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Millionaire or not, plan for retirement.

Wednesday, October 3, 2012

Being a millionaire today is different from being a millionaire 30 or even 20 years ago. This is simply because a million dollars is worth less now due to inflation in the cost of goods and services. These days, even a HDB flat could cost a million dollars!

I cannot remember the person's name but in the latest issue of The Sunday Times an interviewee (a millionaire) says that he does not want to think of retiring when asked for his retirement plan. Why? People who have plans for retirement, he says, will not be as driven or gung-ho.

Conventional wisdom says that we start planning for retirement as soon as possible. Even a very good fisherman should plan for the day when he can no longer do any fishing.

Today, I received a newsletter with a few interesting facts:

1. Singaporean males live an average of 79 years and women live an average of 84 years. Living longer means we need more money.

2. Due primarily to inflation, current savings will be worth less in future. 30 years later, something that costs $3 today could cost as much as $13.70 with inflation at 5.2% per year.

3. Although 91% of Singaporeans find CPF a reliable tool for retirement planning, according to a retirement study in 2011, each year, fewer members meet CPF's Minimum Sum requirement.

4. Escalating medical costs are a big concern.

The newsletter is a sales tool for an insurance company but these four points which I have extracted are pertinent to us all. If we have not started planning for our old age, we should if we could.

Apart from working to make money and being financially prudent, we invest and grow our wealth, creating streams of passive income along the way. Our investment returns, year after year, should be higher than the inflation rate. This is only part of the equation, however.

I am a strong believer in having adequate insurance coverage for medical costs which are bound to be incurred as we age. Our financial health could take a severe hit if we do not have medical insurance as money meant for living expenses could be depleted by medical bills.

Many might have heard the sardonic remark that being sick is worse than being dead. This could indeed be the case especially if one did not have sufficient insurance coverage of the right kind.

Planning for retirement is definitely more than just having enough passive income to replace our earned income. 

Being able to retire is much more than working because we want to and not because we have to.

Knowing how to make money and building wealth is the first step. Knowing how to protect our wealth is the necessary second. 

Protecting our wealth will cost us some money but not protecting our wealth could cost us even more.

In case you are wondering, I am not an insurance agent and this is not an advertorial. If this blog post has alerted some who have yet to plan for retirement to put on their thinking caps, it would have achieved its purpose.

Related posts:
1. Young working Singaporeans, you are OK.
2. To protect our wealth, we have to take risk.
3. Roads to wealth creation in the stock market.
4. Wage slaves should be fearful.
5. CPF is a cornestone in retirement.


B said...

If I remember correctly, I think 1 in 3 Singaporean is a millionaire. So look to your left and look to your right, either one of you three is a millionaire :D


AK71 said...

Hi B,

Not so many lah. ;p

17.1% are millionaire households. Even so, we are talking about households and not individuals.

Boston Consulting Group

Mad Stranger said...

If you look at the latest annual report for IRAS, for year of assessment 2011, there are 3870 individuals who has an assessable income of more than a million.

These people can earn a million in a single year. But there are many who will never earn or even save that amount in their life time.

AK71 said...

Hi Mad Stranger,

Yes, these are really impressive individuals. :)

There is still something magical about a million dollars even though it is not worth as much as before. People aspire to be millionaires and, then, multi-millionaires.

Anonymous said...

Hi AK71,
Once you stop fishing, indeed you have to really see what fishes you have manage to catch and how to keep them alive long enough before you spend your life away.
It is indeed much more difficult to culture and expend the fish's population without the ability of replenishing by just fishing.
So we have to be extra "careful' now with whatever fishes we have. Time is no more on our side.

AK71 said...

Hi Temperament,

As we continue to fish in better times, we should smoke some fish and salt some fish to keep for bad times.

As we continue to fish, we should invest in facilities to keep some fish alive in captivity as well in the hope that they will propagate.

You are right. Fish farming is definitely hard work. Is it easier to go to the sea to hook a fish or two when we are hungry? ;p

LCF said...

AK, there's something about the way you weave your words that evokes emotion. I hope you don't mind me re-posting this here -

AK71 said...


Sure, if we are able to influence more people to take action to improve their financial well-being, I am all for it. :)

JCK said...

TWO sides of WEALTHY Singapore.
i have an uncle who lives on a pension of around SGD300 per month.

Thats the other side of the wealth coin of Singapore.

AK71 said...


I have two uncles, not one, in a similar situation.

Well, they didn't have the advantages we have, I suppose.

I only find people who are able to do something but do nothing instead irresponsible. They not only create a problem for themselves, they create a problem for their family and society.

JCK said...

This uncle of mine is a model citizen.

Worked as police officer in the 60s to 90s ...all his life. Honest as hell.

Not materialistic.

He was one helluva blood donor.
i think he did about 250 to 300 pints in his life.

BUT Singapore social changes caught up with him.
So hes dependant on his children to get by. Hes around 82 now.
But having said this, hes a happy person.

AK71 said...


Ah, that is the greatest measurement of wealth, some would say. How many of us can say we are truly happy? To know contentment is to know happiness. :)

JK Holdings said...

You should write a blog about the insurance that you own , interested to see if Tokio Marine is one of them .... :)

AK71 said...

Hi JK,

I don't think there is much to say.

I have 2 whole life policies bought when I was in my late teens (Prudential) and when I was a fresh grad (AIA).

I have 2 regular premium endowment policies bought when I was in the army (NTUC Income) and when I was a fresh grad (GEL).

I have NTUC Income's Enhanced Incomeshield with rider for H&S.

I have critical illness coverage from AXA.

I have various single premium endowment policies with UOB Life (now Prudential) and NTUC Income. These are with money in my SRS account.

Recently, I bought a 10 year term life policy from AXA for a $440K value. A 10 year term is pretty affordable for my age (about $800+ a year).

I think that is about it. Er.. no Tokio Marine. ;)

HH Low said...

Hi AK,

I have followed your blog for a long time and I think your insights are very good. Could you share with us your opinions on EHT and how the bankruptcy, poor governance and regulatory oversight by MAS, DBS (its sole bookrunner) and SGX will affect future REITs listings as well as the overall SREITs index? Also, what do you think the authorities should do to the six directors? This seems like a fraudulent case to an overwhelming extent and SGX/MAS cannot let them them get away otherwise there is no need to study for the CMFAS modules (m3,m5 etc). Moreover, If MAS/SGX cannot give an answer to some of these questions, there is no need for the government to inject capital and let unicorns list here. Companies are better off listing in HK/US. This is a chicken and egg issue and hopefully by sharing your insights on this platform Singaporean investors can be more well-informed and stay away from some of these listings until the authorities start taking serious steps in overhauling our capital markets.

AK71 said...

Hi HH Low,

I have published my reply to your comment as a blog.

Investing with some common sense for peace of mind.

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