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They can change the Retirement Age but Determine the Work You are Meant to Do by Being Financially Secure

The government, the union and the employers are unanimous. They agreed that changes needed to be done on Singapore’s retirement age and re-employment age.

Manpower Minister Josephine Teo asked the Tripartite Workgroup on Older Workers to look into whether we need to change the retirement age of 62 and re-employment age of 67 and if they should be made when should they be made.

Singaporeans living longer. Josephine Teo’s data shows that on in two Singaporeans aged 65 today is expected to live beyond 85, and one in three will live beyond 90.

Longevity and demand for greater quality of retirement would mean that workers need to save longer.

The time for proposal till final implementation will take some years.

Josephine Teo explained that in many other countries it is rather difficult to move on such issues due to “Deep distrust and division prevent people from focusing on the future.” She said that we must try to avoid that and do better.

She also responded to MPs Foo Mee Har (West Coast GRC), Png Eng Huat (Hougang) and Sylvia Lim (Aljunied GRC) who asked about retirement adequacy, Mrs Teo said that retirement adequacy is improving, with more than six in 10 active CPF members turning 55 last year being able to meet the Basic Retirement Sum of $85,500.

How does Kyith feel about this? 

The age where you can withdraw money from your SRS penalty free, is linked to the statutory retirement age when YOU first enrolled in the SRS. Since the statutory retirement age now is 62 years old, if you open your SRS account with a small sum of money, that would fixed the penalty free SRS withdrawal age.

So whether you need it or not, you can do it now. You can read my previous article on opening my DBS SRS with $1

I think they might have an easier time to reach a consensus over the age, then the amount of CPF contribution for those that are older. 

In my past article, I have stated that it is better to extend the retirement age. 

This is provided the retirement age, and the re-employment age works as it should

Employers are not suppose to dismiss the employee due to age if the employee is below 62 years old. Employers must offer re-employment to eligible employees who turn 62, up to the age of 67. This provides older workers with more opportunities to work longer, if they wish to do so, while at the same time having the choice to retire when they have reached 62.

How many of us believe this to be the case? 

There are some organization that just do not fire people, even if you wish they should. I was told to my face they just do not fire people. And there are people that should really be fired. 

On the other end of the spectrum, you do not need to fire someone. For someone that is older, it is easy to set a a high benchmark and show them that they cannot hit it. Less to no performance bonus, no increment. Report to people you know they don’t like. 

Given this, you can understand why Non-Constituency MP Daniel Goh debated that we should just remove the retirement age. Josephine Teo said that it will be bad news for employees as the employers would have no obligation to keep employees up to  a particular age.

Now I wonder how antiquated is that kind of thinking.

If a worker is in depend, is good, brings in the business, keeps the morale of the colleagues high, even if the person is 67 and can still contribute, the employer will draft a contract for him or her. 

In contrast, if the business is no good, and the person is worth less than what the employer is paying for him/her, they will just activate the strategies to get rid of the person.

The retirement age seem to be a rule to preserve those mediocre or poor workers. So if we need such a rule, then what does that say about us as a nation?

Don’t let others dictate your Retirement Number

Or for the matter whether you retire or not. 

The discussion on retirement, to me, feels very borne out of our fear that we do not have enough for retirement. 

Better yet, it is borne out of our fear that when we are in our 60s, our capacity is so poor that without retirement, it is horrendous.

If this is your fear, and this fear consumes you so much, then my solution to you is:

  1. figure out how to have adequate wealth for financial independence
  2. figure out how to have the same level of cognitive and physical capacity when you are in your 60s

We get angry because we are afraid that we cannot reach this high level of retirement adequacy and rules the government set.

Those that read this blog, and embark on the journey in some ways are likely not worried. 

This is because they have a good idea how to derive the sum of wealth they need and how to go about get it. More importantly, even if they have not reach it, they have enough tactics to make what they have last longer. 

