This week, I had an appointment with Mr Tan whom I met on one of my door knocking sessions. At the start of the appointment with Mr Tan, he was still a bit shy and awkward with us. We started chatting and asked if he has done any retirement planning before. He laughed and asked if we were doing insurance instead of property. I mean how many property agents actually ask you about retirement right? I guess his reaction should have been expected. We got him to key in the amount of budget he thought he needed for retirement ie. For food, transport, utilities, Internet, medical expenses etc. From here, we used the figures taking into account inflation and possible returns from his funds and matched it against his planned expenses and the time span of this retirement. CPF has a retirement calculator which anyone can use to do a similar calculation. https://www.cpf.gov.sg/eSvc/
It was at this point that Mr Tan’s expression changed. He stared at the amount that was listed on the sheet. I believe this was when the full realisation that if he wanted to live according to what he had budgeted for retirement, he really had a shortfall that was not expected. He had to save more than 2K a month for the next 10yrs. Which is not an easy figure to achieve for someone who is the sole breadwinner. We honestly told him that if he had met us 8 years earlier, we should have been able to help do some asset allocation to better plan for his retirement. Right now, we would not want to risk him taking anymore loan due to his age.
For most Singaporeans, usually to raise funds for retirement and because ur family needs have changed, most will downgrade. So yes that was a possibility for Mr Tan that he considered. However, there were a few challenges ahead. One is that his flat is in an area where there is a huge supply of BTOs coming up. If he were to sell in 10yrs time when he retires, he will have a big pool of competition from the other flats nearby. Also, because of the HDB decaying lease issue, it would be harder to sell because his flat would much older by then as well.
5 – 8 years ago, his flat would have been able to fetch about 590K vs only 450K now. 10 years later, how much can his flat fetch? That would be a real worry..
Right now, we are working with Mr Tan on several options to address his challenges. One of the ways is to possibly move to a younger flat within the same vicinity to buy himself more time on his decaying lease. We are still in the midst of looking and planning for the best option for Mr Tan and his family. I also hope that his son who was sitting into the sharing session will be empowered to start planning earlier. I’m sharing his story because in the course of work, we have met so many people who are like Mr Tan. They are average middle class earners (not poor by any means) with fully paid up HDB flats and decent CPF accounts and many are feeling very comfortable. They have never actually done their financial calculations and figured out the realities of whether they truly have enough. I hope people are inspired to spend some time just to use the calculators and ensure they have enough. If they do, it’s great news. If not, don’t wait till its too late to see what can be done. Find out how you can start accumulating funds now while you still can.
All the best for your planning!