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Chapter 1 INTRODUCTION TO RETIREMENT PLANNING Retirement is the period when an individual is no longer actively employed or running a business. It can start at any age and in Singapore, the statutory retirement age is 62 years old. With increasing longevity and rapid social and demographic changes in Singapore, there is a need to consider retirement planning as early as possible in one’s financial plan. This chapter covers the importance of retirement planning and its underlying principles. It also takes a look at some of the changing demographics that will affect retirement planning. With a rising standard of living and the desire for financial independence, it is necessary to consider what constitutes a comfortable retirement. Finally, it will elaborate on the financial planner’s role in retirement planning.

Learning Objectives

This chapter will help you to:

� Understand the importance of retirement planning � Understand the underlying principles of retirement planning � Understand how Singapore’s changing demographics affect retirement planning � Know what adds up to a comfortable retirement � Understand the role of the financial planner in retirement planning

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1. THE IMPORTANCE OF RETIREMENT PLANNING Retirement planning is an important component of any financial plan. It is a process of determining how much financial resources an individual/couple will need upon retirement. Retirement planning also helps a person identify the most suitable means of accumulating wealth for retirement given the individual’s current financial situation and his desired retirement lifestyle. Surveys show that many Singaporeans do not think about their financial needs in old age and how to plan for it. One in three Singaporeans have not started saving for retirement and say that they will do so only at the age of 42. Many are uncertain about how much is needed for retirement and some think that an average retirement fund of $350,000 in today’s dollar is sufficient for retirement. Without doubt, there is an urgent need to educate the public at large about the importance of planning for retirement. 1.1 Lengthy Retirement

Although retirement is considered the last phase of life, it is unlikely to be a short one as Singaporeans are living longer. There is an average of about 20 plus years from the statutory retirement age of 62 (and soon it will be age 65) to the average life expectancy of 78 (male) and 82 (female). Without proper planning for financial security, the elderly of the future may not have sufficient financial resources to sustain him in his non-working years. Adjustments in living conditions like living independently and making the home more elderly-friendly will require a fair amount of money. It is also prudent to assume that prevailing inflation will erode the purchasing power of the retirement nest egg. With changing expenditure patterns like regular medical examinations and provisions for medical contingencies, income needs are likely to increase rather than decrease. Lastly, a comfortable lifestyle in retirement will be costly if the individual continues

to pursue his hobbies, travel, sports, recreational and other social activities. 1.2 Advocacy towards Self-sufficiency

The Singapore government has always emphasised self-sufficiency when it comes to taking care of self and family. A comprehensive social welfare system that is funded totally by the state is out of the question for Singapore. The Government is mindful of the crippling effects that social welfare can have on a person’s motivation to work, the vicious cycle of generational debts, and the

financial strain it will impose on the national coffers. Although there are some medical benefits and schemes offered by the state such as Medishield through the CPF MediSave account, subsidized fees at polyclinics and government hospitals, these are by no means sufficient to meet the retirement needs of the average Singaporean. *The Inter-Ministerial Committee on Ageing Population proposed that efforts should be made to encourage the public to gain awareness of their retirement needs. There is a strong emphasis on Singaporeans taking on more personal responsibility for their health and life-long planning for

retirement. Individuals have to make the necessary provisions for their retirement and not be dependent on any government schemes or benefits. (*The Inter-Ministerial Committee on Ageing Population was formed in late 1998, commissioned by the Ministry of Community Development and Sports, to identify issues posed by an ageing population, develop policy directions and lead a coordinated national approach to address the challenges posed.) 1.3 Building a Retirement Nest Egg Takes Time

Retirement is considered to be the last stage of a person’s life. Unfortunately, it is often last on a person’s priority, even as he saves for his marriage, prepares for his first home, plans for a family, and sets aside money for his children’s education. Indeed, at every phase of a person’s life, there are financial goals to establish and achieve. The tendency is for most people to delay saving for their retirement nest egg.

