Work till 75? It may actually make for a more rewarding life

It goes without saying that the longer you stay employed, the more secure your retirement will be. There are other benefits, too, especially if you live to a ripe old age.

Joey (not her real name) works at a cafe that I frequent. Cheerful and bubbly, she has a way with customers. With her hair always dyed a fashionable bright brown, few could believe it when she became a grandmother last year. Earlier this year, she said she would stop work as she was fed up doing extra shifts when the cafe was short-handed. But I wondered what she was going to do with all that free time on her hands.

Recently, I spotted her back at the cafe. Now she works only two or three times a week and is happier. “Not so tiring,” she told me. She also gets to interact with the customers, which she loves, and gets to make some extra money. A win-win situation indeed. 

There could be many more wins coming the way of lower- and middle-income workers, after the announcement of the Majulah Package during Prime Minister Lee Hsien Loong’s National Day Rally speech on Sunday.

In particular, the component featuring an Earn and Save Bonus. This will help people build up their Central Provident Fund savings with lower- and middle-income workers getting a CPF bonus of up to $1,000 a year, as long as they work full- or part-time. Older workers from the Merdeka and Pioneer generations, as long as they meet the eligibility criteria, will get the same bonus too.

Assuming Joey is 55 years old in 2023 and qualifies for the $1,000 bonus, how will she benefit? If she continues working full- or part-time for another 10 years, the $10,000 she receives over the decade will compound to around $12,000.

Putting this amount in context, this year’s CPF Basic Retirement Sum (BRS) is $99,400 for someone aged 55 this year (2023). Hence, for lower-income workers, this $1,000 a year from the Government will go some way towards improving retirement adequacy, said Phillip Securities’ senior financial services manager Elijah Lee. 

And that is not taking into account the CPF savings that the worker would be setting aside from his employer’s and his own contributions. A 55-year-old with a wage of $1,500 per month could get CPF savings of around $45,000 after a decade.

More help is on the way too. The CPF contribution rates for those aged 55 to 70 are being increased from Jan 1, 2024 to strengthen retirement adequacy. For example, the employer’s CPF contribution rate will go up from 8.5 per cent to 9 per cent for a worker aged 65 to 70 and earning over $750 monthly.  

There is also help from the Matched Retirement Savings Scheme and the Workfare Income Supplement scheme which tops up salaries and CPF savings. 

So continued employment, if you are in good health and want it, can have a hugely beneficial effect on retirement adequacy and especially so for low-income workers who have struggled to build a nest egg.

And this is especially true of those who will live for very long – say, to the age of 100 – but we will come to that shortly.

So picture the 100-year milestone. Age may be just a number but there is no running away from the fact that if you are blessed with longevity, it will mean many years of living expenses that need to be funded. Will you be ready for it?

Wealth advisory firm Providend’s chief executive Christopher Tan said: “This new CPF package is really targeted more at the low-income families and the package is to help them have a bit more in their retirement years.”

DBS Bank’s head of financial planning literacy Lorna Tan said the latest moves “will certainly help those who are already working and may incentivise them to continue working a little longer to build a bigger nest egg. For those who have left the workforce, the annual top-up may nudge them to consider returning to the workforce on a part-time or full-time basis”.

The joys of work

Yes, even as many of us chafe under our bosses and think longingly of retirement, there are benefits from staying employed, given how long we may live. The statistic that, come 2030, there will be nearly one in four Singaporeans who are 65 and older, is a worrying one.

That is where the option of working for longer comes in – not just for the financial security that it provides but also for the joy and satisfaction it may bring.   

Financially, relying on savings to fund retirement is not easy when inflation is elevated and may remain so due to supply chain disruptions and other structural forces such as climate change. There may also be the occasional big-ticket item that eats into savings. There is also nothing more troubling than facing old age and knowing that savings are dwindling rapidly. 

Of course, people may seek to invest in hopes of generating more income, but that carries its own risks. 

So employment is still one way of ensuring a steady stream of income as we age. And also of ensuring that we remain engaged and emotionally fulfilled.

More seniors seem to agree and are working till later in life. In mid-2022, the employment rate among Singapore residents was 67.5 per cent. For residents aged 65 and over, the rate in mid-2022 was 31 per cent, versus 17.1 per cent in mid-2010. Over the same period, the rate for those 75 and over rose from 5.4 per cent to 11.8 per cent. 

