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Why a wealthy nation cannot afford to retire?

Wednesday, February 20, 2013

CNBC just published an article titled "A Wealthy Nation That Can't Afford to Retire" a few hours ago. Instead of cutting and pasting the entire article which some have done, I would like to pick out a few paragraphs and make some comments.

"According to a latest study by HSBC, the citizens of this country, which has one of the highest per capita incomes in the world, face the grim prospect of running out of their savings almost halfway through retirement as the high cost of living and increased life expectancy eats into their nest egg."

It was not stated how HSBC measured "nest egg". Was it just money in our CPF accounts?

Now, I believe that anyone who is preparing to retire with just money from his CPF accounts need to be shaken by the shoulders (quite firmly). Of course, the money wouldn't be enough.

"More than half of the 1,000 Singaporeans interviewed for the survey said that either they were not adequately prepared or not prepared at all for retirement as they expected to continue working beyond the age of 65 to be able to afford their desired lifestyle."

So, more than 50% were not adequately prepared or not prepared for retirement. The rest were adequately prepared? This was just a measurement of sentiments on the street, wasn't it?

What people feel is one thing. What is the reality? How many are actually adequately prepared for retirement? How do we measure this?

Further on in the article, I believe there was a chance to do something more constructive when they interviewed a Mdm Janice Tan. However, it didn't happen. Let me try here:

"Tan and her husband are currently paying for the education of their two children, including a 21-year-old daughter studying in Perth, Australia. While Tan, an administration professional, hopes to retire soon, she says she knows it might be another 10 years before that happens."

Mdm Tan, if you hope to retire earlier, why did you send your 21 year old daughter to Perth to study? I do not know which course your daughter is doing but a quick check revealed that the annual tuition fee for Economics is A$22,500 in Murdoch University. Over a three year period, if fees stay constant, you would have spent A$67,500 on school fees alone for her!

Would it be too much to assume that a three years stay in Australia for your daughter could cost some S$160,000 to S$200,000 in total? That is a significant amount of money. (A$1.00 = S$1.28)

"With retirement savings drying up at a time when Singaporeans are most vulnerable to health problems, funding medical bills could become a big burden, HSBC said. Tan backed that sentiment, saying that medical bills from a motorcycle accident that her husband was involved in last year have been a drain on their finances."

Mdm Tan, did you and your husband get a good H&S insurance policy with a rider? I hope you have policies that pay out in case of critical illnesses. I also hope that you have policies that protect your earned incomes too as you seem to need them still.

Articles such as this one from CNBC do little other than to sensationalise issues. Unfortunately, few would bother to ask the questions which matter. Some would instead use such articles to fan the fear and resentment on the ground.

Yes, costs are rising and this is not about to change. Is complaining about rising costs going to change anything?  Is fearing rising costs going to change anything?

We should, instead, ask if we are doing enough to prepare for retirement in the face of such challenges.

I would suggest a critical look at our lives and to examine ways to increase income and reduce expenses. While we are at it, look into getting good insurance policies to safeguard our earned incomes (if we still need them) and to take care of expenses related to H&S as well as critical illnesses.

Related posts:
1. Millionaire or not, plan for retirement.
2. Enhanced incomeshield for my mom.

Read CNBC article: here.


sads said...

Hi AK71, talking about insurance. May i know your opinions with regards to NTUC enhanced income shield compared with the Prushield? Which is more suitable for my parents who are now >50 yrs old.

la papillion said...

Hi ak,

Totally agree. Instead of complaining, i'll rather take actions to improve the outcome. I've given it a serious thought and the outcome is that I might have to retire overseas. This is not just because of the cost but also the pace of life here. To do that, i need to have a stream of income that i can earn without physically working for it. I'll take the business pathway. So, in order to do well, I need to do really well in the business and that would open the doors for more options downstream. Sitting down and complaining solves nothing. Take action, however small, now!

ivan said...

An excellent, timely article AK!

