Life Expectancy and Retirement Funds

Heard on radio news this morning (22 Oct 07), some information on the government's plan on Annuity for Singaporeans. The annuity withdrawal age is proposed by SM Goh, to be 80 years old. Some facts and figures on Life Expectancy of Singaporeans:
- Male : 79.21 years
- Female : 84.59 years
- Average life expectancy being 81.8 years
- Median Age : 37.8 years
(info accurate as at Year 2007's statistics. Extract from https://www.cia.gov/library/publications/the-world-factbook/print/sn.html)

What gotten me wondering is, why does the government initially propose the withdrawal age at 85 years old, and now SM Goh counter-proposed it at 80 years old, when most males will be dead by then, and not many females will be living past 85 years old? This seems too funny, or rather, unfair to ordinary citizens like us. Is it really for the benefit of the general public, or will insurers benefit more from this? Shouldn't it be based on individual's preference, to opt-in if they like? Alternatively, the government could propose Endowment Funds provided by CPF where we get monthly payout from certain age for certain years, and remaining cash to be paid to next of kin should the member pass on prematurely.

Back to facts and figures. If the average life expectancy is 81.8 years old while the current retirement age is 62 years old, that means we will have almost 20 years to live on our savings. Will you have the finances to retire and live life as before retirement?

Let's take our expenditure after retirement as half that of an active working adult. If your current expenditure is $1,000 per month, you will need $500 per month after retirement. Take into account, this year's (2007) inflation is 2.9% (average inflation is about 3-5%). This means, the $500 should be inflated to (median age till retirement being about 24 years) $987 by year 2031.

With 20 years to live from retirement till motality, we need to have $987/mth for first year, and $1,727 on 20th year, thus average monthly expenses will be $1,357 per month upon retirement in year 2031. This means, we need at least $325,680 for retirement. If we were to save $500 per month, with interest (average savings interest being 0.29% pa), upon retirement, we will have less than half the amount we need to retire. Scary facts!

Let's look at how we can build funds for retirement. If we are able to invest $500 per month, at an average growth of 5% per year, we are only able to retire and have an average life, minus car, minus holidays. But is the average working adult able to save $500 per month?

Forget about your CPF. Our CPF Ordinary Account's funds are largely drained into housing installments. We still need to pay in cash, for the upkeep of the household. An average Singaporean's monthly income range from $2,000-$3,000 (guess-estimate). If the average income is $2,500 per month, $500 goes to CPF, which leaves us with $2,000 take home pay. If the individual owns a car, they are expected to spend $1,000 - $1,200 per month on car. What does that leave you with? Sadly, no more than $1,000 per month. How do you expect yourself to save $500 per month for retirement?

It is either, we start making more money, or make our money start working. Else, continue slogging till death do we part.