Singapore’s boom from money pouring in from mainland China and Hong Kong expats relocating to the financial hub masks a tough economic reality for many locals: A comfortable retirement is getting harder to achieve.

Singaporeans’ long-term saving plans are being jeopardized by inflation hovering near the highest level in more than a decade, insufficient wage growth, accelerating housing costs and other financial burdens from living in a city recently listed as the world’s most expensive alongside New York. In addition, a reluctance by many to put money in riskier, higher-yielding investments means nest eggs are falling short.

The result is nearly 60% of Singaporeans say they are not on track with their retirement plans, according to a report by Oversea-Chinese Banking Corp. in November.

One such person is Ignatius Koh, who hasn’t worked out how much he needs to save as he’s concentrating on buying a house and planning a wedding.

“I don't think retirement planning will be a priority for me until I feel like I’m on stable financial footing, which may be a few years after spending on those big-ticket items,” the 28-year-old Singaporean said, adding that he’s also unsure how to mitigate inflation eroding his savings. “I'm not sure how long we’ll have to work, or at what age we can retire, before we can confidently say we have enough money to stop.”

Singapore, like many wealthy nations including Japan and South Korea, is facing an impending wave of retirees. Most baby boomers are already in their 60s and government data forecast a quarter of citizens will be at least 65 by 2030. As life expectancy in the city-state stretches to 83.5 years — one of the highest globally — Singaporeans are confronting the reality of having to work longer.

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The need for a longer working life was underscored in July when the country’s re-employment age was raised to 68 from 67 and put on course to hit 70 by 2030. Employers must now offer eligible workers who reach the official retirement age of 63 the option to keep their jobs for another five years. The government plans to raise the retirement age to 65 by 2030, in line with Hong Kong and Japan.

The cultural expectation that Asian children will support their parents is also being tested. Singapore’s fertility rate ranks as one of the lowest globally, while its old age support ratio plummeted to a record low of 3.8 in June and is projected to fall to 2.7 in 2030. That means there are fewer people capable of providing economic support to a rapidly greying population.

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Many Singaporeans are still hesitant to invest in riskier assets. Households park about 8.4% of their money in shares and securities, according to official data. That’s less than the 10% figure in Japan, where Prime Minister Fumio Kishida is pushing citizens to invest more to prepare for retirement.

“Singaporeans tend to be relatively low-risk. Many put money in savings accounts and fixed deposits, but it’s unlikely this will be enough to offset the effects of inflation,” said certified financial planner Lee Song Yong. “That’s a really a big challenge.”

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Nearly 20% of household assets, or $540 billion, are stored in Central Provident Fund accounts, a compulsory savings and pension plan for Singaporeans and permanent residents. Lifelong pension payouts ranging from $350 to $2,300 per month are also available to eligible citizens after they turn 65.

But after accounting for inflation over the next decade, the maximum payout from the government is likely to be less than $2,000 per month, Lee said. That compares with the average monthly nominal wage in Singapore of $5,847.

Still, close to half of Singaporeans plan to count on CPF savings for retirement, a survey by digital wealth platform Endowus found. Experts warn a more aggressive investment approach is needed to sustain retirement.

“You’ll have to review the lifestyle you want and the cash flow needed,” said Jacquelyn Tan, head of group personal financial services at United Overseas Bank Ltd. “When you look at all these factors holistically, it might not be sufficient to survive just on CPF savings.”

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Singapore’s sizzling property market poses another threat to disposable income. Eighty per cent of Singapore citizens live in state-subsidized public housing and the median resale price of these homes was at a record $545,000 in October, 35% above its pre-Covid level. Some choice units in the heartlands — suburbs outside the city centre with a high concentration of public housing — are fetching million-dollar price tags even as cooling measures kick in.

Public resale home prices in November rose 10% year-on-year, while rents are also jumping, according to flash data from online real estate portals SRX and 99.co.

These housing costs are contributing to Singaporeans becoming increasingly concerned about living expenses after they stop working. Those in the “mid-high” household income group who aren’t confident about retirement adequacy jumped to 42% this year from 24% in 2021, Endowus said.

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Retiree Kim Sagadeva spends up to $3,000 per month on expenses including golf sessions, car maintenance fees and international travel. The 73-year-old is prepared to cut down on entertainment and travel as inflation bites.

“It would’ve been great if I was able to save a lot more as that would have compensated for inflation, but I have no regrets,” she said. Relocating out of Singapore has never crossed her mind despite the high cost of living. “Being close to family and friends far outweighs any cost saving consideration.”

Saving and reducing expenses can be helpful but it’s unlikely to be a winning strategy to fight inflation, said Samuel Rhee, chief investment officer at Endowus, which also competes for people's investments.

“The best and only solution to inflation is to take a long-term view on retirement planning and investing in financial markets,” he said.

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