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However, financial security in old age cannot be achieved overnight. The earlier the planning takes place, the easier it is to accumulate a sizeable nest egg. The effect of compounding magnifies the accumulated assets if one has a long time horizon to allow the assets to grow. For example, to

achieve $100,000 at age 60, a 30-year-old needs to set aside only $41,198.68 at a 3% annual rate of return, whereas a 45-year-old needs to set aside $64,186.19 at the same 3% annual rate of return. With this in mind, it makes sense to start retirement planning as early as possible. 1.4 Ensuring a Smooth Transition into Retirement When one retires, one has to make many decisions that have financial implications like: � What kind of lifestyle do I want? How much will it cost?

� What are my financial commitments and responsibilities? � Will I be living where I am or will I be staying with my children? � How often will I go for medical check-ups? � How do I keep myself active? � What kind of transportation needs do I have? � Will I still be working during retirement? There is a common thread that runs through the answers to all the above questions: money.

Therefore, it is vital to accumulate enough money to see one through old age. With careful retirement planning, the individual will be able to ensure a smooth transition into retirement. Otherwise, retirement can be a fearful stage in a person’s life if he is unprepared for it.

2. THE UNDERLYING PRINCIPLE OF RETIREMENT PLANNING A critical concern for any retiree is the loss of active earned income during his retirement years. Even in retirement, some form of income stream is still needed for monthly living expenses. There

may also be ad hoc items like minor home renovation, unforeseen medical expenses or planned overseas vacation that require money. It is important to identify and create alternative sources of income to supplement one’s retirement fund. 2.1 Income Sources

Other sources of income must be available for a retiree to maintain a fraction, if not all, of his lifestyle needs. These sources can be:

� Dividend income from shares � Coupon income from bonds � Rental income from property � Royalty or franchise fees from businesses � Pensions from pension funds � Annuity from insurance � CPF Minimum Sum Scheme � Withdrawals from Supplemental Retirement Scheme accounts

� Receipts from reverse mortgages The underlying principle is to acquire these other sources of income to eventually replace earned income during one’s retirement. However, some of these sources of income like rental income may not be permanent. Other sources like dividend income may not be consistent. The choice of income sources depends on the asset accumulation planning process of the retiree. For example, if there is a large portfolio of stocks in one’s portfolio, then dividend income can be a potential source of retirement income. Retirement planning therefore includes the process of identifying and acquiring these other income sources over a period of time prior to one’s retirement.

2.2 Accumulation of Capital The principle behind a large capital or asset base is that it can be drawn down on a periodic basis to match the desired income needs of the retiree. In addition, it provides the necessary capital for one-off, large budget items like home renovation or car purchase.

In chapter 10, we will show you how to determine the capital required to generate the desired level of income with or without the supplement of other sources of retirement income. There are

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two models to determine the amount needed. One assumes that the capital is eventually depleted at the end of the retirement phase while the other assumes that the capital is preserved during the retirement phase.

3. THE DEMOGRAPHICS OF SINGAPORE In the 2000 population census, the census captured some significant trends of Singaporeans living in a fast-paced, ever-changing society. Over the years since independence, Singapore’s economy has become more open by trends like globalisation and advancements in information technology. The booming economy in the late 80’s right up to the mid 90’s created abundant job opportunities in almost every industry. The rising affluence followed by the Asian Crisis in the late 1990s not only changed the employment landscape but also caused massive job shifts. We are now living in an era where economies are more volatile than before. It is against this backdrop that we should examine the changes in Singapore’s demographics and its implications on retirement planning. 3.1 Ageing Population

Apart from Japan, Singapore is the fastest ageing society in Asia in the wake of the millennium. In the 2000 population census carried out by the Singapore Statistical Department, the median age has risen from 29 years in 1990 to 34 years in 2000. The postwar baby boomers, born during 1946 – 1955 (who are aged 45 – 55), are the fastest increasing age group with a 6.7% per annum growth rate (refer to Table 1-1). It is projected that the proportion of this age group will increase from about 10.7% today to about 26% in 2030. This means that there is one senior citizen (aged 60 & above) for every four Singaporeans. Table 1.1 also shows that the old age dependency ratio has risen over the past decade. The ratio of persons aged 65 & over to those aged 15 to 64 has increased from 8.6 to 10 per hundred. In

addition, the birth rate has decreased from 18.2 to 13.6 per every 1,000 residents over the past decade. With such a trend, it is very likely that the old age dependency ratio will increase significantly in the future. The Inter-Ministerial Committee on Ageing Population predicts that in 2030, there will only be three working adults supporting one senior citizen.

