall ill without coverage, guess who’s the zombie then?

 

2. Investing 

Perhaps one of the few things that might potentially be harder than getting Singaporeans to buy insurance is getting them to start investing. Another minefield coupled with plenty of famous cases of Singaporeans getting burnt by bad investments has lead many older folk to shy away from growing their money.

For better or worse, people are starting to wisen up to the fact that living in the “world’s most expensive city” means that their money is going to be eroded by inflation at a much faster rate than they’re earning money from the meagre interest rate most savings accounts give. Unfortunately, many people view investing as a complicated process that requires lots of time and micro-managing. But understanding how, at a simple level, investing can help you grow your money can even help you to understand that living in the world’s most expensive city can actually be a huge advantage.

 

What you should be talking about:

With retirement in mind, your investing outlook shouldn’t be something that revolves around making a quick buck within the next year or so. That’s called Toto and it’s bought at a Singapore Pools outlet. Having a long-term goal in mind helps you to be disciplined about apportioning some of your money towards investing. Utilising simple concepts such as dollar-cost averaging can help you to grow your money steadily and beat inflation. The best part is the earlier you start, the less you need to invest each month to earn the same amount as someone else who starts much later.

 

3. Property 

Many Singaporeans don’t realise this small fact amidst perpetual complaints on housing prices, but this small island has one of the highest home ownership rates in the world. That is by no means an easy feat, but what that also means is that there is the potential for people to be saddled with debt from their home loans going into their retirement years.

This is obviously not ideal but sometimes it might be unavoidable as well. Thankfully, the restructuring of the CPF minimum sum means that there is now some buffer for people who are still paying off their home loans and still need access to their CPF funds.

 

What you should be talking about:

One huge consideration that you will regret not speaking to your loved ones about is the fact that once they are retired and no longer earning a salary, it’s going to be next to impossible to refinance their home loan. This means that they might end up paying a much higher rate than if they had refinanced earlier.

Doing your homework is easy, and MoneySmart can help with simple home loan and refinancing wizards that tell you whether or not there are better packages out there. Mortgage interest rates don’t stay constant forever, and are very much like the tide of the sea. Except this tide doesn’t get much lower, and also doesn’t smell as good.

 

4. Debt

The huge elephant in the room whenever it comes to talking about finances has to be debt. This is something that Singaporeans often refuse to address till it’s way too late. In a society that has in one way or another pressed people into keeping up appearances and inculcating a level of materialism, Singaporeans are either paiseh to admit that they have a debt problem, or just feel so hopeless that they don’t bother addressing it. Sadly, elephants rarely disappear unless they’re part of a magic circus. Like debt, they grow and become less cute every year.

  

What you should be talking about:

This is something that you don’t ever want to leave till the last minute to speak to your loved ones about, or address yourself. Things like credit card debt can be crippling to a person’s finances. However, even if the situation seems bleak, there are ways to remove your debt in a structured manner.

The newly-introduced Repayment Assistance Scheme by the MAS is one very useful tool in getting rid of that debt, so that you can live a truly free life in your retirement. Other solutions like consolidating your credit card debts by taking lower interest personal loans to pay them off are also good options.

 

5. Savings

As we’ve spoken about before, many Singaporeans budget out of guilt. We like to call this crash budgeting, which is essentially like a crash diet, but with money as the replacement for food. And as many studies have shown, crash dieting almost never works. The same essentially applies for crash budgeting.

What is required is a structured plan that prioritises certain financial commitments. This really wraps up all the above points, and helps you to determine how much you allocate towards insurance, investments, savings and expenditure. And yes, just as it’s important to allocate money for saving, it’s also important to allocate money for spending, and to spend that money!

 

What you should be talking about:

This is a great topic for families to start talking about their finances. For parents of young working adults who have just entered the working world, helping them craft out a breakdown of their finances will stand them in good stead as they progress in their career. Prioritising expenses for things like at an early age can lead to savings on premiums as well.

Getting these conversations started isn’t hard, and can help to bring family and friends closer together. Here’s a little food for thought on how you can do just that:

 

 

This article was brought to you in conjunction with the CPF Big R Chat, which is a campaign that serves to encourage Singaporeans to get the conversation on retirement started, with insightful tips on how you can do just that, as well as the topics to address if you aren’t sure of where to start.

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.