Did you know that Singaporeans are living longer? In fact, 1 in 2 Singaporeans aged 65 today will live beyond 85 while 1 in 3 will live beyond 90! What does this mean for you and how will it affect your retirement plans? Read on to find out how you can mitigate the risks of longevity.
By 2030, there’ll only be 2.4 working-age residents to support each resident aged 65 and above
To put things into perspective, the old-age support ratio has declined since 1970 when we had 13.5 working-age residents to each resident aged 65 and above. Rising life expectancy and falling birth rates have contributed to this situation and a lower old-age support ratio places a greater burden on residents in the labour force.
As working-age residents form our tax base, a smaller population of them may cause a stretch in the national budget, as we will need to tap on public monies to support the needs of the elderly in social services and healthcare.
Source: Singapore Department of Statistics
These demographic patterns, coupled with changes in the structure of the family unit, also mean that it is more difficult for many Singaporeans to rely on family support in old age. In fact, many Singaporeans who form the sandwiched generation understand the challenges of supporting ageing parents and at the same time, bringing up their children. Therefore, they are more proactive in planning for their retirement so that their young ones don’t need to worry about them when they become retirees themselves.
This is also why the government has introduced policies such as CPF LIFE and provided attractive CPF interest rates to strengthen retirement adequacy and help members be more self-reliant in retirement.
26.8% of residents aged 65 and above are still working
In 2008, the employment rate of those aged 65 and above was 15.5%. Since then, this figure has steadily grown to nearly 27% in 2018, due to a healthier population and more Singaporeans who wish to and are able to continue working.
Staying in the workforce also gives us a longer runway to accumulate savings that will last us through retirement, while pursuing an active lifestyle through work.
Source: Ministry of Manpower
Being prepared to enjoy one’s retirement
In view of these trends, it is increasingly important for you to plan your finances such that you are prepared for retirement and do not outlive your retirement savings. CPF helps by providing you with CPF LIFE – an annuity plan which gives you monthly payouts for as long as you live.
Read more: Why you need to include annuities as part of your financial planning
You can kick-start your retirement planning by first thinking about how you want to spend your golden years, and then start budgeting for it. The CPF Retirement Calculator is a tool that can help you determine the retirement sum you need to set aside for your desired monthly payouts during your retirement years. From there, you can check your savings to see if you are on track to achieving your retirement goal.
To further build up your retirement savings, you can consider making cash top-ups or CPF transfers into your Special/Retirement Account to earn attractive, risk-free interest rates. Alternatively, if you choose to start your monthly payouts later (up to age 70), your CPF LIFE monthly payouts will increase by up to 7% per year.
Being able to lead a retirement lifestyle that fits your vision begins with prudent planning. Some may wish to delay retirement while others may want to grow their savings. Whichever your plan is, the important thing is to get started. Don't let the reality of longevity hit you only when it’s too late.
Read more: What if I live to 100?
Read more: How I grow my CPF today for my future retirement