SINGAPORE (Dec 4): With many Singaporeans juggling a myriad of concerns such as home mortgages, expensive childcare and mounting healthcare costs for aged parents, saving for retirement may seem like a secondary priority.
But alarmingly, some 60% of Singaporeans are not adequately prepared for retirement, according to the Syfe Retirement Readiness Index (SRRI).
The index calculates the individual preparedness of 1,000 working adults aged 25 to 60, based on expectations around their retirement lifestyle and needs, current income, accumulated savings, saving rates and investments, as well as other factors such as home ownership.
Each individual was then given a score, essentially eliminating a “standard benchmark” of retirement that not everyone may consider relevant for their own needs.
The SRRI scored individuals across levels of retirement readiness, ranging from high (scores over 130), adequate (between 100 and 130), low (70 to 99), and very low (below 70).
The median SRRI score in Singapore is 82, with some 60% of respondents scoring below the baseline score of 100 that denotes an adequate level of retirement readiness.
A deeper delve into the statistics revealed that there is a stark divide in retirement preparedness level across Singapore.
Almost two thirds of respondents sat on either extremes of the retirement readiness spectrum: 39% of them were significantly behind on their retirement readiness with scores below 70, while 27% had scores over 130 which indicated a high level of preparedness.
“This trend may be a reflection of the widening income gap in Singapore. Left unchanged, it also suggests that retirement inequality will only worsen as people become older with varying levels of savings,” says the report.
Additional research found that 69% of Singaporeans do not think they can retire comfortably, while 50% of Singaporeans save less than 20% of their income – the recommended level by financial experts.
Segmentally, generational differences were noted in the collated SRRI scores.
Millennial respondents aged 25 to 34 appearing on track for a comfortable retirement – if they can maintain their current savings rate and relatively low debt levels until retirement.
Conversely, respondents aged 35 to 54 – the so-called sandwiched generation – had the lowest SRRI scores. The report attributes this to the possibility of lower savings rates and relatively higher debt levels.
Notably, individuals across all income brackets seem to anticipate a lower standard of living after retirement. More than half of “high earners” with an income of more than $10,000 per month are expecting not to be able to maintain their current lifestyles in retirement, the report found.
Interestingly, the survey found that home ownership – which has long been considered an indicator of success – negatively impacted retirement readiness.
Nearly 30% of homeowners surveyed save less than 10% of their salary. Correspondingly, this resulted in a critically low SSRI score of 43 for the group.
“While it a financial asset, a home can also be a liability until the mortgage is paid off, and will often occupy a major part of one’s financial portfolio without generating any returns,” explains the report.
Dhruv Arora, founder and CEO of Syfe, commented that the SRRI is a “wake-up call” for everyone to start taking their retirement plans seriously.
“Unfortunately, misconceptions about expectations in retirement and a lack of real financial literacy has left many in a difficult position where they may not be able to reach their own goals – often without them even knowing,” adds Arora.
In tandem with the index, Syfe has also rolled out its Retirement Readiness Tool to the public, utilising the same algorithm to calculate retirement readiness.