Table 1.1 Singapore’s demographics 1990 1992 1994 1996 1998 2000 2002 2004 2006

Total Resident Population (‘000)

2735.9 2849.8 2959.4 3068.1 3180 3273.4 3382.9 3484.9 3608.5

Age Composition (%) 65 years & over 6.0 6.2 6.4 6.6 6.8 7.2 7.4 7.9 8.5 Median Age (years) 29.8 30.6 31.5 32.3 33.1 34.0 34.7 35.6 36.2 Age Dependency Ratio 65 years & over (%)

8.5 8.7 9.1 9.4 9.7 10.1 10.4 11.1 11.8

Birth Rate (per 1000 residents) 18.2 16.8 16.2 15.2 13.1 13.7 11.4 10.1 10.0*

Source: Singapore Department of Statistics * The crude birth rate here is a 2005 figure

3.2 Longevity According to the Singapore Yearbook of Statistics 2000, the average life expectancy for female is

80 years while that of the male is 76. Thus when one retires at the statutory age of 62, one can look forward to living another 16 years on average. Table 1.2 below shows that male and female life expectancies have increased over the past 10 years.

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Table 1.2 Life expectancy at birth (Years)

Year Male Female Total

1990 73.1 77.6 75.3 1995 74.1 78.6 76.3 1996 74.4 78.9 76.6 1997 74.8 79.1 76.9 1998 75.3 79.4 77.3 1999 75.6 79.6 77.6 2000 76.0 80.0 78.0 2003 76.9 80.9 78.9 2004 77.3 81.3 79.3 2005 77.7 81.6 79.6

Source: Singapore Yearbook of Statistics 2005

With advancements in medical technology, better nutrition and healthier lifestyles, it is likely that Singaporeans will live longer. In this regard, the government’s primary emphasis will be on health promotion and disease prevention to enable the elderly to remain socially active during their retirement years. In their vision to achieve “successful ageing for Singapore”, the Inter-Ministerial Committee advocates adopting a prevention approach to ensure that the younger population will

age healthily in 10 to 30 years’ time. 3.3 Better Educated, More Independent The education profile of Singapore residents has improved significantly over the last decade as shown in the recent Population Census. The number of Singapore Residents without any educational qualification has dropped while the number of those with university qualification has increased over the past 5 years (Table 1.3). The young working adults of today place much emphasis on continuing education and upgrading to enhance their marketability in an economy that values professional skills and up-to-date work-related knowledge. The census also showed that there is an increase in the percentage of administrative, managerial, professional, technical and related occupations in the last 10 years. In the 21st century, a knowledge-based economy will produce well-informed and educated senior citizens of tomorrow.

Table 1.3 Highest qualification attained by Singapore residents

Singapore Citizens

Permanent Residents

2000 2005 2000 2005

No Qualification 20.9 18.0 7.5 5.6 Primary 23.6 22.9 17.6 15.6 Secondary 25.3 22.5 18.5 14.2 Upper Secondary 14.5 14.9 18.4 16.6 Polytechnic 6.3 8.2 5.2 8.1 University 9.5 13.5 32.7 39.9 Total 100.0 100.0 100.0 100.0

Source: General Household Survey 2005 – Socio-Demographic and Economic Characteristics

There is a significant rise in the number of nuclear families over the years due to the economic boom in the past decade and an increasing affluent young workforce. With better pay, newly married young couples would invariably prefer to set up their own nucleus family unit. Refer to Figure 1.1. The Government’s effort to assist every Singaporean own a property also provides the impetus for young married couples to purchase their own home. Coupled with this is the retiree’s desire to remain independent especially in his initial retirement years. Such independence allows them more freedom to enjoy their retirement without the encumbrance of making day-to-day living decisions of an extended family.

