Hooray! You are going to officially retire today and there are two announcements.

The good news is that you will live longer than you expect.

The bad news, associated with this, is that you won’t be able to afford the long life you are going to live.

The International Monetary Fund (IMF) has warned that “the World is sitting on ageing ‘time bomb'”. What is the time bomb? That is every country’s pension scheme. In Singapore, we call it CPF.

It says “Richer countries would have to set aside another 50 per cent of their 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.”

You might say: “I’ve already started saving a little – I should be okay”

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! Well, that is just insane.

You might also think: “I can depend on CPF Minimum Sum“.

Can you?

I once attended a talk given by Peter Davis from international pension specialist PenTech. He said,

The increasing complexities of pensions increased 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, our own pension scheme, is sound and solid now. The problem is that the 2.5% to 4% interest is huge 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, the sustainability of the system will be at risk.

Can you stop people around you from living longer? If you can’t, probably you should start plan for your own future now.

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
The views and opinions expressed in this article are those of the author. This does not reflect the official position of any agency, organization, employer or company. Refer to full disclaimers here.

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