Most Singaporeans won’t be able to Retire

I feel fairly confident in saying that most Singaporeans won’t be able to stop work. Many will have to stay employed well into their 70s, and will plead for the privilege.

The environment for retirement is the worst it has ever been. This generation and the next have it much tougher than their parents. I will touch on four aspects why this is so, though I think there are quite a few more.

Low Interest Rates

First, we are looking at ridiculously low interest rates for the foreseeable future. The lowest it has ever been. This is bad for most Singaporeans, because much if not most of their money is tied up with insurance, such as in whole life and endowments. With low interest rates, insurance companies can’t make the same kind of returns when fixed deposits and government bonds were going at 5% or even 2%. Chances are that the projected returns will go considerably lower, unless insurers start adding riskier equities to their portfolio.

Low interest rates mean that investments that pay steady returns are dwindling. Singaporeans are generally conservative and prefer small consistent payouts over large uncertain rewards. It shows in the popularity of dividend yielding counters and cash. But now dividend investors have the worst of both worlds, depreciating capital and reduced payouts. Just look at the telecomms, banks, oil and gas stocks. It will take years for these to recover, if at all. Cash will continue to erode due to inflation and bank accounts paying next to nothing in interest.

No Job Security

Secondly, job security is non-existent. Millions of jobs will be wiped out due to work from home, automation, and robots. If a company doesn’t need someone in the office, it doesn’t matter if that person is 5 km or 5,000 km away. Judging by the number of people working from home, it is a very sizeable part of the workforce.

The probability of being retrenched in your 40s and 50s is near certain in some sectors. Retrenchments will start earlier and earlier, and many people in their thirties are already going through it.

There is no real defence against this, besides side-stepping the entire process by gaining financial independence early. Training or upgrading is unlikely to save a job. It will only save the worker by making it possible for him or her to join another sector. But more often than not, this new sector comes with more work and less pay. Restart at the bottom. Repeat every 5-10 years.

Inequality will be greatly exacerbated. It will only be a select few that will keep making outsized gains in their career. But many do so at a high cost, such as not being able to have or enjoy children.

Property will no longer contribute to retirement

Thirdly, property won’t appreciate like how it used to in the 1970s and 80s. Quite frankly, the older generation isn’t more financially savvy than their children. They just needed one good decision, which was owning their own home. The more they leveraged, the better. It is also the reason why our parents insist we do the same and buy property.

But that strategy is in serious doubt today. No one thinks that Singapore will grow at the same rate it did before. Most Singaporeans are clamouring for expats to go home. Who do you think will rent these empty condos, which are predominately owned by Singaporeans?

The outlook for HDB flats is even worse. The government has made it clear that the vast majority of HDB flats will be returned to the state at 99 years. 80% of Singaporeans stay in HDBs, which are depreciating in value. At best, HDB flats are cheap rentals. At worse, they are illiquid liabilities.

Aiming Downwards

Finally, most Singaporeans will shoot themselves in the foot. The majority of people work against their own interests and never realise it. Investing and saving are done late in life, crippling compounding power. Funds are funnelled through biased advice into products with high fees and low returns. There is no concept of low-cost investing and insurance, which beats the so-called experts by a wide margin. Most follow the crowd and inevitably panic sell.

I don’t have hope for most Singaporeans. They want to be spoon-fed and told what to do. They fall easily for simple shows of wealth and promises to get rich. There is no saving them.

But I don’t believe my readers are like most Singaporeans. If you want a better retirement for you and your parents, maybe take a look at my e-book The Essential Guide to Retirement. It provides everything you need to plan a secure and satisfying retirement. I promise the tone there is much gentler. The subscription of $10 with a 50% discount is a better deal though. The paperback will be launched in another month or two.

Retirement should be a choice. But the reality is that it will be forced upon an increasing number of people. Recognise retirement is your responsibility. Not your employer, government or children. You are the one who will have to get through it.

Don’t put off planning for too long.

