Retirement adequacy calls for prudent investing and planning

NUMEROUS surveys highlight Singaporeans' concern over whether they will have enough funds for their twilight years. The trend towards longer life expectancy suggests that an individual who retires at 62 may need a kitty that can last 20-30 years - a tall order given today's low interest rates.

Measures announced in the 2015 Budget provide a welcome boost: a higher salary ceiling for the CPF; higher contribution rates and extra CPF interest for older workers; and a higher contribution cap for the Supplementary Retirement Scheme (SRS). While the measures go some way towards enhancing savings, the question of retirement adequacy is muddied by a number of other factors: lifestyle expectations, financial commitments towards property, and the ability to invest savings to generate sufficient returns.

The issue is serious and promises to get weightier in a short space of time. Singapore's life expectancy is one of the highest in the world; the number of elderly is expected to more than double to 900,000 by 2030, from over 430,000 currently. Today, there are an estimated 4.8 citizens of working age to support one elderly person; by 2030, the ratio will narrow to just two citizens to one elderly. For most people, the CPF remains the main pillar of retirement savings. The ability to use it for the purchase of a home is a double- edged sword. While it enables members to own a home - that is surely a means to enhance savings - it also raises a number of risks. One is that property takes up a disproportionate share of members' savings, making them vulnerable to cycles in the property market. Those risks are acute today: members who are counting on selling their home to fund retirement are in a bind. Not only is their home's value likely to be depressed by the current down cycle, they also grapple with illiquidity as transactions dry up amid the property market cooling measures.