Many Of Us Will Save For A Wedding, But Not Retirement
All images by Chan Hui Wen for RICE Media.

I first meet Marcus and Tiffanie near Queenstown MRT as we head towards their future BTO neighbourhood. At first glance, the newly-weds seem to have it all.

My first impression? A power couple. After all, they’re on their way to comfortably ticking off all the boxes of the Singapore dream. A steady income? Check. Marriage? Check. BTO? Check. 

Yet while all this might be true, the couple also admits to having done little to no planning when it comes to their shared retirement. They might have ticked all the above boxes early, but they still feel unprepared for their future. This has been largely due to the lack of discussion and personal knowledge surrounding the topic.

Marcus and Tiffanie first met in university four years ago, and have since stepped into the working world. With little purchasing power back then, expenses were naturally more calculated.

“We had no income, so just eat at Koufu or Kopitiam lor,” shares Marcus.

Today, both parties enjoy a stable, above-average income. Marcus works in the banking industry under the IT department, while Tiffanie is in financial sales.

As much as possible, they try to cap their spending each month, saving at least half of their monthly salary. They also place small funds in various different joint accounts for investment purposes. The question though, is whether these plans are sufficient.

“We might have placed some money everywhere, but we don’t really know what they do,” admits Tiffanie.

When asked about their thoughts on retirement, they echo a similar sentiment: “Like many people, we both know that retirement planning is important. It’s definitely a concern in our heads, but we never know where and how to start.”

Their situation isn’t the exception. A recent financial wellness survey revealed that most Singaporeans are still neither equipped for financial emergencies nor well-prepared for retirement. In another study, it was found that 69% of Singaporeans felt that they would not be able to retire comfortably.

As such, young couples should recognise the importance of having discussions about retirement sooner rather than later. By identifying goals at an earlier stage, they can then start making plans and work together towards them.

For now, the couple foresees themselves having children before Tiffanie reaches 30 years old—which gives them 5 years to save up.

“It’s a bit tight if we have children now. We want to work hard and bulk up our savings first,” they tell me.

Currently, the next biggest step is for them to move comfortably into their new BTO home and for renovations to be completed.

Exciting as this may sound, it also comes with a ton of uncertainty.

The Importance of Emergency Funds

Settling down, in reality, hasn’t been entirely a smooth-sailing process. Since Marcus was the first of the two to step into the workforce, the initial down payment for their house easily wiped out most of his CPF savings. 

For a young person making their first big, life-changing purchase, it can be crazy to realise that months and years of savings can be so easily drained in an instant. And with increased financial commitments also comes an underlying fear of whether one will have enough for their future. Short-term spending on significant life events like a wedding or a home can also distract from long-term goals such as retirement planning. 

The majority of us don’t often see life beyond the next 5 years, what more life in our 60s and 70s? And while it’s possible to chart a course towards your retirement dream, we aren’t always aware of the options. 

Solemnisation Event: $7608.80
Customary Wedding Event: $8,417.91
Due to the pandemic, Marcus and Tiffanie’s solemnisation this year was limited to only 50 people. As such, they plan to hold another in 2021. 

An additional event, however, also means additional costs. This strain becomes apparent when they explain the situation to me.

Like many of us, anxieties surrounding financial and job security are still undeniably present. This worry has also heightened due to Covid-19, with Marcus already witnessing the departure of some colleagues. 

When asked to imagine a scenario where they were to lose their jobs, both Marcus and Tiffanie turned to look at one another, before looking back at me, confusion and bewilderment flashing across their faces. I knew then, that this is not even an option.

Save on Taxes, Build a Nest of Savings 

When we were on the topic of retirement planning, I brought up the Supplementary Retirement Scheme (SRS) to Marcus and Tiffanie. The SRS is a voluntary scheme that aims to help people save for retirement. It sounded familiar to them, but they were still relatively unsure of its benefits, especially on how it helps to reduce taxes.

Using a calculator, we worked together to see how useful it would be.

Based on an estimate of the market rate (for Marcus’s position).
Based on an estimate of the market rate (for Marcus’s position).
Hypothetically, with a contribution of $500 each month, this would result in $420 of annual tax reliefs. It may not seem much, but small amounts add up. Assuming his retirement age is set at 62, his pay remains the same, and so does the IRAS/SRS calculation, that gives him 34 years of tax savings, considering that he is 28 this year. In total, that would mean saving at least $14,280 worth of taxes.

With an SRS contribution each month, the couple can also have peace of mind knowing that there will always be a sum of money set aside for them until retirement. Ever left a pair of jeans someplace and later found cash in one of its pockets? The best kind of money is often the kind you forgot you had, and discovered again by accident. Of course, one has to first be willing to part with a sum of money each year until retirement age. 

Even though contributions into an SRS account provide tax savings, it only earns 0.05% interest per annum. As such, one can consider investing their contributions in a wide range of financial assets, including those offered by financial institutions.

A plan that the couple can consider is AIA Smart Wealth Builder, which is an endowment insurance plan that makes their money work harder to magnify returns through a combination of  guaranteed cash value and non-guaranteed returns. Moreover, regardless how the market performs, the premium paid will be fully secured from the end of the 15th policy year.

Alternatively, AIA Retirement Saver (III) provides guaranteed monthly income over a period of 15 years.

At the end of the day, these are plans that help to provide a sense of relief by taking away some unspoken pressures that many have when it comes to their retirement. 

Act Now, Don’t Procrastinate

For Marcus and Tiffanie, their only hope for retirement is to be financially stable. 

“When we’re old, all we want to do is chill,” they tell me. 

I’ve learned that fantasising about early retirement is not the same as being realistic. If we want to be cool grandparents who travel around the world while still at the peak of our health, then we have to first ensure that some sort of retirement planning is in place. Otherwise, it will remain a dream.  

Eventually, our initial awkward encounter transforms into a rant session, as we sit in the food court bonding over our uncertain futures. Clearly, anxieties surrounding retirement life is something that we can all identify and empathise with.

While I may not have the ability to make active contributions to my SRS account just yet, it’s a different story for them. Like what Marcus and Tiffanie shared with me during the end of our meeting, at least it is an option now.

Retirement may not demand our immediate attention, but it’s still a looming prospect. It’s scary, but it doesn’t have to be.  

This article is brought to you by AIA Singapore.
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This publication is for your information only and does not have regard to the specific investment objectives, financial situation and particular needs of any persons. It is intended only to be a simplified description of retirement planning and is not exhaustive. The information presented is not to be reproduced or amended, whether in part or in whole for whatever purpose or reason without the prior written permission of AIA. Please refer to the relevant policy contracts for the precise terms and conditions of the products. Terms and conditions apply. Protected up to specified limits by SDIC. This advertisement has not been reviewed by the Monetary Authority of Singapore. The information in this publication is correct as at 01 Dec 2020.

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