The Findings
Among the many findings provided by the in-depth study were some
key insights that showed a worrying trend.
1. Singaporeans are ill prepared for retirement
The study found that 74% of Singaporeans wish to retire before the
current
mandatory retirement age of 62; however most of them are
ill-prepared for their golden years. Whilst 90% are not content to
spend $700 or less per month during their retirement years, many do
not have enough in their CPF to supplement additional monthly
allowances.
As CPF savings are unlikely to be sufficient for retirement, its
critical that
Singaporeans save and invest actively during their working years.
Yet our study shows that Singaporeans are poor money managers. They
invest too little and too late to be able to enjoy quality
retirement. In fact, we found that many who are aged 55 only have
S$40,000 in liquid assets and S$20,000 in invested assets to help
fund their retirement. This is insufficient, said Practice
Professor Koh.
2. Singaporeans are poor money managers
Singaporeans are poor money managers and are overly dependent on
their earned income as the main source of wealth accumulation. Most
tend to invest only when they start a family and are in their 30s.
The average amount that Singaporeans across all age groups have in
liquid assets (savings, current accounts and fixed deposits) is
only about S$30,000.
3. Majority of Singaporeans not prepared for structural
unemployment
Singaporeans are not well prepared for structural unemployment.
Statistics from the Labour Market show that 41% of retrenched
workers remained un-employed after six months. Professor Koh added,
"Our survey shows that the median Expense Coverage Ratio was only
5.24 months. Thus, four in ten Singaporeans would face financial
difficulties if they are retrenched. We also found that about 16%
of individuals had less than one month coverage, which is really
not satisfactory. They will encounter immediate problems upon
retrenchment and may have to borrow to meet immediate cash flow
needs.
4. Group most likely to face financial problems are those earning
less than
S$3,000 per month
Singaporeans who are most likely to face financial problems are
those earning less than S$3,000 per month. This is because they are
vulnerable to structural
unemployment, and are overly conservative in their
investments.
In addition, these individuals are not willing to take risks to
grow their savings. They are also not willing to pay fees for
quality financial advice. This implies that Singaporeans who are
earning S$3,000 and below are not likely to invest unless their
money is guaranteed or their investments yield guaranteed returns
or have good performance records.
As the average wage of a Singaporean in 2004 was S$3,329, this
means that the majority of the population is vulnerable to
financial problems in times of structural unemployment. At the same
time, they are not investing their savings in the most effective
way to grow them.
Our survey shows that this income group has relatively low savings
with an average savings balance of S$14,000. And, more than 37% do
not have regular savings on a monthly basis and about 60% have an
expense coverage ratio of less than six months to cover their
needs, shared Professor Koh. What this means is that this group
is more likely to suffer in the long run when faced with structural
unemployment. Their investments would not generate sufficient
returns and they have minimal savings to cover their needs. Source
of Average Wage: Ministry of Manpower
5. Commonly used financial ratios may not be accurate
Singaporeans may seem financially healthy based on financial ratios
often cited by financial planners. However these ratios are based
on US data and may not be relevant to Singaporeans. For example, in
the Singapore context, the current savings ratio of 12% has
resulted in an expense coverage ratio of 5.2 months which many may
find inadequate when unemployment occurs.
