This is the third of a four part Coffee Conversation series brought to you by CIMB where its private banking economist - and foodie - Song Seng Wun makes simple even the most complex of economic brews.
Interviewer: I've only just entered the workforce, do I need to start saving for retirement?
Mr Song: Yes, people are living longer now and Singapore is dealing with the challenge of an ageing population, so younger people need to start thinking - and planning for - retirement earlier. Not only does starting early give you more time to grow your savings, but the longer-term horizon also allows you greater flexibility in riding out any short-term volatility on your investments. Moreover, in the case of any unexpected events, you will be better prepared.
While some say retirement can be delayed till we earn more and can therefore save more, we may be too caught up with our current spending patterns or plans to upgrade to a larger home, for example, that by the time we are older, we may still not be better off. This is especially so if we are also supporting our elderly parents and children.
Interviewer: How much money do I need to save every month?
Mr Song: This depends on a person's current lifestyle and whether he hopes to maintain that lifestyle or to scale it up - or down - during retirement years. For instance, if you want to enjoy a more glamorous retirement lifestyle that includes frequent travelling and fine dining, you might have to start saving earlier or saving more when you are younger.
Think of it like this. Will you be satisfied with having an ice kacang for dessert or do you crave the taste of bingsu, the fancier - and pricier - Korean shaved ice dessert. Ordering a bingsu can set you back by some five orders of ice kacang so if that is something you want, you'll have to generate more income now to support your future consumption of bingsu.
Interviewer: I'm already contributing to my Central Provident Fund (CPF) account every month. Isn't that sufficient in meeting my retirement needs?
Mr Song: The monthly CPF payouts during retirement is a good place to start, but you must determine if these funds are sufficient to support the retirement lifestyle you want to enjoy. You can start by assessing your current financial situation - do the sums on how much you expect to have in total from your savings account, insurance policies, CPF funds and investments when you stop working. But in light of longer life spans, be mindful as well of the number of years you would expect these savings to last, as you want to prevent a situation where you outlive your retirement funds.