Importance of retirement planning and savings: 3 reasons why you need to start early
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3 min read
When we think about retirement, it is often filled with images of a carefree life, travelling with our spouses, spending happy times with our family and friends, being in the pink of health and staying active. But the reality might be a little further than what we imagine.
Many approach retirement without feeling adequately prepared. Despite the importance of financial planning for this milestone in life, saving for retirement often comes second to ensuring other goals are met sooner - whether that's buying a house, planning a wedding, or financing your children's education in Singapore. This happens to everyone, but there are compelling reasons for us to start planning for retirement now and enjoy the benefits in our later years.
We are living longer
According to statistics, Singaporean’s life expectancy at birth is 831 . That said, it also means that we need more retirement income to last us through our golden years. With our official retirement age set at 63 years2, it means that we need our retirement income to last us for about 20 years. This highlights the crucial importance of retirement planning and savings – starting early will give us much more options and flexibility down the road.
Rising cost of living
With Singapore headline inflation at 5.6% in May 20223, up from 5.4% in April 20223, the consumer price index (CPI) reading is at its highest since late 20113. Hence if you would like to preserve your current standard of living (or improve it) during your retirement years, you would need to make more provisions when calculating your desired retirement fund.
Inflation will affect your savings
Many of us who are saving money would most likely keep it in a savings account in a bank. However, there may be detrimental effects of inflation that may decrease the value of our money sitting in a savings account. Therefore, not only do you need to start saving, you need to do it smartly and identify ways to preserve the value of your money as well. To enjoy more retirement benefits when the time comes, opt for savings accounts with higher interest rates in Singapore. Alternatively, you can also consider investment-linked policies (ILPs) which combines life insurance and investment components. For example, InvestReady (III) is a whole-life regular-premium investment-linked plan that offers access to a diversified suite of funds – including dividend-paying funds for potential income.
How to get started on my retirement planning?
The good news is, with proper planning, you are still on your way to living the retirement life you have always dreamed of. Now that you understand the importance and benefits of saving for your retirement, check out our guide on retirement planning for young adults and find out what are the 5 tips to know when planning for your retirement.
Besides, there are other steps you can take to protect you and your family, including considering a range of insurance policies in Singapore. These can add an extra layer of confidence and safety to your overall financial well-being. From retirement income insurance to whole life insurance with accrued cash value, these insurance plans can provide a range of benefits while safeguarding you and those around you from unforeseen events. To successfully achieve your retirement goals, it is essential to take responsibility for your finances today and lay the foundation for a secure future.
1. [Life expectancy of Singapore population rose in last decade but fell during Covid-19 | The Straits Times | https://www.straitstimes.com/singapore/life-expectancy-of-singapore-population-rose-in-last-decade-but-fell-during-covid-19]
2. https://www.mom.gov.sg/employment-practices/retirement
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