Leap into prosperity this CNY 💰     Get an $88 head start to growing your wealth.

Leap into prosperity this CNY 💰Get an $88 head-start to growing your wealth.

CIO foreword

Samuel Rhee
Chairman and Chief Investment Officer

An estimated one in three Singaporeans will be aged 65 and above by 2035i while the average life expectancy in 2021 stood at 83.5 years. The share of the global population aged 65 years or above is projected to rise from 10 per cent in 2022 to 16 per cent in 2050i and many will come from developed countries such as Singapore.

Two generations ago, living to a hundred was akin to striking a jackpot. But with improved access and advancement in healthcare with better nutrition, there will be more centenarians among us in the decades ahead.

Still, the success story of longer lives is a cursed prize if it is not matched by an enduring quality of life. A lack of retirement income and savings can force older Singaporeans to work past their desired retirement age to supplement income or to sacrifice their quality of life by tightening their belts into old age.

With an increased dependency ratio and a decline in the working-age population, younger Singaporeans must be prepared to be more self-sufficient for retirement as there is less support from family. But are Singaporeans prepared for retirement amid higher inflation?

Inflation erodes retirement savings

That is what we set out to understand in the second edition of our Endowus Retirement Report. This year’s edition showed that high inflation is exposing clear and widening gaps in retirement adequacy, especially among those in the middle income brackets who had, just a year ago, felt comfortable with their finances and their retirement plans. Today, rising costs and declining real returns are causing them to reassess whether they are prepared to face retirement with their finances.

According to the Endowus Wealth Insights report launched earlier this year, we noted that the rising cost of living is the top concern for respondents. Of those polled in the report, 45% of them say that inflation is their top finance-related worry for the year ahead. If anything, these concerns would have intensified as inflation has stayed stubbornly higher for longer.

Their concerns are not unfounded. As of the third quarter of this year, headline inflation has sharply increased to above 7% — after a decade low of 1% — and long-term averages of just above 2%. While inflation cannot remain this high forever, there is a clear expectation that even if it stabilises, it will do so at a level higher than in the past decade.

A sustained increase in the long-term trend inflation from 1% to 3% will lead to a 45.8% decrease in retirement savings over thirty years. A 1% annual inflation rate will reduce purchasing power by 26% over thirty years whereas a 3% rate will reduce it by almost 60%. This cost escalation and declining purchasing power makes it even more important for Singaporeans to not only set aside enough money for retirement but to also grow it meaningfully through investments.

Investing during unprecedented times

While this market downturn and the recent negative returns are enough to spook anybody, the long-term empirical evidence backed by long historical data shows that investing on a regular basis over a long period of beyond 15 years would rarely lose you money. However, it must be accompanied with a clear focus on your long-term goal and not on short-term market volatility. You have to remain disciplined and dedicated to your long-term and goal-based investment plans.

Our latest Retirement Report shows that 52% of Singaporeans still do not invest their savings despite inflationary pressures. For others, many prefer options that yield lower returns than inflation, such as Singapore Savings Bonds (SSB) and bank fixed deposits. Many Singaporeans have also professed that they need help to manage their wealth against inflation better.

As Singapore's first and largest digital wealth advisor for cash private wealth and public pension (CPF & SRS) savings, we are on a mission to help people achieve long-term goals and build long-term wealth. We have given access to institutional investment products across cash, CPF, and SRS, to help all Singaporeans invest better today to live easier tomorrow. Endowus has also launched the Fin.Lit Academy this year, providing free and easy access to financial literacy and educational materials to everyone.

The best long-term solution to inflation is not just to save fastidiously but also to take a long-term view on retirement planning and investing. We hope that this report can help everyone gain new insights and a different perspective on how best to manage their wealth during difficult inflationary times.