Most of the time, we always look at how we are going to retire. So all of us know all the forumlas and everything. Save more, spend less, invest, etc...
All so simple right? So many financial bloggers, financial advisers, etc, the numbers are pretty standard.
But as we read in the newspaper, many people, do not think about or plan for retirement.
I discussed this with a 30+ year old colleague once, and he said he did not have much savings. He typically spends it all.
I discussed this with a few other people here and there, and most of them, either do not save much, or save a little, and not many have investments.
Then if look around at all the people, with such poor financial planning, doesn't that mean many people would not be able to retire? The reports in so many articles make retirement seem so distant and impossible...
So I wondered... how do the normal people retire? With such terrible numbers reported in all those articles, do people really have no way to retire and have to work until they die?
I won't go into detail, cos I don't have much info.
The problem is that I don't really know how other people live. Cos I only know how I live. And some decisions which others make, I'll never make. So it's actually really hard for me to calculate from someone else's point of view. Like I've been saving since I was really young. So the idea of having a low balance in the bank is really unknown to me, whereas it is somewhat normal for many people especially when they just started work.
So as usual, I'll try to estimate.
The median salary in Singapore is around $6000 per household.
I take this as a household salary when the couple is around 40 years old.
Most people don't think about retirement or plan their finances til they start to have kids at around 30-35. But at that point, they don't have much room to maneuver cos kids cost money.
So I think people might start to save seriously at maybe 40-45 years old, when their kids are slightly older already.
This leaves around 20-30 years for wealth accumulation.
If they save 10-20% of their salary,
This would be $7200 - $14400 per year
IF we compound it at 2% fixed deposit rate over 20 years.
(Many folks still use FD as their means of "investment")
We're looking at $178k - $356k (at 60-65 yrs old)
OR if we are looking at 30 years, then $297k - $595k (at 70-75 yrs old)
The numbers for 30 years are pretty good. If we include CPF life, we're looking at another $150k on top of this. It's going to be around $450k and above.
Considering the life expectancy to be 85 or so, that's around $450k for around 15 years.
Also, most people who have kids do get some form of monthly contribution from their kids. So it's really not too bad.
Of course my numbers are just a simple estimation. I didn't take into account inflation and salary increment. I do think that inflation and salary increment MAY net off each other. But looking at history, it actually looks like inflation usually outpaces wage increase.
So my numbers should be adjusted down if we are looking at numbers after inflation.
So I reckon that this is how most people would be retiring in future or even now. Cos if we look around us, that's just how things are. I don't really think it's a poor retirement. I think it's pretty ok. It's going to have to be around 70+ but that's still ok. Most folks won't need to collect cardboard boxes or sell tissues. As long as they start saving around 40+ they would be able to accumulate enough wealth in 30 years to be able to retire, and live without much financial worry til they leave this world. That is IF they are frugal in their older years and not spend all the money at a fast rate.
At that age, they shouldn't be spending too much already, unless they get conned by some foreign nationals in some scam... which is also common...
But it probably isn't as bad as some people would believe it to be. Some people say, they will work until they die, but with some financial planning and frugal living, I think it's possible to have a few relaxing years in the end. I mean... we don't see a lot of 70+ year old seniors working right? There are some, but it's not like a super large number. So this leads me to conclude that most people do pretty ok in their retirement.
Although another point which I noticed is that last time the old folks had kids. And this generation, Singaporeans don't really have a lot of kids so... the scenario really changes. Who knows what the future retirement landscape would be like...
Maybe I should think about having kids too... just in case...
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