Comments on Straits Times Article: "Singaporeans Start Earlier In Saving For Retirement"

01 Apr 2013 
SOURCE: Calvin Passive Income
According to the Straits Times article, Singaporeans tend to start saving earlier for retirement. That’s a good sign and I have met many young people who are already thinking about planning for retirement. However, more than 50% find that they are not on track to meet their financial goals.
That’s alarming as even though they start saving early, they are still unable to meet their financial goals. It could be due to various reasons.
1. Insufficient Savings Set Aside From Income
Insufficient savings is one of the main reasons for being unable to meet financial goals. Even though they claim to be saving, they could still be under-saving relative to their gross income levels. Overspending or undisciplined use of credit can contribute to insufficient savings. At least 10% of gross income is recommended to be saved annually.
2. Poor Risk Management
A major disease or accident can lay waste to any savings plan if the risk is not managed appropriately. Private MediShield plans are necessary to cover the inadequacy of the basic MediShield plans. Life insurance coverage requirements should be calculated carefully to ensure that the dependents will not have financial problems. It is highly recommended to separate insurance from investments to reduce the cash outflow. Term policies are also cost effective ways of ensuring sufficient coverage.
3. Failure to Invest or Insufficient Investment Returns
The survey further reported that “to achieve their financial goals, 51% of Singaporeans aim to save on a regular basis, while 48% plan to cut down on their spending, but only 31% of those polled will purchase an investment product.”

With only 30% of those polled willing to invest, the other 70% will have their cash depreciating in value over time. Many people underestimate the impact of inflation on their savings. It reduces the purchasing power of money over time as expenses get more expensive and the effect becomes magnified over time. It is also important to learn how to invest smartly as most savings products out there do not have very good returns.

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