19 JULY 2005
S'POREANS ILL-PREPARED FOR SUDDEN JOB LOSS
They also don't have enough for retirement and are heavily-reliant on CPF
savings: SMU survey
"How long can I survive with the cash on hand?" is one of the first
questions you will ask yourself if you are suddenly out of a job.
Chances are, you will need enough money to last at least six months, which
is the average length of time it takes to find a new job in Singapore.
But a survey by the Singapore Management University (SMU) shows that
nearly two out of 10 Singaporeans are unable to cover more than a month of
expenses upon retrenchment.
This means they will have to resort to borrowing to meet their immediate
cash flow needs.
On average, Singaporeans have enough cash to last about 5.24 months,
according to the 922 respondents to survey drawn from different segments
"Singaporeans are not well-prepared for structural unemployment," said
Professor Francis Koh, Associate Dean of the SMU's Lee Kong Chian School
of Business, at the press briefing yesterday to release the survey
While a person does not generally expect to be retrenched, he or she can
better prepare for rainy days and ultimately, retirement, says Prof Koh.
The problem, however, is that many Singaporeans will not have as
comfortable a retirement as they would like to believe.
According to the SMU survey, the average Singaporean at 55 years old has
only $120,000, comprising a Central Provident Fund (CPF) balance of
$60,000 plus cash and investment assets of $60,000.
This amount will yield about $600 per month for 20 years, taking into
account an annual inflation rate of 2 per cent and an interest income of 4
per cent per annum.
This is far from the expectations of the poll's respondents.
They want to retire with about $1,800 per month, which comes up to a lump
sum of $350,000 for 20 golden years. Some, like sales trainer Gary Tan,
want a cool $1 million for retirement at the age of 55.
"When you are older, your health isn't as good. And you need to enjoy!"
said the 34-year-old, who diligently saves half his monthly salary besides
investing in various financial products.
But he only started managing his money when he hit 30, an age which
veterans from the wealth management industry reckon is a bit too late to
prepare for a cushy retirement.
"That gives me the goosebumps," said Mr Nicholas Tan, head of wealth
management at Oversea-Chinese Banking Corp, which commissioned the SMU
"Because when you are in your 30s and starting a family, that is when
commitments really pile up. Unless you are in a high-paying job, chances
are that you are not going to make it," he said.
While many survey respondents indicated that they relied solely on CPF
savings to tide them through retirement, Professor Koh said: "Saving
alone is not enough. Investment will bring more creation of wealth."
For more on this issue see:
Can't Afford to Retire? That Means No Babies !!