Are your savings enough for you to retire?

What do these stats mean for you? While it is great news that you may live longer, this brings about a new set of questions: What if you outlive your savings? How can you prepare for the extra years you’ll have for retirement?

Answer: Future-proof your life with early retirement planning and ample emergency funds. Here are 4 reasons why these are crucial:

1. Longer lives, increased expenses

As you live longer, you may need more money for the extra years possibly spent in retirement. Most Singaporeans expect to retire at 62 years old², so your retirement fund needs to last for at least 21 years.

The earlier you start planning for your retirement, the more time you have to save up for it and let your savings grow through compound interest. This can help to take some pressure off when you’re older, and could even help you retire earlier! If you have not planned for your retirement and would like to start, here are 6 factors to consider when building your retirement portfolio.

2. Unexpected illnesses can lead to unexpected costs

One of Singaporeans’ top concerns² about their personal finance goals is being unable to afford expensive treatments if they are diagnosed with serious illnesses. This comes as Singapore’s healthcare costs continue increasing in recent years. In the first 7 months of 2022, it rose by 1.7% year on year³. Healthcare costs in Asia-Pacific (APAC) also rose to 6.9% in 2022⁴. The cost is projected to increase to 10.2% in 2023⁴.

With such high costs, it’s necessary to save early for the uncertain future. Besides ensuring you have enough emergency funds set aside for rainy days, you can also financially protect yourself with a Critical Illness plan.

3. Be prepared for any sudden loss of income

Another financial anxiety of Singaporeans is the sudden loss of income². This could be caused by varying reasons: economic downturn, company restructure, personal health issues and more.

When you lose your source of income, you’ll have to rely on savings to tide you through daily expenses and fixed expenditures such as mortgage and bills. If you don’t have an emergency fund to rely on, you might have to take out loans and could possibly end up in debt.

How much emergency fund is enough? It is a common practice to save at least 3 to 6 months of your salary. This savings goal is a good benchmark for working adults, especially those with dependents.

4. Be a step ahead of inflation

Besides unexpected costs, you need to be financially prepared for inflation. From 2020 to 2022, Singapore’s inflation rate has greatly increased from -0.18% to 6.1%⁵. Without updating your financial planning or growing your finances, your existing funds might lose value over the years.

To ensure you’re not blind-sided by inflation, be sure to review your financial plan regularly and evaluate your expenditures to see if there are unnecessary spends. An alternative way is to invest some of your money. Find out why you should invest and how you can get started. 

What you can do to save money

Cultivating the good habit of saving money is not difficult. For a start, you can try using the 50/30/20 budgeting rule. Spend 50% of your income for purchases you need, 30% for purchases you want, and 20% for savings.

For household saving hacks, consider:

Saving money on electric bill

•  Replace your incandescent light bulbs with energy-efficient LED bulbs. LED bulbs use up to 75% less energy and last much longer.
•  Turn off lights and electronics when you're not using them. This includes your computer, TV, and unused charging ports.
• Use a programmable thermostat to adjust your cooling settings based on your schedule. This can help you save energy when you're not home.
• Do laundry and dishes only when you have a full load. This can help you save energy, water, and money.

Saving money on food

Save on grocery bills in these uniquely Singaporean ways:

• Earn rebates at your favourite supermarkets by participating in loyalty programmes.
• Shop for house brands, which are often offered at a lower price than a name-brand product.
• Opt for home-cooked meals instead of dining out to save expenses in the long-term.

Go forth and save

Saving enough money is as important as having a long, fulfilling life. So start planning earlier to ensure you are well-equipped for your dream retirement. If you need a hand in crafting a financial plan tailored to you, speak to our friendly financial consultants today!

Footnotes

1. United Nations, Department of Economic and Social Affairs, Population Division (2022) https://www.population-trends-asiapacific.org/data/SGP

2. Based on Manulife’s Asia Care Survey 2023. https://www.manulife.com.sg/en/about-us/newsroom/singapore-respondents-hope-of-saving-for-retirement-stifled-by-more-immediate-financial-and-lifestyle-pressures.html

3. Seedly (2022). https://blog.seedly.sg/rising-healthcare-cost-in-singapore/

4. 2023 Global Medical Trends Survey. https://www.wtwco.com/en-sg/insights/2022/10/2023-global-medical-trends-survey-report

5. Statista (2023). https://www.statista.com/statistics/379423/inflation-rate-in-singapore

Important Notes

These insurance products are underwritten by Manulife (Singapore) Pte. Ltd. (Reg. No. 198002116D). This advertisement has not been reviewed by the Monetary Authority of Singapore. Buying a life insurance policy is a long-term commitment. There may be high costs involved if you terminate the policy early, and your policy's surrender value (if any) may be zero or less than the total premiums paid.

This article is for your information only and does not consider your specific investment objectives, financial situation or needs. It is not a contract of insurance and is not intended as an offer or recommendation to purchase the plan. You can find the full terms and conditions, details, and exclusions for the mentioned insurance product(s) in the policy contract.

This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the LIA or SDIC websites (www.lia.org.sg or www.sdic.org.sg).

We recommend that you seek advice from a Manulife Financial Consultant or our Appointed Distributors before making a commitment to purchase a policy.

Information is correct as at 01 Aug 2023.