Pre-Retirees? Who are they and what are their concerns?
I will define ‘pre-retirees’ as the group with another 5-10 years left in the professional tank before retirement. They often question whether investments, in equities and bonds, suit people running on the final bend towards the finishing line.
Apathy towards investing inflicts many Singaporeans, but I will zoom in on the pre-retirees in this article. In a BlackRock global investor pulse survey in 2015, with 1000 Singapore residents between the ages of 25 and 74 taking part, the respondents expect 8.4% target return per annum.
However, the very same survey reveals all groups, including pre-retirees, allocate a disproportionately large amount into cash. Pre-retirees for example, have 46% of their assets in cash. So, while Singaporeans want to generate income and investment growth, there is clear misalignment between aspirations and actions.
Retirement, and pre-retirement, present the ultimate challenge in financial planning, as no single instrument is adequate in terms of meeting all the financial needs involved. There is a need for financial protection against adverse life events, like disability and hospitalisation. There is a need for liquidity and emergency fund. Importantly, having sufficient wealth and income is a pre-requisite so people get to enjoy their golden years, free from the shackles of monetary worries.
Many Singaporeans, including pre-retirees, are torn between generating enough wealth and savings for retirement, and protecting their resources. Many err towards the latter, preferring to take shelter in the perceived security of financial safe havens, like fixed deposit and savings accounts.