Many Of Us Will Save For A Wedding, But Not Retirement

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.

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. 

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.

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).

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. 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.

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.

Author: Eve Lock, staff writer, RICE Media. All images by Chan Hui Wen for RICE Media.

Content originally published at https://www.ricemedia.co/current-affairs-commentary-many-of-us-will-save-for-a-wedding-but-not-retirement-aia-srs-sponsored/.

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