Manulife Singapore warns that local people should be expecting to live for a further 20-30 years after retirement
Singapore — Many Singaporeans may be seriously underestimating how long they will live for after retirement, potentially leading to a significant shortfall in their retirement savings, according to a new study from Manulife Singapore, out today. This evidence of the lack of awareness about longevity risk comes as well over three quarters (81 per cent) of Singaporeans admit that they are primarily worried about rising healthcare costs, inflation and living expenses in retirement.
The research suggests that on average, Singaporeans anticipate only living for another nine to 12 years after retiring and are planning their finances accordingly. However, government life expectancy statistics clearly show that, on average, local people can expect to live at least another 17 years and in many cases much longer, meaning many run the risk of simply running out of income in their old age.
“Awareness of longevity risk is low among Singaporeans and they will spend far more years in retirement than they estimate,” said Darren Thomson, President and CEO of Manulife Singapore. “Based on the government’s 2006 statistics, average life expectancy for males at age 65 is 82.1 years and 84.4 years for females. With longevity, the retirement period is extended and the risk of outliving one’s resources is higher. To enjoy a comfortable retirement, one would easily need a steady stream of income for at least 20 years, and to be prudent one should really be planning for 25 to 30 years since these are just averages.”
For the pre-retiree respondents, the average planned retirement age was 63 and on average they expected their retirement savings to be able to support them for 12 years. The average retirement age among the retiree group is as early as 57 and they only plan for less than nine years of retirement or till age 66 on average.
As the Singapore population ages rapidly, 79 per cent of the general respondents and 86 per cent of the affluent respondents interviewed in the study said that unexpected healthcare costs were their primary concern during retirement. Besides healthcare, the other major concerns are primarily related to retirement funds and investments, including:
Eighty per cent of both the general and affluent respondents valued access to savings in case of an emergency as their top priority. Another important financial goal was having a guaranteed income for life so that they would not run out of income during retirement. Seventy-eight per cent of the general and affluent respondents shared this same view. Having a predictable retirement income so they know exactly how much they can spend was cited by 83 per cent of the affluent respondents as their top priority.
It confirmed the need for a solution to address Singaporeans’ quest for a predictable and sustainable retirement income and ensure financial security for peace of mind.
CPF funds and their own savings are viewed as the main pillars to support retirement. Pre-retirees believed that CPF funds and their own savings each would contribute 27 per cent of their retirement income. The retired respondents, however, cited that only 21 per cent of their retirement income came from CPF funds or their own savings. Children, in fact, are the key providers for their retired parents, money from children make up a quarter (25 per cent) of retirees’ income.
Though 66 per cent of general pre-retirees expected that their lifestyles would remain the same or even get better when they retire, less than half (45 per cent) have a financial plan for regular flow of income during retirement. For the general retirees, only 25 per cent have a financial plan for regular income. These findings confirmed that Singaporeans are overly optimistic of having a comfortable retirement and also under prepared to deal with the financial demands of retirement.
“People are living a longer life. Quality of life, rather than length, has become an important concern,” said Mr. Thomson. “Everyone aspires to live their preferred lifestyle after retirement. The challenge is how we can secure retirement funds for a 20 year holiday.” He continued, “Having worked hard for a major part of your life, you deserve to enjoy the fruits of your labour, with financial independence.”
Notes to editor:
Below is a graph to illustrate how populations are aging in Asia (including Singapore) and the U.S. Source data in Excel format is available upon request.
Source: U.S. Census Bureau - www.census.gov/ipc/www/idbnew.html
SaffronHill Research conducted the survey. The sample size survey polled 450 Singaporeans aged 45+ who were randomly selected and quota-controlled on gender, age, race and income to ensure that it represented the population.
1) General Segment = 250 general respondents with minimum monthly income of S$4,500.
2) Affluent Segment = 200 affluent respondents with minimum investable assets of S$150,000.
Methodology: Intercept + face-to-face interviews using a structured questionnaire.
About Manulife Financial
Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 19 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners. Funds under management by Manulife Financial and its subsidiaries were Cdn$426 billion (US$370 billion) as at March 31, 2007.
The financial strength of Manulife Financial’s insurance subsidiaries, including Manulife (International) Limited, is rated “AAA” by Standard & Poor’s Rating Services, the highest level available.
Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘0945’ on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com.
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For further information, please call:
Manulife (Singapore) Pte Ltd
Tel : 6 833 8162