What’s more, jobs are being redesigned to suit seniors. Mr Kurt Wee, president of the Association of Small and Medium Enterprises, said that while some jobs may be too physically taxing for the seniors, this is already changing, partly due to a manpower shortage.

“Job specs and job design is an area that is continuing to evolve positively, alongside these years of support schemes from government agencies such as Workforce Singapore,” he added.

Working also brings benefits that go beyond money. In the United States, a 2016 study of about 3,000 people, published in the Journal of Epidemiology and Community Health, suggested that, regardless of health, working even one more year beyond retirement age was associated with a lower risk of dying during the 18-year study period.

Providend’s Mr Tan said: “Beyond the monetary benefit of remaining in employment, there are mental and emotional benefits as well when one remains engaged in the later years of one’s life.”

Joey is a case in point. If she continues to work, she will rely less – or even not at all – on her children for financial support. By keeping herself active, she stands a good chance of staving off dementia and other age-related mental illnesses and avoiding the corresponding healthcare costs. Joey’s social isolation is reduced with her job within the community. In work, an older person can find dignity in being useful. 

The larger the proportion of the population that is happier and healthier and contributes to the economy, the better it is for Singapore all-round. 

A 100-year life 

And that is important because of an even more worrying statistic. As mentioned by PM Lee in his speech, Singapore has 1,500 centenarians now, up from 500 in 2007, with the number expected to rise to 2,000 by 2030. 

Still, the country’s figures are dwarfed by Japan where its Ministry of Health, Labour and Welfare put the number of centenarians at 90,526 as at September 2022. With the figure expected to grow, Japan has been addressing how such a society can cope.

For example, the Smart Platinum Society, launched by former prime minister Shinzo Abe, does not treat older people as senior citizens but encourages them to stay healthy and continue playing active roles in the labour force and society, noted Dr Belinda Yuen, professorial fellow and research director at the Lee Kuan Yew Centre for Innovative Cities at the Singapore University of Technology and Design.

Financially, relying on savings to fund retirement is not easy when inflation is elevated and may remain so due to supply chain disruptions and other structural forces such as climate change. There may also be the occasional big-ticket item that eats into savings. There is also nothing more troubling than facing old age and knowing that savings are dwindling rapidly. 

The big 100 is entering the consciousness of Singaporeans, too, and many do not shrink from thinking about it. While CPF Life gives lifelong monthly payouts, Phillip Securities’ Mr Lee has clients who are planning for additional income streams. He said: “This will be about ensuring streams of income that last. Longevity is a multiplier of all risks in retirement. The longer you live, the greater the likelihood of being adversely affected by inflation, health issues and market volatility.”

In 2018, Prudential Singapore became the first financial institution to do away with retirement age, explaining that if workers retired at 62 (the retirement age then) and lived until 100, this would mean nearly 40 years of retirement. This long period could result in financial challenges should they outlive their savings. If employees perform their jobs well, they can continue to work, it said.

In another first for a financial institution, it also raised its CPF employer’s contribution rate for employees above 55 as another way of boosting their retirement savings.

Prudential’s new retirement policy was introduced on the back of the insurer’s “Ready for 100 in Singapore? Preparing for Longevity” research report that examined the readiness and aspirations of Singapore residents as people live longer. The project was partly inspired by the book, The 100-Year Life, by Lynda Gratton and Andrew Scott, which talks about “multistage lives” in which people take career breaks as well as work longer and across various fields.

So picture the 100-year milestone. Age may be just a number but there is no running away from the fact that if you are blessed with longevity, it will mean many years of living expenses that need to be funded. Will you be ready for it?

If you retain that traditional mindset of school-work-retirement, then after retiring at 63, your savings (and CPF Life payouts), while sufficient to meet your basic needs, may fall short if you also want the finer things in life.

But if you take a multistage approach to life, then one option will be to take a break from work to reskill before embarking on another work cycle.

Or you can keep working till you are 70, 75, if you wish. But perhaps during these years, you can ease off the job pedal so that work remains a pleasure – as it is for Joey – while earning some spare cash and adding to your CPF savings.

In that situation you will have to fund fewer years of retirement when you finally leave the workforce. Meanwhile, in the bag will be extra years’ worth of savings from your own and your employers’ CPF contributions and, if you are eligible, the Earn and Save Bonus.

This way retirement will not just be stress-free but also happier.

Article taken from The Straits Times by Lee Su Shyan, Associate Editor & Senior Columnist