10 comments

  1. Suggest you have a look at Bala’s table and its treatment of leasehold. VERS and HDB lease buyback. Also hang out on reddit. Our youth are investing/speculating much earlier, say pre-NS age, they have access to other asset class like cryptocurrency and with the advent of robo advisors and other Fintech, their paths will definitely be different from their parents. Every generation is different and yet every generation is similar. I remain cautiously optimistic of our collective future.

    1. Hope you are right.. I have a next generation to raise. I tend to be pessimistic so I can be pleasantly surprised. Im skeptical about crypto but no doubt some have made money on it. Thanks for reading Carl

  2. Will be similar to prev gen lah. Maybe work a bit longer. But generally most will call it quits by 70. As usual, a significant % will rely on children for additional allowance.

    As for hdb’s LBS, it consistently underpays when compared to bala’s table. But probably better than nothing & may be option for those who don’t care about passing the remnants to their children.

    1. I don’t think so leh. Our environment and our parent’s environment is very different. If you had a degree last time, won’t have problems getting a job. But graduates today who cannot find real jobs are compromising and taking roles with much lower pay and status. It will decrease their career earnings for the rest of their life, because the low pay will be used as a reference for their next job. You mentioned that a significant portion will rely on their children. It’s true, and will grow because our parents are living longer and have lesser children. When we support our parent’s retirement (which we should), it does affect our own ability to retire.

      I looked at bala’s table and I think its really optimistic. 60 years remaining lease means it’s worth 80% of its freehold value? Siao. As you say, reality pays lower than some colonial-era clerk’s estimation. Most people will struggle to sell their flat once its past 60 years lease.

      1. Actually quite a few real estate consultancies have said in recent years that bala’s table is too pessimistic in today’s economic environment.

        HDB (as well as the rest of govt) does use bala’s table. E.g. SLA uses it to compute development charges & lease topups that developers have to pay in enbloc.

        It’s just that HDB (1) treats the computed amount as Future Value, and (2) applies too aggressive a discount rate to get the final present value.

        The discount rate is something like 2.1% or 2.2%, which is way above Singapore’s sustained headline inflation rate over the last 20 years.

      2. Interesting… you brought up good points. I’m still sceptical about people wanting to buy over an old flat, especially considering that there are more restrictions on loans once past 60 years of lease. I also wonder who will want to live in such an old flat. Things are crumbling, pipes and wires are breaking down, estate looks tired…

        But I don’t have all the answers and I could be surprised too. Just my own prediction. As flats continue to age, I guess we will get better data on the depreciation curve. Thanks man

  3. The younger demographic are no longer after the 5C like the older generation are chasing as it is out of reach. They are very conscious in their spending. Most probably their money go to life experience – sports, travel, entertainment and dining.

    I can only hope they have no burden to have to look after their parents who are likely live to 80s.

    I believe many pmet jobs would be digital jobs with no geographic boundaries in the future, this will make the market very competitive.

    Maybe the world will move into an universal basic income if jobs are destroyed and replaced by automation.

    We are in a supposedly better world yet challenging. Maybe humans are not meant to live a long lifespan so to reboot the demand/supply.

    1. We live in a better world in a sense because now the world’s information is at our fingertips. But in many ways, it’s tougher. My grandmother could have 8 children, 2 maids, and only one parent needs to work. Not very possible today. I feel its harder to build wealth as compared to the last generation.

      Life expectancy in Singapore is now 83.. and that refers to those who have passed recently. Those in their 50s and 60s now have good chances of making it till their 90s. Which is when those under the old CPF retirement sum scheme stop receiving payouts. So yes, children will have to support.

      Agree with you on the PMET jobs being more and more competitive. Can’t be helped liao. We only can work harder and add more value. And pray hard haha.

  4. Well written piece on the realities of possible futures. Though pessimistic, better to manage risk and build sufficient buffers rather than getting caught with less. Not sure everyone likes to hear some of your truths, but I sure did! Liked your statement on who will rent investment properties after all the expats sent back.

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