You are earning now to have a decent way of life and to have a secured life after your retirement. But are you saving an adequate amount for the later part of your life? Will you have enough to maintain the same lifestyle after your retirement? Here is a reality check – according to a survey by the Straits Times, Singaporeans now live much longer than most people around the world and a 60-year-old Singaporean today can expect to live another 25 years in the face of the earth.
Australian Centre for Financial Studies and Mercer, a firm that is in retirement business, did a research by the ranked the retirement income system of 18 countries based on 40 indicators in the areas of sustainability, adequacy and integrity. Singapore ranked 13th in that research and got a C grading. Beguilingly, four Asian countries – China, South Korea, Japan and India obtained the bottom places. Top three were Denmark, the Netherlands and Australia.
Now listen to this – Singapore ranked second from the bottom in the adequacy criteria. Adequacy is about whether the retirement fund of a person is enough when it is needed. So it means that retirement fund of Singaporeans is not adequate.
Most Singaporeans keep their money with Central Provident Fund (CPF) which is a good option but not enough. It does not ensure a healthy return after retirement. Unfortunately, there is no guarantee that investments under the CPF Investment Scheme will bring certain profit. It is up to the CPF members to decide for themselves how they want to invest their savings and what risks they want to accept, to make sure that their financial well-being remains in a good shape after retirement. Some people are risk-averse and feel relaxed in leaving money in their CPF account that earns a certain interest over time and is completely risk-free. Others, who want to take controlled risk, should invest the amount in profitable sectors.
Here comes the billion dollar question – where to invest then? The answer is not a billion dollar one though. Here is the answer, in a form of another question – why don’t you invest in property or in insurance policies?
Property market of Singapore is going through a correction phase at the moment as the government took several initiatives to remove the bubble that has been created over the past couple of years. Due to the cooling measures, prices have started to drop, making it an ideal investment option. Urban Redevelopment Authority recently said that about 25,000 public housing flats will come into the market in 2014. It means that supply will supersede demand. This scenario suggests that it would be a good option if you buy a property or two now. You can rent it out and earn a fair share of income. The value of the property will grow many-a-times at the moment of your retirement. You can then sell it and enjoy the return which will be higher than what you would get from the CPF.
Another good option for working adults of Singapore is to invest in an insurance policy. For instance, if you have a life insurance, it will secure members of your family if you pass away unexpectedly. But when the insurance policy is matured, you will get a good return. This is because most insurers are skilled investors and they invest is profitable avenues. All insurers distribute the profit among the policy holders. This makes the insurance policies secured and ensures a good return at the maturity. Nevertheless, Insurance policies are considered as tax-saving instruments. If you choose the policy wisely, you will be able to transfer an amount in the tax-benefit portfolio.
As Singaporeans are living longer, it means they need to make sure of having a bigger retirement fund. Otherwise the fund will be totally insufficient to most of the people to finance the lifestyle in later stage of life that they have been used to. As of mid 2013, there are more than 800,000 residents of Singapore, who are 55 and older, or about one in every five. These people have a very little time to make a good inroad for the after-retirement phase. But the young adult people who entered professional area in last couple of years should seriously thinks about the issue and plan properly. If you are one of them, start thinking now.
Before selecting the option, calculate what would you need after retirement and make investment accordingly.
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