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Figure 1.1 Household structure of Singapore

Returns

28%

8%

–12%

Years

Source: Singapore Census of Population 2000

4. THE EFFECT OF DEMOGRAPHIC CHANGES ON RETIREMENT PLANNING Demographic changes are a cause of concern at both the national and personal level. As a nation, making provisions for future senior citizens requires a multi-pronged and cohesive approach at all levels of society. The Inter-Ministerial Committee for Ageing Population is subdivided into six workgroups to look into the following areas: � Social Integration of the Elderly � Health Care � Housing and Land Use Policies � Employment and Employability � Financial Security � Cohesion and Conflicts in an Ageing Society

The Inter-Ministerial Committee carried out a broad audit of present policies and programmes concerning the issue of ageing. It also made suggestions and recommendations in each of the above areas to deal with the issues of an ageing population. Policies changes, public education, working with private and voluntary welfare organisations and campaigns are some measures that the Government adopts to help Singaporeans age successfully. However, it is necessary for the individual to take personal responsibility and make deliberate plans for life beyond the active working years.

4.1 Take Charge and Plan Early In view of Singapore’s rapidly ageing population, there is an urgent need to educate the population on the need to begin planning for their financial security in old age early. Each individual ought to take charge of his retirement needs by anticipating the various issues that he is likely to address upon his retirement. The CPF scheme is but a basic financial backbone and is not adequate to provide for a comfortable retirement. In fact, most CPF savings are used for property purchase, thus creating an “asset rich and cash poor” phenomenon common among many

Singaporeans. This leaves insufficient funds for retirement. By planning early, the individual will have time to build up a sufficient nest egg for a desired retirement lifestyle as well as rectify any investment failures one may make in the process. Being conservative in one’s investment may impede the growth of it while being too aggressive may wipe out a person’s resources entirely. Proper asset allocation and appropriate wealth accumulation strategies must be in place and executed with discipline to achieve success. However, if the value of the portfolio gets eroded for whatever reason, the individual who starts

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planning as early as in his 30’s will have an advantage in recovering his losses over another who starts in his 40’s.

Planning early also allows a person to adjust his plan at various stages of his life taking to account for conflicting financial goals. Also, it is never too early to adopt a holistic approach towards retirement planning and consider other aspects of life in retirement like housing, family support, accessibility to amenities, and hobbies. 4.2 Needs versus Desires Today’s Singaporeans are well-educated and have higher expectations of retirement. Besides a

healthy, independent and fulfilling life, younger Singaporeans also desire a comfortable lifestyle with financial independence and security. Having been exposed to a higher standard of living in their youth, they would most likely want to maintain a fairly similar lifestyle when they retire. For them, retirement does not mean retire from enjoyment but to enjoy the same amount of freedom of choices as before. Retirement planning is therefore tailored personally to individual’s desires and circumstances. With a longer life expectancy, it is also necessary to consider the possibility of elderly employment and making larger provisions to retirement nest eggs.

As Singaporeans live longer and have greater aspirations in life, the definition of a desired retirement lifestyle keeps changing with the times. As such, the blueprint for retirement must be regularly reviewed to ensure that it remains relevant to address beyond the living, medical and housing needs of the individuals. All said, the greater challenge for the professional financial planner lies not just in helping his client manage his money, but his expectations as well.

5. WHAT ADDS UP TO A COMFORTABLE RETIREMENT?

It is very important to have a holistic approach to retirement and many aspects of retirement must be considered so that life in the golden years will not be drastically different from the pre-retirement years. As such, to ensure a smooth transition from an active work life to retirement requires not only financial preparation but also mental and health preparation. Encouragement and support among family members are also essential to help a new retiree make the necessary adjustments.

