Happened on 3rd Nov 2021 at 8 pm!
The Last 7000 Days!
At that webinar, I put up 4 questions!
- P1. Have you started your retirement plan?
- P2. Will you have your CPF Life (FRS) paid out from 65 onwards?
- P3. How many years to arrive at your intended retirement age?
- P4. Do you think it's possible to retire comfortably in Singapore?
84% have started their retirement planning journey.
Such an outcome is so delightful as we are more and more understanding of the importance of retirement planning.
As for P2, 68% of the attendees mentioned that they will achieve their CPF Life paid out at age 65 onwards, based on meeting their Full Retirement Scheme (FRS) at age 55.
From P3, we have a good mixture of demographics making ways for their retirement planning.
The longer the time we have to accumulate the nest egg, the easier for the potential retirees to meet their goals.
For those who have less than 5 years to arrive at their desired retirement age, I choose to believe they are on track with their retirement goals.
If not, deferring their retirement age can be one option. Another option is to reduce their future expenditure. All these decisions might be less stressful on their retirement capital if they plan early.
Finally, for P4, this is a new addition to the survey. As it’s a live session, I keep thinking about how best can I add value to my audience in each webinar session.
I’m happy to note that 74% think that they can retire comfortably in Singapore!
However, I feel confused or rather I feel concerned, as we are all aware that the future standard of living in Singapore could be a challenge.
From the chart, we can point out the cost of living has risen over the observed period from 2008 - 2018.
A quick calculation, we can see that there is an absolute increment of inflation of 28.8% over the 10-year period. [($4,906-$3,809)/$3,809 = 28.8%]
In the same infographic, the monthly average household expenditure per member is $1,628 (2017/2018) per month for the current standard of living.
Back to the inflation number, how can we interpret this 28% absolute inflation rate? In other words, personal consumption which used to cost a dollar yesterday, now we need to spend $1.28 for the same goods or services today.
So how much is exactly the rate of inflation per year?
Let me consult my “Personal Financial Consultant” (aka the financial calculator)
From the 2 calculations, we can qualify that for the 10-year period, the annual inflation rate is 3.47% whereas, for the 5-year period, it is a 2.34% annual rate of inflation.
Why do I need to go to the extent to do these calculations?
Because it is a silent killer!
More often than not, we have missed this critical number!
Worst, if we choose to ignore it, then we are probably liquidating our capital at a faster rate.
Let me explain further.
Let’s say we need a $40,000 annual expenditure. As long as the million can earn a 4% rate of return, then the capital will be forever intact. That’s good news!
However, as we all know the standard of living is not fixed, and it’s highly probable to be on the rise. There is a recent article mentioning a higher standard of living. Henceforth, that million need to work harder to provide a consistent value of $40,000.
So we would have worked on a financial instrument that provides a potential range of annual rate of return of 6.34% to 7.47%.
To keep the mathematics simple, lessening the mentioned annual rate of inflation of 2.34% & 3.47%, we still have a good 4% annual interest earned on that million.
So with that inflation in mind, we now have a better idea of how to be retirement adequate.
Don’t plan alone!
Let me take this opportunity to thank my attendees who not only participated in my poll but also have requested to do up their retirement adequacy test!
Here are a few samples which I have sent out the last couple of days to attendees who are keen to find out thier gaps, if any.
Are you keen to have this retirement adequacy report?
You might be interested in attending the next “The Last 7000 Days!” webinar.
It will be on 1 Dec 2021 at 8 pm.
Chew Hock Beng is a Certified Financial Planner, Chartered Financial Consultant, Chartered Life Underwriter & Chartered Family Office Specialist. He has community involvement experience and has held appointments like Honorary Treasurer & Exam Board Chair with Financial Planning Association of Singapore (FPAS), Education Sub-committee with IFPAS, PSG Chairman. Hock Beng is a certified IBF instructor with Financial Perspectives and an Adjunct Trainer with Falco Academy. Currently he is managing a team of independent financial adviser representatives, providing training, mentoring & coaching.