IMHO it's about personal accountability aka "noone owes us a living". So it's really up to us to optimize the resources and learning we have, regardless of where the starting is. The course of inaction today will result in never meeting our individual aspirations and/or potentials.

I would suggest trying to develop the future state (vision) and then start working towards it. Unless we have clarity at the macro level, there can be many distractions along the way - like picking wild berries on the way home and before we know it, it's already dark and we are any not nearer.

It's unfortunate if we believe it's someone else problem and cannot differentiate between accountability and responsibility; if we submit the government is responsible for doing its duty vested upon them, it's ultimately the individual's to account for in making the specific outcome tailored to our needs and circumstances. That is unless we cannot help ourselves and need the social safety net to assist.

I believe Singaporeans - who are already so much better off in comparison to those living in many other countries - are able to muster their courage to do what is really a necessity and take ownership using the resources handed to us (many of which are sacrifices from generations past). Hopefully along the way, we can see the unlimited abundance of this world and start paying it forward.

JCK said...


i am also looking at a similar scenario to Mdm Tan.

The only difference is i am in Malaysia where the education system is rather questionable in terms of quality control.

The chinese tend to put kids education at the top rung of things to be done in life.

As it is, i am lookin at sending my son to Perth for engineering studies. That would set me back by AUD220k in today's money.

i suppose that as a parent, thats my gift to my son's future as far as his career is concerned, never mind my own retirement..... :)

seefei said...

to paraphrase spiderman, "with wealth come responsibility". we are responsible for our own decision. we can retire comfortably if we invest more and consume less. LOL

AK71 said...

Hi sads,

My mom is 66 this year and I got her to upgrade to Enhanced Incomeshield with an Assist Rider last year. I think it is good enough. :)

I am not the best person to talk to when comparing products. You want to talk to both Prudential and NTUC Income. Compare what they have to offer and the prices before making a decision.

AK71 said...

Hi LP,

You are always inspirational! I am always impressed with how you have the "get up and go" spirit and energy! :)

Retire overseas? To a seaside chalet in Batam, perhaps? ;p

At least you wouldn't have to worry about not being able to drive into Singapore like this guy:
Take the good with the bad if we retire to Malaysia.

AK71 said...

Hi P,

I like your analogy of picking wild berries along the way and not getting home by dark. Indeed, we should always have a big picture in mind and plan towards achieving it and not just take ad hoc action.

For anyone who thinks planning for retirement is daunting, just take baby steps but think big.

I also like your idea of paying it forward. :)

People who are good fishermen should help those who don't know how to fish. Giving them some fish might be a start but teaching them how to fish would be capital!

AK71 said...


I am sure Mdm Tan loves her daughter and wants the best for her.

However, I always think about affordability and value for money. Should we buy something just because it is affordable?

In Mdm Tan's case, couldn't her daughter have done a course in one of Singapore's universities? We have NUS, NTU, SMU and SIM. Plenty of choices and I am sure the total outlay would be much lower.

Of course, if it is a course that is not available in Singapore, then, there is no choice but to go overseas. :(

In your case, why not consider sending your son to Singapore? Trying to do my bit for Singapore's economy here. Kidding lah. ;p

AK71 said...

Hi seefei,

I would say "we must behave more responsibly to accumulate wealth". ;)

Indeed, consume less. Make a conscious effort to differentiate between needs and wants. That would be a good first step.

Money management: Needs and wants.

JCK said...

i did think of Singapore.
BUT the entry qualifications are pretty high for me normal son! :)

Aus university entry process is much easier with attached foundation courses to the universties. Entry qualifications to such is lower than those of Singapore Unis.

As far as Mdm Tan is concerned, it appears affordable to her as far as cash flow is concerned.
Its a matter of prolonging the cash inflow for a longer season, thus delaying her own retirement..

i told me children: If i dont have to send you overseas, i can presently

a) buy a BMW
b) retire tomorrow!


AK71 said...


