Living to 100 or beyond? 5 important financial areas to review to build a multi-stage life

With one of the highest life expectancy at birth of 84.8 years, it should come as no surprise that the number of centenarians in Singapore has also increased significantly over the past 10 years, from 700 in June 2010 to 1,500 in June 2020.

Thanks to advancements in medical technology and healthier living, people in Singapore can expect to live even longer lives in the future. This brings us to an important question: If we are going to live longer lives compared to the generation before us, what can we do with the additional years?

Do we use the extra years to volunteer for a cause that we believe in, pursue an interest that we have, or extend the number of years that we would continue working for?

And with our additional years in the world, we need to be prepared to build for ourselves a multi-stage life that goes beyond just the traditional three stages – school, work and retirement.

This may include further education and retraining as we find ways to stay relevant in our workforce.

Options to take a sabbatical before pursuing our next career could also transform the traditional three stages of life that we are used to into a longer, multi-stage life that would look like school, work, sabbatical, school, work, retirement.

In theory, this sounds feasible and even logical. In reality, a 2018 research paper commissioned by Prudential showed that more than half of Singaporeans surveyed were not ready to live till 100. So what can we do to prepare ourselves financially for a multi-stage life that could stretch beyond 100 years?

1. Save & invest a larger portion of our income

As we embrace a multi-stage life that may include multiple periods of non-work, we need to take proactive steps to ensure that we have enough not just for our retirement, but also when we are not working such as during our sabbatical or when pursuing further education.

This means diligently saving a larger proportion of our income during our working years.

Besides saving, we also need to invest our savings. This will allow us to grow our retirement nest egg and to ensure that inflation doesn’t erode the spending power of our savings.

According to Prudential’s Saving For 100 research, the top three most popular tools that Singaporeans are using are their CPF (79 per cent) , bank savings accounts and fixed deposits (71per cent) and 66 per cent (life insurance). Which brings us to our next point.

2. Utilising CPF LIFE & retirement insurance plans to obtain higher monthly payouts

As Singaporeans and PRs, we have to make mandatory contributions to our CPF accounts each month when we work.

Perhaps as a sign that even the Singapore government understands that people need to plan to live beyond 100, CPF LIFE was introduced in 2009 to replace the Retirement Sum Scheme (RSS).

The critical difference between CPF LIFE and the RSS is that CPF LIFE provides a lifelong monthly payout for as long as we live while the RSS provides monthly payouts that is expected to last till 95.

For those who wish to have a higher lifelong guaranteed income, we can consider topping up our CPF Retirement Account to the Enhanced Retirement Sum, which is $271,500 as of 2020. This will give us a monthly lifelong payout of between $2,030 – $2,180 from 65.

However, depending on the standard of living that you are used to, CPF LIFE may not be enough to provide you with all the income that you need.

According to the most recent Household Expenditure Survey 2017/18 , the monthly expenses for a non-working person aged 65 and above who is living in a condominium or private apartment is $2,680 per month.

In this instance, the individual would need to have additional income to supplement his monthly CPF LIFE payouts.

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A retirement insurance plan is one tool that we can use to provide us with supplementary income for our retirement. As compared to CPF LIFE, retirement insurance plans are more flexible and can cater to the specific needs of individuals.

For example, those who wish to opt for early retirement can use a retirement insurance plan such as the PRUGolden Retirement Premier , which allows us to start payouts from as early as 55. We can choose how long we want the payout period to be.

So, if we want to retire at 55 but need a steady stream of income to sustain us till our CPF LIFE payouts commence at 65, we can choose a payout period of 10 years, starting from 55.

For those of us who need greater flexibility, we can consider the PRUActive Retirement plan. This plan allows us to customise when our payout period start, from age 50 up to age 110.

So whether you want to have an early retirement or intend to work till your later years, the PRUActive Retirement is suitable in supporting the decisions you want to make for your multi-stage life.

3. The remaining lease on the home that we buy

Some Singaporean home buyers are attracted to older HDB flats and rightly so. Older flats tend to be 1) located in central locations such as Kallang and Ang Mo Kio 2) are usually more spacious and 3) may be cheaper compared to newer flats in the same area.

However, when buying a resale flat, one factor to be mindful of is the remaining lease on the flat. For example, buying a 40-year old flat means having a remaining lease of just 59 years from when we purchase it. For a 30-year-old buyer, this means that the lease will run out when the person is 89.

Now that many of us need to be prudent about planning to live beyond 90 or even 100, we should carefully consider the remaining lease on the home we purchase as we would ideally not want to outlive the lease on our home.

4. Consider insurance policies that provide you with coverage for life

There are two main types of insurance plans – Whole Life Insurance Plans and Term Life Insurance Plans .

As their names suggest, a whole life insurance plan provides us with insurance coverage for life, or up till age 100.

A term life insurance plan usually provides us with insurance coverage for a specific term, usually up till age 70 or 75. However, some term life insurance plans such as PRUActive Term may allow you to buy coverage till age 100.

As we live longer, we may prefer to have insurance coverage to cover us during our later years, or even for the duration of our entire life.

For example, we may wish to have a whole life critical illness plan that provides us with a lump sum payout if we are diagnosed with any critical illnesses during our lifetime. This is when a whole life insurance plan will be important.

5. Embrace learning in our multi-stage life

When it comes to learning, the traditional mindset that we used to have was that people learn in school before joining the workforce to work. In 2020, such a perspective is no longer applicable . Rather, to keep ourselves relevant in our later years, we should regularly upskill ourselves.

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SkillsFuture is the umbrella movement to support Singaporeans in their journey of lifelong learning and professional development.

Among other things, the SkillsFuture framework provides an integrated eco-system of high-quality, relevant, and industry-recognised educational and training programmes, regardless of your age or stage of career. Subsidies are also provided via a variety of credits, grants, and even scholarships available.

Beyond just utilising their SkillsFuture credits, many working professionals are also embracing lifelong learning.

An example is Darren Ho. One of the founders of local men’s title AUGUSTMAN.

Darren took some time off in 2017 to reassess his life and after spending a few months picking up new knowledge in e-commerce while travelling through Western Europe and Asia, Darren returned to Singapore to work for a global content and e-commerce platform.

Due to the Covid-19 pandemic, Darren has switched to a new industry – advertising while concurrently pursuing further studies. 

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As more of us begin on our multi-stage lives, we may find that similar to Darren, our careers and even our children’s careers will not conform to traditional societal norms that we were brought thinking.

Career switches, further studies, constant upskilling and even taking a sabbatical during the peak of our careers may become increasing common in the future.

We may also find ourselves working beyond the retirement age – not because we have to, but because we want to and are able to.

With all these in mind, it is wise to consider having a holistic long-term plan to help us prepare for this longer, multi-stage life. With the additional life span, living a fulfilling long life is possible when we are financially prepared and set realistic goals to realise our dreams that we have always desire.

This article was first published in Dollars and Sense.