Reflecting on 30 years of work and investing, and why it matters more today

[SINGAPORE] As we celebrate National Day, let me offer a birthday thought experiment that is relevant for all generations, using those who started their career in the mid-1990s as a reference.

Now within sight of their retirement, they have only known a Singapore that has thrived throughout their working lives.

In 1996, a worker earned a median wage of S$1,800 a month. Today, that figure stands at S$5,775, trebling over a full working life, multiple crises and a pandemic.

It reflects 30 years of raises, promotions, job changes, upskilling and the extraordinary transformation of the Singapore economy. By any global standard, it is a remarkable achievement.

And yet, here is the uncomfortable truth. A single Singapore dollar invested in global equities would have grown more than 14 times.

That gap between the rate of growth of wages and investments is not a criticism of work.

It is the entire lesson of this column. It is about the choices we make, and the consequences that we face.

Arithmetic our brains refuse to do

Albert Bartlett, an American professor of physics, said that the greatest shortcoming of humans is our inability to understand the exponential function.

This applies not just to physics, but also retirement planning. Wages grow linearly. Capital compounds exponentially. Our brains are wired for the first and systematically fooled by the second.

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Consider why. Your income is anchored to your time and position, and both have ceilings. There are only so many hours in a day. There are only so many rungs on an organisational chart.

Singapore’s nominal median wage growth has averaged 4 per cent a year over 30 years, which feels like good progress, and it is. But it is progress on a treadmill that is moving backwards.

Capital faces no such constraints. A Singapore dollar invested does not wait for a performance review, nor does it plateau in your 40s.

The Rule of 72 shows that a 10 per cent return a year for 7.2 years doubles your money, and vice versa.

Global equities have delivered a range of 7 to 10 per cent in most rolling 10-year periods. Over a 40-year working life, that is five to six doublings, and the final doubling in the last decade alone adds more than everything you have earned before it.

Your salary is the engine that funds your life, but your invested capital determines whether you can one day stop relying on that engine.

Human capital or the ability to earn, when converted to financial capital and properly invested, is the only asset that can keep working when we no longer can.

The job of a working life is to convert human capital into financial capital as early and as consistently as possible.

Not whether to invest but how

This brings us, naturally, to the Central Provident Fund. Because for most Singaporeans, CPF is where a lot of that lifetime of conversion actually sits.

In January, the Lifetime Retirement Investment Scheme was discussed in Parliament.

Member of Parliament Shawn Loh noted that a typical balanced portfolio had earned 9.5 per cent per annum over the past five years, and that further delay of the scheme might deprive CPF members of the option to take measured risk for higher expected returns.

We have since learnt that a new, simple and low-cost investment scheme is on its way, built around globally diversified portfolios with a glide path, giving equity exposure when members are young, and de-risking gradually as they approach retirement.

This is one of the most important developments in Singapore’s retirement landscape, because of what it acknowledges: Time in the market is an asset CPF members own in abundance.

Leaving decades-long money entirely uninvested in growth assets has a real cost.

The 2.5 per cent interest rate of the CPF Ordinary Account (OA) doubles your money every 29 years, or about once in an entire career.

A sensible global equity-heavy portfolio would double three or four times over the same period.

Compounded over 30 years, it provides the opportunity to retire on your savings multiplied many times over.

Safe vs uninvested

Let me be very clear about what I am not saying, because this is where the debate usually goes wrong.

CPF’s guarantees are genuinely valuable. A risk-free 2.5 to 4 per cent is a foundation most retirement systems can only dream of. The floor matters, especially for those close to drawdown.

But “safe” and “uninvested” are not the same thing.

For a 30-year-old individual with a 35-year horizon, the biggest risk is not a bear market.

Markets have always recovered within the horizons that matter for retirement. The biggest risk is arriving at 65 having compounded a lifetime of savings at a rate that barely outpaces inflation.

That is a slow, certain and real loss paid in retirement adequacy, the one goal that matters most. Consequently, the riskiest asset is actually cash-like savings, as you are 100 per cent certain to fail.

This is precisely the logic of the glide path, and why the proposed scheme is so encouraging.

A glide path does not choose between growth and security – it sequences them: heavy global equity exposure when you have time to ride out volatility, shifting towards stability as the horizon shortens and the guarantees become more valuable.

It is the portfolio expression of a simple truth: Risk is not a fixed personality trait; it is a function of time.

Raising the probability of success

If the science of compounding is so well established, why do so few people capture it? Because the gap between knowing and doing is where most retirement plans fail.

The empirical evidence on investor behaviour is consistent and humbling.

We start too late, sit in cash waiting for clarity that never comes, chase past winners, panic and sell near the bottoms, and we pay fees that confiscate a large share of our compounding.

Each of these is an unforced error and correctable. This is where advice earns its keep: not by predicting markets, which nobody can do, but by making you actually stay on course.

A good fiduciary adviser does a handful of unglamorous things.

He or she puts you in a globally diversified portfolio at low cost; sizes your equity exposure to your actual horizon rather than your current anxiety; automates the investing so that discipline does not depend on willpower; and stands between you and your worst instincts in the moments that matter.

None of that is exciting, but all of that compounds for a better outcome.

The new CPF scheme will lower the barriers for members to get started, and that is worth celebrating.

But retirement adequacy and the probability of success still depend on the process you build around your money and the behaviour you bring to it: how much you contribute, how your cash, Supplementary Retirement Scheme (SRS) and CPF savings work together, and whether you stay invested.

The next 30 years start now

Singapore’s story is itself a compounding story. It is six decades of reinvestment in education, infrastructure, institutions and trust.

We intuitively celebrate that kind of compounding every August. We are far less adept at applying it to our own accounts.

So, this National Day, look back at what 30 years of work bought you or your parents. It is almost certainly a story worth honouring.

Then, look forward to the next 30 years, and ask what your capital could do alongside your labour if you finally put it to work properly. Your salary built your life. Only your investments can build your retirement.

The nation did not get here by leaving its resources idle. Neither should you.

The writer is co-founder and group chief investment officer of Endowus, CPF digital adviser and Asian digital wealth platform with S$17 billion in regional client assets across public, private markets and pension (CPF OA, Special Account and SRS)