5.1 Money

Making the necessary financial preparations will ensure that a person’s savings will not run out during retirement, especially when there is no more active income to fall back on. In the initial years, a retiree may still be accustomed to the lifestyle he had before retirement. As such, the expenditure patterns are likely to remain similar during the first few years of retirement. It is usually after some years that the living standard has to be adjusted, especially if inflation continues to erode the retirement nest egg beyond the anticipated growth rate of the asset. Sometimes, unforeseen circumstances like the early death of a spouse or partner and or an

unexpected prolonged sickness may put a heavy strain on one’s financial resources. Apart from ensuring a sufficient level of retirement income, contingency planning against rising health cost is also essential in retirement planning. 5.2 Health

It is not be possible to enjoy the many activities the individual has planned for his retirement if he does not have good health. Regular medical examinations, proper diet and an active lifestyle are some preventive measures to attain good health. Most of us would not want to spend our retirement years nursing a prolonged illness. We would rather travel, engage in hobbies, serve the community, or take care of younger family members. However, it is also possible that our health may suddenly collapse and require intensive medical attention. Having an adequate and comprehensive medical insurance will indemnify against a sudden and huge drain of personal retirement fund in these circumstances.

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5.3 Purpose

Retirement does not have to be meaningless. However, the individual will have to redefine the meaning of life when he retires. This is where relationships with family and friends take on

renewed importance as he seeks not only support but also meaningful companionship. The early departure of one’s spouse or partner may deepen the state of loneliness. However, a newfound purpose and meaningful relationships will encourage him to live life to the fullest. Sufficient material comfort and excellent physical well-being are certainly important to enjoy one’s retirement. However, without a renewed purpose and perspective in retirement, the individual cannot achieve total contentment. Hence, as we lay plans to accumulate sufficient wealth for our

old age, we should also not neglect the other non-financial aspects of retirement planning. Plan early and holistically to have a comfortable retirement.

6. THE FINANCIAL PLANNER’S ROLE IN RETIREMENT PLANNING Having understood the need to plan early and conscientiously for retirement, how does one then go about the process of putting up a financial roadmap to achieve financial independence and security during one’s retirement years? The later chapters will discuss in detail the process of designing and implementing a financial plan for retirement. Briefly this process involves the following steps: � Set and prioritise retirement goals � Evaluate present available resources and situation � estimate the growth of present available resources to meet the goals � Implement necessary strategies or plans to supplement any shortfall � Monitor and review strategies and plans implemented to ensure that goals can be met

As the process may be tedious and detailed, and requires ongoing review and monitoring, the role of the financial planner is to assist the client in setting, implementing and reviewing the retirement plan to achieve his retirement goals. Apart from this, as financial products become more and more sophisticated and complex, it is valuable for the client to seek adequate and proper advice on the products that meet his retirement goals. During retirement, the client will have to make decisions with regard to capital preservation and

consumption needs, subject to factors like inflation, the availability of other sources of income, his current health status and other special needs. Thus, the role of the financial planner is to assist the client make decisions concerning these areas of wealth management during the retirement years. 6.1 Pre-Retirement Planning

Financial planning is a dynamic process. Depending on the stage of life a person is at, goals may not be as important as other financial concerns that he may have. Newly married couples, who are

setting up a family, buying a house, paying off a home mortgage and/or a renovation loan, may not have enough resources to set aside for retirement. A middle-aged couple whose children are about to proceed to tertiary education may have to spend their retirement savings to fulfill their children’s education goals if they did not plan for it earlier. It is important for parents to realise early that there must be a sufficient endowment fund set aside for their children’s needs; otherwise they (parents) may have to lower their retirement expectations. To reiterate, the role of the financial planner is to set up, implement and monitor the retirement plan of the client to ensure that the retirement goals are realistic and well prioritised. Realistic goals are achievable. This will ensure commitment from the client. The planner then assists the client to prioritise the goals so that the proper amount of resources is channelled to achieve the important goals first. At the same time, the planner needs to integrate the retirement plan with the rest of the client’s financial goals to ensure sufficient emphasis is given to the other goals that the client may want to achieve as well. These could include early repayment of debts, adequate provision for children’s education funding.

