Employers should encourage employees to start retirement planning early
This gels with virtually all surveys into retirement adequacy. For instance, OCBC's Financial Wellness Index findings, published last November, showed that although more people are investing, retirement planning is still a problem.
The survey found that only 54 per cent of respondents have started making financial plans for retirement, down six percentage points from 2023, while 24 per cent said they either intend to start or started planning for their retirement only in their 50s or later, which realistically, does not leave much time to accumulate sufficient funds.
OCBC also found the problem to be more acute among 'Dinks'' – those with dual incomes and no kids. These findings have actually been fairly consistent over the years, so nothing new perhaps. But in a rapidly ageing society, it has to be troubling.
Although financial planners advise individuals to start investing and planning for their retirement as early as possible in order to maximise the benefits of compound interest and ride out volatility in financial markets, most people do not.
Individuals who are in the early stages of their working life and are just starting their families tend to be shouldering numerous financial commitments ranging from mortgage repayments to setting aside funds for children's education, to the point that investing and retirement planning tend to be relegated to secondary importance.
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Many also believe they lack the time and funds to do proper planning. The result is the majority relies on simple savings to build retirement nest eggs. This is far from ideal and presents a problem for a greying population that has to grapple with persistent inflation, at least for the foreseeable future.
When there is insufficient investment and advance financial planning, what happens is that as retirement looms and people realise they have a significant shortfall in funds, the tendency is to search for quick solutions via complex instruments that offer high returns but come with plenty of risks. If these securities do not perform as hoped, large losses are incurred, and the problem is worsened.
But the OCBC study also found that getting proper help, whether in terms of advice or tools, has had a positive impact on improving scores. For instance, almost half of investors who sought qualified financial advice from financial institutions were on track with their investments.
In this connection, employers, particularly human resource departments, can play an important role by encouraging employees to start gearing up for retirement from a young age. If cost is a consideration, there are available, for instance, free and unbiased courses offered by IFL on money management, insurance, investing and retirement planning.
A key plank of these courses is how the oft-misunderstood Central Provident Fund scheme can provide everyone with the foundation for a comfortable retirement. Also taught is how one's nest egg can be supplemented by investing in various instruments and tapping into government schemes such as the Silver Housing Bonus and Lease Buyback Scheme.
Given how pervasive the problem apparently is, employers certainly can help spur awareness and action by including (perhaps even emphasising) retirement planning in their suite of employee benefits.
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