Raising the Retirement Age in Singapore

Since hitting the news last evening, PMO Minister Lim Boon Heng’s trial balloon about raising our retirement age to 68 has prompted a fair amount of negative comments online, with Singaporeans expressing anger and fear about the issue. Some online commentators have even called for Singaporeans to vote against the PAP in the coming elections to express their displeasure and to effect political change.

Since dealing with this issue through the ballot box requires that other Singaporeans to co-operate in terms of voting, and since we cannot be sure of the outcome until after the fact, I thought that it would be more useful for us to plan on how to deal with this potential policy change at the level of our individual lives instead.

Likely Impact

First of all, let’s look at the likely impact that raising the retirement age to 68 will have on us. The thing that we can be certain of is that access to our hard-earned CPF funds will be delayed in line with the later retirement.

The other thing which I think is likely to happen, although there is some uncertainty, is that the chances of us staying employed beyond the age of 60 will not improve even with legislative changes. This is because without complementary policy changes and actions elsewhere (e.g. immigration), this policy alone will not alter employers’ preference for younger workers, and legislative compulsion will simply drive them to take evasive actions and to move production overseas to cheaper locations such as Vietnam, which has a young and motivated population. The result will be that for the years between 60 and 68, we will need to find alternative means of supporting ourselves financially without recourse to CPF funds.

Defensive Actions

Having spent time thinking about the future economic prospects of our country, I am driven to conclude that for the majority of the working middle-class in Singapore, our current lifestyles will almost certainly translate into poverty in old age (I will write a more thorough analysis if I have time in future).

Given this situation, I feel that it is very important for us to make preparations for the possible retirement funding crisis. The first step is to come to terms with the reality of poorer future prospects for most of us who have to depend on a salary for our livelihoods. If you are not convinced of this either rationally or emotionally, please leave a comment here to let me know that you want further analysis on this subject. Note that blaming the government for past policy mistakes will not be helpful towards our preparedness!

The next step is to take a critical look at our current lifestyles, and find ways to cut back on expenses in order to increase savings. In a more serious case, it may even mean selling an over-priced property to downgrade to more modest dwellings. And as I have argued earlier, it is not prudent to depend on cashing out of our real estate at retirement in order to raise the needed funds.

Once a plan to cut unnecessary expenditure is in place, we can then upgrade our knowledge on investing in order to be better at making our savings work harder. This is necessary because markets are getting more volatile unlike the previous 30 years when a buy-and-hold strategy works because of the rising tide lifting all boats.

Finally, we may want to re-examine the premises upon which we define our happiness and fulfillment. We may want to find meaning in building deeper relationships with our friends, family and community, and move away from the endless cycle of ‘work-and-consume’ that seem to pervade our materialistic society.

The above is merely an outline of what we can possibly do to prepare for the policy changes that the government is thinking about. I hope that it will encourage you to think of creative solutions and to take proactive steps to deal with the situation. Comments are most welcome.