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All of us have limited financial resources. The financial planner’s role is to ensure and guide the client to consider how his retirement plan may fit into the overall financial plan so that the other goals, together with the retirement plan, can be achieved without much compromise.

Additionally, financial products may have to be bought as part of the implementation plan. Another role of the financial planner is to assist the client in product analysis and information. As Singapore’s ambition is to become the financial hub of Asia, it is not surprising that, with the Government’s encouragement, there is a plethora of insurance, investments, annuity and debt-base financial products in the market. With the proliferation of financial products, the extensive range of choices may create confusion for the client. At the same time, the client may need

appropriate and sufficient inputs to choose the most suitable and effective products to match his goals. These are the value-added services that a financial planner may provide. The financial planner must recognise that it is never too early to provide for medical contingencies even when one is healthy. It is best to advise the client to have a comprehensive health insurance plan in place to ensure complete coverage as early on in the planning stage as possible. Otherwise, it is necessary to indicate to the client that postponing the acquisition of such insurance may result in an uninsurable risk caused by poor health later on in old age. Also, a

medical condition may arise later on, and this will lead to an imposition of an exclusion clause that renders the coverage incomplete. Health insurance planning is a critical part of retirement planning that cannot be neglected. It is important for the planner to help the client realise that retirement planning is an ongoing process that requires periodic fine-tuning. With the familiarity of the various strategies and goals of the plan as well as the assurance of continuity, the financial planner is a valuable asset to the client in ensuring his financial security during retirement. 6.2 Post-Retirement Planning The first thing to evaluate upon one’s retirement is the availability of passive sources of income like annuities and rental income. It is important for the financial planner to assist the client to evaluate the dependability, consistency, variability, and perpetuity of these sources and the need for a supplementary income. Will there be sufficient liquidity for a supplementary income or does the client need to liquidate some investments to attain this? If so, what are the most suitable assets one should liquidate? How will this affect the overall asset allocation during the remaining years of retirement? Upon retirement, it is unlikely for a client to convert all his assets into liquid capital for consumption purpose. Hence, there is a need to consider proper asset allocation to continue to preserve and grow the remaining assets. Also, they should be protected against any inflationary pressures so as to retain or enhance their purchasing power. There is a need to work with the client to reconsider investment strategies, as the objective during retirement is skewed towards wealth preservation. Lastly, as death may occur unexpectedly, the financial planner must not overlook the need to discuss issues involving the transfer of wealth to beneficiaries. Most people will need advice on proper estate distribution, an area most people are unfamiliar with. Wills may also be used as a vehicle to transfer assets. Thus, the role of the financial planner is to highlight the implications of the various options that the client may exercise to ensure proper wealth distribution.

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SUMMARY Financial security cannot be achieved overnight. Careful, deliberate and early planning ensures the success of accumulating a sufficient retirement nest egg. The

changing demographic characteristics and the state’s advocacy towards self-funded

retirement are strong indicators that we have to be financially independent in our retirement. A holistic approach to retirement planning in the areas of wealth, health,

relationships and purpose is essential for a comfortable retirement. The role of the financial planner in retirement planning is to provide the necessary guidance and

advice relating to the various financial concerns a client has before and during his

retirement. It involves needs analysis, product comparisons, strategy implementation and counselling the client to achieve a successful retirement.

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REVIEW QUESTIONS 1. Why is retirement planning important? 2. Why is there a need to take personal responsibility for retirement planning? 3. What are the possible competing financial goals to retirement planning? 4. What are some of the issues that a retiree would face that may have financial implications? 5. What are the underlying principles of retirement planning? 6. Identify the various sources of income that a retiree can depend upon apart from his

employment income. 7. Describe the characteristics of Singapore’s demographics. 8. What will be the ratio of senior citizens to the rest of the population 30 years from 2000? 9. What is the average life expectancy of a Singaporean male and female? 10. What are the six workgroups formed by the Inter-Ministerial Committee on Ageing Population? 11. Why do individuals need to plan early for retirement? 12. What are the retirement expectations of the young affluent?

