It’s interesting to see how different cultures view work and retirement. It’ll probably come as no shock to see a recent survey shows Singaporeans like work and are optimistic about retirement. But there will still be issues.

Findings from the Manulife Investor Sentiment Index survey show that Singaporean investors view retirement with almost unrealistic optimism. They see it as a time not just for leisure and being with the family, but also for doing a job to top up savings and to help keep mind and body healthy. They anticipate retiring early at the age of 61, before embarking on a longer period of post-retirement work that is lengthier than that of their peers elsewhere in the region.

However, this accepting attitude to work may ultimately not be optional – it may be a necessity – and it also requires good health and the availability of work itself, neither of which are foregone conclusions. The survey findings show investors making three retirement misjudgments concerning:

– The actual duration of their retirement

– Their day-to-day expenditure whilst retired

– Their ability to work during retirement

“Given the rising cost of living in Singapore and the fact that people here are living longer, the amount saved for retirement may seem fine now, but simply won’t work in say 10 years’ time,” said Ms. Annette King, President and CEO of Manulife Singapore. “To delay or to not bother planning appropriately is a high-stakes option, and one that Singaporeans should avoid if they don’t want to feel like workhorses in their golden years.”

Living Longer and Spending More

The survey, covering the fourth quarter of 2013, shows that Singaporean investors planning for retirement expect to retire at 61 years of age and then continue working for a further nine years, well above the regional average of six years. They anticipate retirement, including the nine years of work, to last 19 years, suggesting a life expectancy of 80 years. In reality, the average Singaporean now lives to 84 years and, with that figure being an average, about half will live considerably longer.

The findings suggest that Singaporean investors won’t have enough savings to see them through. They expect retirement expenditures to be 65 per cent of their current income but in reality, and taking into account recent trends in inflation, this figure will likely be much higher.

“For example, one area of expense that may well increase is healthcare,” said Ms. King. “Medical prices have risen in Asia at about twice the rate of inflation over the past 10 years. In fact, World Health Organization data[1] shows health spending per person in Singapore has risen nearly four times in the past decade. Healthcare is very expensive and you need more of it as you get older.”

The rising costs mean that the majority (52 per cent) who said they probably or certainly will be able to afford a desirable retirement could struggle to do so.

The “Working Longer” Dilemma

Running counter to the risk-averse qualities that characterize many Singaporeans are their expectations of being able to work in retirement for an extended period. Nearly three-quarters (71 per cent) expect to work in retirement, in contrast to a much lower actual participation rate of about 40 per cent for 65-69 year olds, and less than 15 per cent for those 70-plus[2]. It’s an approach that buys into the myth that the right type of work will be available come retirement. They also expect to derive more of their retirement income (17 per cent) from work than the regional average (13 per cent).

“Research reveals that elderly labor employment levels are generally well below the level the survey findings point to,” explained Ms. King. “This may be because retirees are more selective about the jobs they take, looking for positions that offer flexible work schedules, or ones that are in line with their personal interests and that are less physically demanding. Or they may have elderly-related health issues that prevent them from working[3].”

Just as their life expectancy estimates and savings and retirement-work prospects can be viewed as a gamble, some Singaporeans look to be taking a high-risk route in their investment choices, albeit one built on caution. Singaporean investors hold on average 33 months of personal income in cash, well above the regional average (21 months). Of that cash, just one-fifth is set aside for day-to-day and unexpected expenses, leaving the remainder underutilized and losing value – as inflation can erode the value of one’s savings.