We're living longer, but spending more time in poor health.
With a life expectancy of 84.8 years and a retirement age of 62, Singaporeans now have 23 years of retirement we must be able to tide ourselves through. Studies conducted by the Ministry of Health have shown that out of those 23 years, 10.6 years are spent in ill health.
We can expect our costs required for retirements to increase – are you ready for that?
Don't count on your CPF Payouts to cover all of our retirement; they’re only a complementary or supplementary source of income for retirement. You're going to have to do more.
Source: Ministry of Health, 2019
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We’re sure you hear this a lot. But do you really know what it means?
It’s a snowballing effect where your earnings help you generate even more earnings. For example, if your investment return is 2% a year, this becomes:
$1,000 + 2% = $1,020 (Earnings of $20)
$1,020 + 2% = $1,040.40 (Earnings of $20.40, $0.40 more than the previous year)
As such, this 2% isn’t stagnant, but continues to grow because of the compounding effect. The earlier you start, the greater this compounding effect will be.
Having a longer time horizon allows you to take on investments with higher risks while riding out the short term fluctuations and volatility. This typically provides you with higher returns as well, so long as you remain well diversified.
As a long-term investor, time is on your side.