When is it too late for financial planning?

AT A press briefing for financial advisory firm MoneyOwl’s new retirement-income planner, a reporter was asked: Did he think his parents would benefit from it?

His reply was: “My parents are too old.” I was momentarily nonplussed.

Of course, I don’t know his parents’ ages. Financial planning may arguably be too late for people in their mid-70s or 80s.

Retirement planning ideally starts when one enters the workforce. But I think even people in their 60s should have a plan. That’s because in super-ageing Singapore, many people currently in their mid-60s could live until their 90s or older. That’s a span of 30 to 40 years.

When it comes to retirement adequacy, longevity is sobering because of the risk of outliving one’s resources. According to MoneyOwl, those who reached 65 in 2025 can expect to live another 21.6 years to age 86.6 on average, or up to age 84.9 for males and 88.1 for females.

Among these, 31 per cent of males and 46 per cent of females can expect to live past 90.

Japan has a startling statistic. As at September, more than 107,000 people became centenarians. Of these, nearly 88 per cent are women and just 12 per cent men. Singapore has around 1,500 people 100 and older. For the age band of 90 and older, about 70 per cent is female, 30 per cent male.

The need for financial planning is clearly more pressing for women, as their longer lives are likely to strain their savings. It doesn’t help that a longer life also spells higher health insurance premiums for women. And, as revealed by MoneyOwl’s chief executive Chuin Ting Weber, even CPF Life income payouts are slightly lower for women than men.

The firm has calculated the scheme’s annuity payout rate using the Full Retirement Sum (FRS) applicable for those who turn 55 in 2026. The rate is 6.5 per cent for men and for women, 6 per cent.

Yet another hurdle is that many women may defer financial matters like investing to their spouses. They may also fail to realise that their spouse’s CPF Life income ceases when death occurs, reducing their income stream.

MoneyOwl’s OwlRetirement Planner is a handy way for almost everyone to assess where they are in their retirement-savings journey. It estimates the value of CPF, cash and investments accounts. Users can customise assumptions such as retirement age, income needs and wage growth. You’ll get a consolidated view of the potential income stream from four sources: CPF, CPF Life, investments and cash.

Once decumulation starts, assumed at a 4 per cent withdrawal rate, the tool shows graphically how long you have before income from other assets – except CPF Life – dries up.

The catch is that for now, the tool is for those up to age 64 because it aligns itself with Singapore’s official retirement age, which resets to 65 in 2030. This is taken to be the “majority experience”, said Weber.

The ability to model decumulation is a plus in the advisory landscape; the tool is also free from any product pushing. The next step is to extend the age cap for users beyond age 64, which is surely young in super-ageing Singapore.