One of the news headlines today is The International Monetary Fund (IMF) warns that the World is sitting on ageing ‘time bomb’. The good news, given from the article, is that “we will live longer than we expect”. Ironically, the bad news associated with this is that “we won’t be able to afford it”.
Today, I happened to attend International Adivser Pensions Forum. Although the main topics of the seminar are UK pension and QROPS schemes, a lot of information shown are astonishing and definitely relevant to Singaporeans.
If you read the news paper article today, it says “Richer countries would have to set aside another 50 per cent of their 2010 gross domestic product (GDP) and developing nations, an extra 25 per cent” for the costs of ageing. “Singapore, which has the world’s third-fastest ageing population, it is not likely to be spared.”
If you earn $100,000 a year now. How much do you think you need to set aside per year if you were to retire at age 65 and maintain the same standard of living? 30%, 50%?
JPMorgan’s research shown that you need to save more than 2 times of your annual income to retire comfortably! How can it be possible? Think about it…
You might also think: “I can depend on government pension scheme”
In the talk today given by Peter Davis from PenTech, “The increasing complexities of UK and international pensions”, he highlighted the solvency issue faced by defined benefit pension plan, which is once regarded as “safe”. It does not take a PHD to understand that once the new money flowing into the pension is not enough to cover the outflow, the pensioners’ future cash flow is at risk.
We are blessed that CPF, much like a pension scheme, is sound and solid now. However, don’t forget you are earning 2.5% to 4% interest for you CPF money now. That is outflow of the fund.
When the population is ageing, when the investment return is harder to obtain, when there are more outflows than the inflows, what is going to happen? Think about it…
Can you stop people around you from living longer and longer? If you cannot, you’d better start plan for your own future now.