Importance of Retirement Planning
From Financial Literacy Wiki
Importance of Retirement Planning
The main purpose of financial planning is to ensure that we have enough funds to finance certain foreseeable expenditures. We spend close to a quarter of our lives in retirement. So retirement planning is very important given that Singapore has a rapidly ageing population. This means that in the future, there will be limited financial resources to meet the needs of the aged, thus it may not be possible for you to depend on the government or even your children to support you financially during old age.
Quoting from the CPF website:
" Today (2007), 10 economically active persons are supporting one elderly. By 2030, only 3.5 persons will be supporting one elderly!"
One of the common mistake people make is not planning early for their retirement. A longer time horizon would give your money better chance to work up enough funds for a comfortable retirement. A successful retirement planning would greatly depends on the assets you invest in and the timing of your investment. Thus learning how to plan your consumptions, savings and investment forms an integral part of your retirement planning process.
Below are other reasons why you start planning for your retirement needs early:
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High Standard of Living
Singaporeans are accustomed to high material standards of living. There are a lot of finer things in life that we enjoy. Unless you are able to forgo most of the material comforts available in Singapore, you will face with a high costs of living.
Increased Life Expectancy
Singaporeans are living longer thanks to medical advances and healthier lifestyle. A longer lifespan means that more money will be needed to meet living expenses during retirement unless one is wants to keep on working to reduce their retirement period.
Lack of Welfare Support
The Singapore Government operates on the principle of non-welfarism. Thus there are hardly any safety nets for people to fall back on. Thus those with insufficient funds would need to turn to their family for help.
Higher Medical Costs
As we get older, our demand for health care services increases. With higher demand, health care costs would tend to rise. Thus we need to set aside an amount in our retirement funds to meet the increasing medical costs.
CPF Savings
It is found out that many will not have enough CPF savings for their retirement. A 1996 Watson Wyatt worldwide survey shows that CPF savings generally fall short of the comfortable level of retirement income and this gap is very likely to widen.
Given all the reasons above, it is never too early to start saving and investing for retirement. So do start now.
