S’POREANS MONEY NO ENOUGH FOR RETIREMENT, LOW CPF INTEREST RATES TO BLAME?

1 in 3 S’poreans not planning for retirement

I refer to the article “1 in 3 young Singaporean adults not planning for retirement: Survey” (Channel NewsAsia, Feb 15).

Most willing to save $300 monthly to have $1m at 65?

It states that “Of those in the 25 to 35 age group, 86 per cent are willing to set aside S$300 a month to accumulate S$1 million by the time they retire at 65”.

How to get 7.9 or 11.8%? 

I think there seems to be something not quite right because one would need an annualised return of about 7.9 per cent in order for $300 monthly to accumulate to $1 million from age 25’to 65.

If its from age 35, the returns would have to be even higher at about 11.8 per cent.

How realistic is it to expect a return of 11.8 or 7.9 per cent?

Each S’porean “lost” about $300,000?

The $300 monthly savings at 3.5 (estimated CPF weighted average interest) and 6 per cent (estimated GIC’s annualised return from inception) from age 25 would only accumulate to about $314,314 and $600,435 respectively, at age 65.

In other words, every Singaporean in this “$300 savings” scenario may be losing about $286,121 – due to the lower CPF interest.

Moreover, this “loss” may actually be much more, as from age 65 to death – the interest continues to be lower.

Need to save $954 monthly instead?

If we assume the estimated weighted average return on all the different CPF accounts to be 3.5 per cent – the monthly savings required would be about $954 – more than three times of $300.

Half the savings required if % higher?

If we assume the returns derived from our CPF funds is about 6 per cent – the monthly savings required  is much reduced to about $500.

As to “The survey found that retirees aged between 60 and 69 had saved only one-third of the funds they perceived to be sufficient for retirement.

CPF’s low % the dominant factor in retirement?

Two-thirds of retirees – 66 per cent – said they wished they had started planning for retirement earlier, with 65 per cent indicating that they do not expect their savings to last throughout retirement” – the dominant factor why Singaporeans have so little when they retire, is arguably the low CPF interest rates.

Leong Sze Hian

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