Wishing You A Long, Long Life : A Bond and CPF Perspective

I had the idea of the reverse mortgage over a decade ago.

It is similar to the Sale and Leaseback scheme of the government’s that takes over properties and leases it back to the former owner till their deaths.

My idea differed in that the pool of properties would be sold as a hedge to young families looking to secure housing for their children and they make monthly contributions at present prices and the proceeds would go towards the monthly payments made to the property owners.

It would be a transparent pool and buyers would know exactly which properties are in stock and I really thought it was a fantastic idea, disregarding the morality behind it and that some would be bereft of their legacies.

Yet I also considered the event of premature death. My belief is that some form of restitution be made, according to formula, to nominated beneficiaries.

The idea is taking off now, in the good hands of the government who can be trusted to sell the flats back at subsidised rates to the new generation.

From the CPF website, the first thing you will read is this.

Among Singapore residents aged 65 in 2006, 67% can expect to be alive at age 80 and 47% at age 85. This rising life expectancy means a change in the way we support ourselves.

Like it or not, the facts and figures are very real:
Number of Singapore residents aged 65 or older…

2007 305,600
2030 795,900


Supporting and caring for a rapidly aging population will be an increasing strain on Singapore’s younger generations. Today, 8.5 economically active persons are supporting one elderly. By 2030, only 3.5 persons will be supporting one elderly! Therefore, it is important that you plan early for a secure retirement.

Source : http://mycpf.cpf.gov.sg/CPF/About-Us/Intro/Intro

The number of people over the age of 60 (older persons) is set to exceed the number of children for the first time, by 2047 (source : Business Insider).

This is not a unexpected as new reports continue on the same rhetoric with a latest opinion piece by UK’s former chairman of the FSA, Adair Turner, that in prosperous countries, we can expect children to live over a hundred years in age.

That is also not unnecessarily bad according to him.

1. it is a sign of medical and economic progress
2. additional years of active and healthy living
3. a probable result of the empowerment of women
4. reduced costs of child upbringing = increased investment in education
5. less competition, less pollution and more value add eg. China’s declining fertility led to its economic breakthrough

Then why is the UK and gang in a hurry to boost immigration ?

Because it is beneficial to the citizens through income redistribution, according to a World Economic Forum study. http://forumblog.org/2014/08/immigration-benefits-natives-despite-labour-market-imperfections-income-redistribution-2/?utm_content=bufferaa8f7&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

In addition, the migration policies of the US, UK, NZ, Spain and rest, to encourage wealthy immigrants lead to almost instant gains for the country’s housing and GDP numbers.

Savvy citizens of South Korea are making plans for their retirements as the country prepares to be world’s oldest nation in 20 years with life expectancies of 95.

The government intends to introduce longevity bonds pegged to life expectancies to help insurance companies tread the unknown waters of unprecedented longevity while citizens are stocking up on long end retail papers.

Singaporeans are content to leave it in the good hands of the government and the government is doing its utmost in balancing expectations and raising the minimum sum in CPF again to SGD 161,000  in last night’s National Day Rally speech. http://news.asiaone.com/news/singapore/ndr-2014-minimum-sum-rises-161000-next-year-no-more-major-increases-afterwards

The reason that our government may be more concerned than the rest is…. probably because it is one of the longest lasting ones around whereas Obama, Cameron, Merkel and gang are leaving their offices soon. Long before the retirement crisis strikes.

Does Obama have to prioritise that 1/3 of Americans have less than $1,000 in savings and retirement funds (source : USA Today) ? which is no wonder that only 52% of Americans are vested in the stock market with the rest missing out on the current longest bull run (source : Business Insider)  ?

The answer is no. Leave that to the next President and let the San Diego pension fund run up the risk ( source : WSJ) which will explode years down the road.

Knowing that I will not die is a scary thought after my mother’s short and snappy life which ended on a high note (indeed, at 5,000 m above sea level).

And since I have to plan to 95 ? which is a long way ahead, and still 4 years short of my grandma at 99 this year, I better relook at those bonds and my living arrangements.

First, I would want to be stuck in a country that has money or resources. Singapore passes. Malaysia and Australia too, because they have resources.

Second, the country should have decent geriatric care and aged activities and not send the old and infirm off to the gas chamber yet I struggle with the idea of feeding tubes in Japan.

“one old man who wanted to commit suicide but feared that his children would not bury him, so he dug a hole, lowered himself into it, and drank pesticide while burying himself.” Source : China.org http://www.china.org.cn/china/2014-08/05/content_33148303.htm

Third, I need a powerful portfolio to support me which means ANNUITIES DO NOT WORK, medical insurance (hopefully from an offshore insurer) and a universal life policy for legacy because by then, normal mom and pop local life insurance would be loaded with too many clauses to protect profits that they would be quite worthless (just an opinion).

We have no where to turn but stocks and bonds and that odd property in Africa because  by 2050, Nigeria will account for almost 1 in 10 births worldwide (source : BBC).

Now the big question is – do we need to put aside more for retirement if we expect to live longer ?

My answer is not necessarily and this applies to people who already have retirement funds set aside, the idea would be to beat inflation with your current retirement amount to ensure the capital does not erode besides generating a return to support your lifestyle.

Because needs of the elderly are different as shown in this Goldman Sachs diagram in the context of the US.

consumption by age - Goldman

And if you are in the 35-55 age group, cutting back on unnecessary expenditure would go a long, long way towards retirement goals.

The entire idea is to generate returns and it will be more about bonds which is why I am writing everyday – a terrible tragedy with interest rates at such low levels.

And it looks like interest rates will continue to be lower than normal to cope with the aging problem. (Do you think CPF would like to pay more than 2.5% ? – just a thought)

Attitudes are unfortunately not in the favour amongst the majority with even middle aged folks succumbing to the YOLO (You Only Live Once) mindset and living life on a precarious edge.

Suicide amongst the old also throws a spanner into the works of those insurance policy clauses (except those that specifically allows suicide like mine) . As unofficial suicide stats climb in China and the huge cohort of retirees join the throng (350 million Chinese — one in four of the population — will be aged 60 or older by 2030, almost twice as many as now : source Japan Times).

I personally anticipate euthanasia and assisted dying and all the right to die laws to start emerging globally, taking the lead from Scandinavia and Switzerland.

The government is taking big steps to plan for the future, but we cannot leave it all in their hands. The CPF rules are useful in protecting the next generation from over burden and leave remnants of a legacy for them too.

The man has spoken. CPF is stuffing that news down our throats whether we like it or not. Unless you up and leave, there is only 1 thing left to do – to get ready for that long, long life.