Yes, parenthood is not easy and this is just the financial aspect that we are discussing here! ;p

As for Mdm Tan, I am sure affordability is not an issue but for someone who is already complaining of the high cost of living in Singapore setting her retirement plan back by 10 years, what about her decision to send her daughter to Perth to study?

This reminds me of a story my dad told me. A friend of his had to borrow money from him for some business purposes. It was quite a big 5 figure sum too. Two years later, this friend had the money to fly his whole family to London to witness the graduation of his daughter but he did not have money to repay my dad.

There are some people who might complain that they don't have enough money for this or that but, strangely, they would have enough money for something else which seems extravagant. ;)

Singapore Man of Leisure said...


LP is indeed inspirational ;)

No CPF, no ah kong's medical and dental benefits, no paid vacation leave, etc...

It's a bit ironic go-getters like him can be more prepared for retirement :)

People often say one thing and do something else.

The future is influenced more by what we DO today than what we PLAN TO DO tomorrow.

AK71 said...


You are absolutely right, of course. There are always the NATO type but worse are the NACO type. ;p

I will admit that there are times when we are faced with high walls which others put in our way. I guess knowing when to quit requires wisdom too.

However, walls of our own making should be torn down. If we have the energy to build them, we should have the energy to take them down!

Unknown said...

Hi AK,

To be honest, I do find harder to breathe too.

I did my math and enrolled to AIA PMIS last Jun. I continued to do my budgeting and working to bring my wife + 2 teenagers onto Income's PMIS plan. But the latest enhanced MediShield Scheme, effective next month really shocks me. The new premium will hit me (mid 40s) in my next renewal. And I am starting to wonder if I should KIV the others.

I also wonder how many more years can I strive (saving + investment) to just catch up with their "shocking" decision (they increase the premiums numerous times).

To keep others aware, there is a post title "Premium for MediShield ballooned" shared on this latest price revision. Please Google to read it as I am not sure it’s good for me to paste the URL at here.


AK71 said...

Hi Kent,

You have raised a pertinent concern and that is the cost of insurance is on its way up. However, not being insured is likely to be costlier.

I wouldn't KIV getting my family covered. A good H&S plan with a rider is essential.

It doesn't have to be a H&S plan for staying in private hospitals or Class A ward in a restructured hospital. It could be just a H&S plan for Class B2/C wards in restructured hospitals. The difference in annual premium is significant. For my mother in her 60s, the difference in annual premium is >$1k between the two options.

Do everything within our means. The important thing is to get covered so that we have the lowest cash outlay possible in the event of hospitalisation.

EY said...

Hi AK,

I'll never bring myself to be sympathetic towards the NACOs. When life throws us a curve ball, we can either whack it hard and try to hit a home run, or minimally, dodge. Those who see it coming and yet stand there like bowling pins, should accept the fate they have decided for themselves.

About buying an H&S plan for Class B2/C ward. I used to think medical care is probably still good and premimum is more affordable. But after last night, I have decided to fork out more to have a better plan. I visited my ex-student's father at NUH. He was admitted for profuse bleeding resulting from stomach ulcer. He is suffering from Huntington disease, a form of neuro-degenerative disease and has been bedridden at a nursing home for years. The care that he received at NUH has been very poor. In fact, due to the staff's poor attention and negligence, his condition is worsening. Doctor asked the family to be prepared. I was quite indignant but there's really isn't much we could do.

To say the least, I think we should buy the best H&S plans that we can afford. It makes a difference in life and death situations where medical support and care is critical. Even if I end up not using the plan, I take it that my premium will help those who need it.


AK71 said...

Hi Endrene,

I think you have hit the nail on the head by saying that we should buy the best medical plan we can afford. I believe if the best we can afford is for class B2/C, we should buy it too.

I have had debates with many on this topic (including extended family members) but I no longer bother these days. We can lead horses to water but we cannot make them drink. Pretty depressing.

An often heard reply is, "Aiyah, cannot pay for hospital bills, just die lah" or some variations. Fatalistic and end of discussion.