13. What adds up to a comfortable retirement? 14. What is the role of the financial planner in retirement planning? 15. Why is it never too early for the financial planner to help his client set up proper health

insurance as part of retirement planning?

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ANSWERS TO REVIEW QUESTIONS 1. It is important for the following reasons:

(a) The retirement years may be lengthy and last for more than 16 years (b) Building a retirement nest egg takes time (c) Need to ensure that the transition into retirement is smooth (d) Individuals need to be self-sufficient

2. The Singapore government has always advocated self-sufficiency when it comes to taking care

of self and family. In addition, it is more than aware of the debilitating effects of social welfare.

3. The possible competing financial goals are:

(a) Purchase of property (b) Pay off loans (c) Save for children’s education (d) Preparation for marriage

4. The various issues are:

(a) Level of lifestyle (b) Financial commitments and responsibilities (c) Housing (d) Healthcare (e) Social activities (f ) Transportation (g) Continued employment

5. The underlying principle in retirement planning is to identify and/or create sufficient levels of passive sources of income and accumulate a sufficiently large capital base to supplement these incomes.

6. The various sources of income are:

� Dividend income from shares � Coupon income from bonds

� Rental income from property � Royalty or franchise fees from businesses � Pensions from pension funds � Annuity from insurance � CPF’s Minimum Sum Scheme � Withdrawals from Supplemental Retirement Scheme accounts � Receipts from reverse mortgages

7. The list of demographic characteristics includes: (a) Ageing population (b) Growing life expectancy (c) Better educated (d) More independent

8. The post-war baby boomers, born during 1946 – 1955 (who are aged 45 – 55), are the fastest

increasing age group with a 6.7% per annum growth rate (refer to Table 1-1). It is not difficult to project that the proportion of the aged will increase from about 10.7% today to about 26% in 2030. This means that there will be one senior citizen (who are aged 60 & above) in every four Singaporeans.

9. The average life expectancy of a Singaporean male is 78 and female 82.

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10. The six Inter-Ministerial Committee workgroups are: (i) Social Integration of the Elderly (ii) Healthcare

(iii) Housing and Land Use Policies (iv) Employment and Employability (v) Financial Security (vi) Cohesion and Conflicts in an Ageing Society

11. The advantages of planning early are:

� Sufficient time to build sufficient nest egg for one’s desired lifestyle during retirement.

� More time to rectify any investment failures one may make in the process. � Flexibility to alter one’s plan to take into account the different financial goals. � More time to consider a more holistic approach, taking into account issues like housing,

family support, accessibility to amenities and hobbies so as to plan holistically. 12. Young Singaporeans today are impatient and cannot wait to enjoy the fruit of their labour.

They are used to a comfortable lifestyle with all the trimmings of material wealth, and would not expect life in retirement to be any different. With growing affluence, such desires become

basic needs in the future. 13. A comfortable retirement consists of:

� Sufficient financial resources to be independent � Good health to live an active life � Purpose in life with meaningful relationships

14. The role of the financial planner is to:

� Set up, implement and monitor the retirement plan of the client so as to ensure that the retirement goals are achievable

� Provide financial product analysis and advice � Ensure adequate and comprehensive health insurance is established � Evaluate the dependability, consistency, variability and perpetuity of the various income

sources � Plan for wealth transfer upon death: estate planning

15. The financial planner must recognise that it is never too early to provide for medical

contingencies even when one is healthy. It is best to advise the client to have a comprehensive health insurance plan in place to ensure complete coverage as early as possible during the planning stage. Otherwise, it is necessary to inform the client that postponing the purchase of such an insurance may result in an uninsurable risk caused by poor health later on in old age. Also, a medical condition may arise and this will lead to an imposition of an exclusion clause that renders the coverage incomplete. Health insurance planning is a critical part of retirement planning that cannot be neglected.