BRANDED CONTENT
Retiring in your 50s: How young adults in Singapore can make this a reality
Gen Zs in particular are aspiring to leave the full-time workforce much earlier than older generations
Mr Ryan Sim has not joined the workforce yet, but he already knows that he wants to be free from full-time employment in about 30 years.
“My ultimate financial goal is to be able to sustain my lifestyle without being obligated to work, though I am open to pursuing work in the form of passion after 50,” Mr Sim, 21, says.
He completed his national service last November and will be starting his degree programme in Business Administration later this year.
So, too, Ms Cleo Ang, 23, who recently graduated with a hospitality degree and is now hunting for her first full-time job.
“I hope to retire between 50 and 55 years old, while I’m still able-bodied. I envision being able to travel around the world and do things that I enjoy – without having to worry about finances,” she says.
Their sentiments are in contrast to the findings of the Manulife Asia Care Survey, which found that Singapore residents expect to retire at 62 on average.
Conducted between late December 2022 and early January 2023, it polled 1,037 residents aged between 25 and 60, and covered 7,224 respondents in seven markets across Asia.
The official retirement and re-employment ages in Singapore are currently 63 and 68. These will be progressively raised to 65 and 70 by 2030.
“Many Gen Zs (commonly defined as those born between 1997 and 2012) aspire to retire in their 50s,” observes Ms Kimberlin Chew, associate director of sales, Manulife Financial Advisers.
Ms Chew, 28, has more than four years of experience in financial advisory. About 40 per cent of her clients are Gen Zs aged between 18 and 26.
What motivates Gen Zs to want to leave the workforce more than a decade earlier than the official retirement age?
Mr Sim explains: “The average life expectancy in Singapore is about 83 years old. This means that I would only get to enjoy roughly 20 years of retirement life if I were to retire at 65; and I think that’s simply not enough.”
Never too early
But how to achieve their aspirations? To live their early retirement life to the fullest, young adults would need to build a larger nest egg to support their longer years in unemployment, says Ms Chew.
“The amount of retirement fund they require would also depend on various factors such as their lifestyles and their desired amount of monthly payouts.”
Her advice to young adults: Build your retirement fund as early as possible. How early? “Once you graduate and start working full-time,” Ms Chew says.
Since they want to retire in their 50s, “this means they cannot expect to rely on their Central Provident Fund (CPF) savings”, she says.
CPF members can withdraw some of their savings when they turn 55, and receive monthly payouts under the CPF Life scheme when they reach the eligible age – currently at 65.
Ms Chew notes that many of her clients who are still pursuing their studies have been eager to kick-start the journey. Some have even started setting aside portions of their part-time salaries for savings and investment.
Throughout her university days, Ms Ang earned about $1,800 a month working part-time in the F&B industry, as well as taking on ad-hoc event gigs. “The hours were flexible, which made it perfect for me as I was still schooling,” she says.
Ms Ang saves up to half of her earnings each month, and uses the rest for her daily expenses.
Breaking down the amount, she says: “Three years ago, I started investing $400 each month in Singapore Savings Bonds (SSBs) with the advice of my aunt, who is a financial consultant.”
Ms Ang also bought an endowment plan when she was 17, paying a premium of about $110 each month. Additionally, she sets aside $300 a month in a long-term savings account.
Financial power of time
Putting retirement planning on an accelerated timeline may sound daunting, but Mr Sim is optimistic. He says: “If I start working towards my goals early, I have time on my side.”
Like Ms Ang, Mr Sim saves around half of what he earns each month – about $900 – juggling an internship while working part-time as a swimming coach.
He aims to continue building his savings over the next four years by working part-time while schooling. “I will also start looking into investments as a vehicle to grow my wealth,” he says.
On his medium-term financial goals (in the next five to 10 years), Mr Sim points to wedding considerations, buying his first home, and potentially welcoming his first child.
“These are really expensive goals, and with inflation, the cost of these goals will only keep rising in the future. I definitely feel the urgency to start planning for them as early as possible,” he shares.
Mr Sim’s concern is not uncommon.
About 68 per cent of Singapore respondents in the Manulife Asia Care Survey worry about the impact of inflation as a threat to their savings goals. Less than half (43 per cent) said they are confident about saving fully for retirement.
Core inflation in Singapore – which excludes private transport and accommodation costs – was at 5 per cent year-on-year in April, unchanged from March.
The study also found that the majority of Singapore residents (63 per cent) use cash and bank accounts to save for retirement.
Both Mr Sim and Ms Ang say they are keen to invest, but cited a preference for leveraging a mix of bank accounts and investments to grow their retirement nest egg.
For Ms Ang, the stability of Singapore banks makes them a trustworthy option despite the lower interest rates. “I intend to supplement my bank savings with investments once I start drawing a stable, full-time salary.”
Says Ms Chew: “For people who are nearing retirement, cash is king due to its liquidity.” But young adults can afford to take larger risks and use investments as a key vehicle for retirement planning, she adds.
“Getting an early head start in investments will allow them to harness the power of compounding interest and enjoy higher returns in the long run."
Compounding interest refers to the reinvestment of returns you earn, which enables you to earn more interest over time.
Ms Chew also advises young adults to follow one of the golden rules of investment: “Never put all your eggs in one basket.” By spreading investments across different industries and geographical regions, they can reduce their risks and mitigate the effects of market volatility.
“For example, during the Covid-19 pandemic, the airline industry suffered a significant blow, while healthcare stocks, such as pharmaceuticals and telehealth, experienced a surge,” she says.
“With diversified investments, one could leverage investments in a thriving industry to offset losses in other areas. This makes your portfolio more resilient in the long run,” Ms Chew says.
This is the fourth of a nine-part series titled “Your wealth and well-being”, in partnership with Manulife Singapore.
Save more every month with our annual plan: unlimited access, better price.
Unlock these benefits
- All subscriber-only content on ST app and straitstimes.com
- Easy access any time via ST app on 1 mobile device
- E-paper with 2-week archive so you won't miss out on content that matters to you
Join ST's Telegram channel and get the latest breaking news delivered to you.
No comments:
Post a Comment