I do like your final paragraph. :)

LP, the blog master of Bully the Bear, used that same line of reasoning to persuade me to sign up for Eldershield when I turned 40. I must thank him for contributing to my journey in becoming a better person. ;)

EY said...

Hi AK,

My late father felt that the government should pay for his medical bills! Hard to reason type. Haha.

Persoally, I would like to choose the most positive interpretation for even the least favourable situation. Just like I would joke that my late father was a philanthropist even though he did not take care of the family. He had helped many people by contributing to Singapore Pools which supports many charities! LOL~

Anyway, I am really appreciative of LP's generosity and kindness in helping my ex-student. I told him I should buy him a meal. You should be invited too. We'll take that offline. :)


AK71 said...

Hi Endrene,

Indeed, very often, it is how we view something that would determine the outcome. Our views would influence our actions and our actions would produce results.

LP is one impressive individual. The world would be a much better place if we have more people like him. :)

You guys enjoy your date lah, I don't want to be a lampost. Er... A fair bit of warning. He is married hor. ;p

EY said...

Hi AK,

From a business perspective, meeting people is called networking. From a social perspective, it is called making friends. So now I know you'll only go out with ladies/women who are single and available. :P

Btw, LP won't have been married as long as I. That, I sure win him one! Hahaha...

Will still invite you when I invite LP. You better come, if not his wife won't let him come out! Moreover, I have nice female colleagues at my new workplace and I'm a good matchmaker wor. :P


AK71 said...

Hi Endrene,

I warn you first hor. I will surely decline the invitation. ;p

Thanks very much for the thought. I appreciate it. :)

mark said...

Why no one invite me? A swinging single bachelor? :P

AK71 said...

Hi Mark,

Today's weather not bad hor?

EY said...

Hi AK,

No worries. It is only polite that I extend the invitation cos without your help, I wouldn't have linked up my ex-student and LP.

Anyway, if we have a meal, it won't be anytime too soon. I'll have to check my ex-student's and LP's availability and now that I have a new job, I'm quite tied up. Maybe the June holidays will be a good time.

If you can't come, LP shall ta pao the leftovers and put in the fridge until he meets you?!?! LOL~

Have a good weekend!


AK71 said...

Hi Endrene,

Yes, put the leftovers in deep freeze. LOL! :D

Anyway, LP is very good at taking photos of half eaten food. Putting half eaten food in deep freeze sounds like a logical development in his fascination with the same. Shhhh.... ;p

la papillion said...

Wah, cat not around all the mice come out to play :/ meow!

AK71 said...

Hi LP,

This sounds ominous. Is the cat going to set mouse traps soon?

Anyway, I am a pig. Oink, oink... ;p

AK71 said...

The majority of Singaporeans are concerned about not saving enough for retirement, according to a survey of the middle class commissioned by insurer AIA.

About 55 per cent of Singaporeans said they are concerned, compared with the overall figure of 44 per cent across Southeast Asia, the AIA survey, released on Friday (Oct 20), revealed. The survey also found that Singaporeans think they need about US$900,000 (S$1.15 million) on average in savings for retirement - the highest in the region.

Additionally, 67 per cent of Singaporeans indicated that healthcare was the top cost concern, and the top goal among Singaporeans is to be healthy.


AK71 said...

My parents were prepared to send me overseas for further studies because I was always failing Chinese. I knew they would have to use most of their savings. I told them I was OK with a Poly education and I could always go to a private college to do a part time degree later.

You have loving parents and they are fortunate to have a loving son. :)

laurence said...

Quote: "Unless we have clarity at the macro level, there can be many distractions along the way - like picking wild berries on the way home and before we know it, it's already dark and we are any not nearer."

Any Little Red Riding Hood here, anyone?
Beware of the Big Bad Wolf, always.

WTK said...

Hi AK,

The exchange of SGD to AUD (as of today) is $1.07.

This goes to show that the only constant is change. An example is such currency exchange relating now to 2013.


AK71 said...

Hi Ben,

That is not the crux of the matter being discussed in the blog.

However, yes, change is always with us.

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