Feature Articles: Retirement - OCBC Wealth Management

SMU-OCBC Study: Singaporeans are ill prepared for retirement

An independent study by the Singapore Management University (SMU) was conducted recently to ascertain Singaporeans' aptitudes towards money management.

The study, commissioned by OCBC Bank, is the first comprehensive study conducted in Singapore that seeks to understand money management behaviour at different life stages.

A key conclusion of the study was that Singaporeans are poor money managers and consequently, the average person is ill prepared for retirement.

The study found that many Singaporeans who are currently aged 55, only have $60,000 in liquid assets and invested assets. In addition to an estimated $60,000* in CPF balances at age 55, the total resources available to an average Singaporean at age 55 is about $120,000 - which is grossly insufficient to meet his/her retirement needs for the next 20 to 25 years.

The study also found that Singaporeans aspire to spend $1,800 per month (in today's dollars) in their retirement years. Assuming an inflation rate of 2% p.a. and discounting the annuity at 4 % p.a. over 20 years, yields a present value of about $350,000. This is the lump sum a retiree would need in today's dollars, to keep him going for 20 years of retirement. It is well above the estimated $120,000 mentioned in the previous paragraph.

The gap is substantial, and the reason why current retirees may still be able to keep themselves going despite the shortfall, could be because many still depend on their children to see them through their retirement years.

However, future generations may not be so lucky given the falling birth rates here and the low incidence of marriages. Also cost of living, especially medical cost, is on the rise. This makes it even more important for the younger generation to start saving and investing early for their retirement and putting in place wealth protection strategies.

To read more about how you can retire comfortably click here.

For details of the SMU study and other key findings click here.

* Estimate based on statistics from the CPF Board which shows that those aged 50 to 55 had nearly $60,000 in CPF balances in 2003

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