I think many would be aiming for having wealth other than CPF Basic Retirement Sum. If we are complaining that CPF is not adequate, then we jolly well need to make sure we have liquid investable assets that is not in CPF.

Which makes the idea of checking retirement adequacy by measuring it against CPF BRS (like what Josephine Teo described) to be a little ridiculous. 

The second part is to find out how you could make yourself strong so that you could work beyond the retirement age. 

I think work gives us a lot of focus. It distracts us from loneliness. It allows us to find an evolving tribe. The bane of work is poor health. 

And poor health is a fear of many. 

Do I have the solution? No. You might have your opinion here. I just sprain my back these few days and felt that this competency is harder to achieve than the money aspects.

One point that I am trying to make is that you might struggle with wealth accumulation, but you could have the health aspect figure out rather well. We all have our own struggle and its up to us to make the best of our situation. 

If you find it a struggle to accumulate enough now, you have enough run way to ensure that you could work longer. 

Dictate how long you wish to work, whether you get paid or not, what kind of work that you wish to do. Financial independence is about the money, but it is also not about only the money. 

Work gets good if you do not have to depend on it. 

This Country is Conducive to Retiring Early

We live in a country that, by all standards, favors those that make good life and economic decisions. 

Those that are able to, will find that they can pick and choose the grade of goods and services that they subscribed to. The taxation is conducive to let you accumulate wealth, and de-accumulate wealth without too much leakage. The lack of estate duty, capital gains tax on many financial assets, dividend and interest income tax on distributions is a big advantage.

When there are a lot of taxes, like in other countries, you are being forced to put your money into private or public retirement accounts, that locked you in till near retirement age, to give you incentive to save money and reward you by paying less effective taxes

Whether you use our private retirement contribution account, the SRS, is less important. For most people they could accumulate well without the SRS. 

That means that you can build up your wealth, and choose to semi-retire, Barista FI, or be financially independent much early. 

However, it absolutely penalizes you if you make a lot of bad life, working, wellness and financial decisions. 

It also penalizes you if the odds are not stacked in your favor. 

So here is one of the reasons why I right these outlandish financial independence stuff:

If you do not reach there, at least you will have more than a CPF Basic Retirement Sum so that you can top it up next time and get an annuity income. You can attempt to try and reach financial independence and not reach there. However, what you learn along the journey will make you financially agile that you would be able to make more good decisions than bad, and not get penalized for it. 

Do Like Me on Facebook. I share some tidbits that is not on the blog post there often.

Here are My Topical Resources on:

  1. Building Your Wealth Foundation – You know this baseline, your long term wealth should be pretty well managed
  2. Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
  3. Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
  4. Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
  5. Free Stock Portfolio Tracking Google Sheets that many love
  6. Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free

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Wednesday 6th of March 2019

I'm not sure employers are really thrilled about increasing the retirement age. This exposes them to greater probability of having to pay retrenchment benefits. True, there are many tactics like you mentioned to psycho-force the worker to resign, or to have him terminated for incompetence/inability --- both of which doesn't require paying retrenchment benefits.

The penalty for employers not to re-employ older workers, or to let them go in the middle of the re-employment years, is currently quite low --- either 2 months or 3.5 months salary (EAP -- employment assistance package). Govt may increase this penalty as part of the review, who knows?

As I mentioned before, having an official retirement age in S'pore is superfluous, as we don't have a state pension or free healthcare that is tied to the retirement age like in other countries.

The bigger (unspoken) issue is how this will affect CPF accessibility.

Currently the withdrawal age is 55, subject to meeting various minimum sums. This is a Sacred Cow that couldn't be killed since 1984. Will it be increased as a result of retirement age review? Or even totally removed altogether? This will definitely screw up many peoples' planning.

Then there is the minimum Payout Age, currently 65. Very high chance this will increase. People planning their retirement funding based on CPF Life annuity will be hit.

I have a feeling that the end result of this Retirement Age review for most Sinkies will be similar to other aging Western countries --- working longer & delaying retirement especially if access to CPF is pushed further out.

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