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Retiring At 68

>> Sunday, November 21, 2010

The Singapore government is in process of rising the retirement age from 62 to 65 and may eventually increase it to 68.

This would not have been necessary if most had been prepared for their retirement. So what is the main cause that they are caught off guard?

I believe it is due to a lack of access to good financial advice.

The primary people giving out “financial advice” are insurance agents, Independent Financial Advisors (IFAs) and bank relationship managers (RMs). All these financial experts have passed the requisite MAS qualifications to be certified in basic insurance and investment product knowledge.

Firstly, this does not prepare these product sales people with the skill for comprehensive financial planning. Covering not only insurance and unit trust investing but include estate planning, tax planning, budgeting, portfolio management, etc. This reflects the quality of the financial advice available.

Secondly, their remuneration is mainly based on commission from product sales. Everyone needs to make a living so no one will work for free. Therefore, if there is no sale of any product, do not expect any advice at all. Moreover, the type of advice will also be focused on the product with the highest commission.

This shows that there is virtually no access to proper financial advice.

Instead of relying on others, it is best to get educated. Ministry Of Education (MOE) could look into making financial planning a compulsory subject in school and educating students on the importance of taking charge of their personal finances.

Singaporeans also have the CPF board which quietly looks after many areas through “Opt-out” schemes.

* One, it helps many to save. Being a compulsory disciplined savings, it has allowed many to afford their first residential property and a minimal level of income upon retirement;
* Two, it has provided the most affordable group insurance scheme, Dependant Protection Scheme (DPS);
* Three, it has helped to cover most under the MediShield scheme to defray the rising cost of medical care and have some savings for medical through MediSave;
* Four, it covers those over age 40 with long term care insurance, ElderShield;
* Five, it allows for estate planning through nominating a beneficiary or compulsory schemes like Home Protection Scheme (HPS);
* Six, it even grows the savings at a guaranteed rate of 2.5%, 4% and an additional 1% bonus.

CPF could look into educating the public of the benefits of their schemes and how best to compliment a financial plan with what CPF currently provides.

2 comments:

financialray November 22, 2010 at 11:20 AM  

There are many reasons why many are not prepared. One of those is that very few understand they may be living longer than expected. Another is that even fewer understand that medical technology is getting more and more expensive as they become more and more advanced. Today's insurance plans, even in the hands of an expert, may not prepare you for tomorrow's new technology eg gene therapy.

Lau November 22, 2010 at 9:14 PM  

It is precisely for these reasons that a good adviser should educate one to at least be mentally prepared and to cover financial aspect to the best possible.

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