Singaporeans are increasingly working past age 65 because they lack retirement funds. And many are not certain if they can ever enjoy their golden years. Financial calamities such as the recent financial crisis have also caused many retirees to lose their life’s savings to structured deposits. The Central Provident Fund (CPF) only 25% of funds needed in retirement and yet, many are heavily dependent on this source of savings to fund their retirement.
Are you financially prepared for retirement? The key is to start early.
Why?
The more time you allow your savings and investments to grow, the closer you are to achieve your desirable retirement goals.
Savings alone are not enough to plug the retirement funding gap. This is because the low rates of return for savings (around 0.25%) cannot keep up with inflation. What this means is that the purchasing power or the real value of money diminishes. If you are unwilling to take risks and prefer to depend only on your savings (i.e. negligible returns) to secure your retirement, you run an even higher risk of not being able to retire comfortably.
For example: A 40 year-old who invests S$100,000 cash in fixed income/bond instruments or kept his monies with the CPF board would have grown his money to S$315,000 by the time he turns 70. The average rate of return here is 3.9%. If he chooses to invest the same amount into a global diversified portfolio of equities and fixed income funds, his money would have multiplied to S$1.06 million, based on a return of 8%.
The keys to retirement planning are these:
- To start early and,
- To make your money work harder for you.
