Source: OCBC. Average retirement ages by age cohorts.

Retirement and emergency planning have taken a backseat in Singapore. OCBC’s research reveals that “planning for retirement” experienced the most significant decline among financial priorities, with the index score dropping from 47 in 2022 to 40 this year. This finding comes from the fifth edition of the annual OCBC Financial Wellness Index, which surveyed 2,000 working adults in Singapore aged 21 to 65 in August 2023.

The study discovered that almost 80% of Singaporeans either lack a retirement plan or are not on track with their existing one, marking an increase from 71% in 2022. While it’s understandable that younger individuals in their 20s and 30s might lag in retirement planning, a concerning 34% of those in their 50s and 60s are also behind, representing an 8 percentage point decrease from the previous year.

Furthermore, individuals are postponing their retirement planning. Those in their 50s who haven’t started planning now aim to begin at 60, two years later than what this age group indicated in 2022. Similarly, those in their 20s have pushed back their intended planning start age to 42, eight years later than their 2022 estimates.

Concurrently, alternative retirement strategies are gaining traction. Nearly 37% of individuals without a retirement plan intend to work past the typical retirement age, while 28% are considering retiring abroad in locations with a lower cost of living. Additionally, 9% plan to rely on their children for financial support during their later years.

Singaporeans are also falling short in their emergency preparedness, particularly in covering significant medical costs or securing their family’s financial needs for the upcoming year. For instance, only 42% of Singaporeans with dependents possess sufficient savings to meet their family’s financial requirements for at least the next year, down from 50% in 2022.

While a larger percentage of individuals in their 50s (48%) and 60s (43%) with dependents have saved enough for this purpose, these groups also experienced substantial declines compared to younger Singaporeans, with drops of 14 and 24 percentage points respectively since 2022. This difference likely stems from the financial pressures of supporting both their children pursuing higher education and their aging parents.

In contrast, 31% of those in their 20s (compared to 41% in 2022) and 46% of those in their 30s (unchanged from 2022) with dependents reported having adequate savings. Furthermore, the average savings rate, representing the percentage of monthly income saved, has decreased by 5 percentage points to 25%, with 84% of Singaporeans now saving at least 10% of their salary, down from 91% in 2022.

A growing number of Singaporeans (53% compared to 46% last year) lack even six months’ worth of their salary as an emergency fund. Unsurprisingly, fewer people are investing this year, with only 79% of Singaporeans holding investments, down from 85% a year ago. The average investment return for Singaporean investors has also been halved for the second consecutive year, now standing at a meager 0.4%.

Generation Z and younger Millennials recorded the highest proportion of investors experiencing losses, with 40% of those in their 20s facing negative returns. Overall, the percentage of Generation Z and young Millennials on track with their investment objectives has plummeted from 75% in 2019 to 32% this year, potentially due to insufficient research. OCBC highlights that 22% of investors in their 20s rely solely on social media platforms and messaging apps like TikTok and WhatsApp for investment advice and news, the highest percentage among all age groups.

The bank notes, “Many young investors in their 20s who experienced losses might not even recognize potential pitfalls, as over a third (35%) actively manage their own investments, engaging in daily trading to capitalize on short-term price swings.”

Additionally, Generation Z and young Millennial investors are more likely to have been impacted by the downturn in international stock markets this year, with 30% of investors in their 20s having invested in such stocks, the highest allocation among all age groups.

Previously favored by young investors, non-traditional investments such as cryptocurrency and NFTs have lost their appeal this year. While nearly one in five (18%) respondents in their 20s invested in cryptocurrency in 2022, with 40% of these young crypto investors expressing continued willingness to invest despite the volatility witnessed that year, only 6% of respondents in their 20s invested in cryptocurrency in 2023. This decline is likely linked to negative news surrounding the cryptocurrency market, including the high-profile collapse of the FTX cryptocurrency exchange.

OCBC suggests that seeking qualified financial advice and utilizing digital tools can improve financial well-being. The Index reveals that individuals who seek professional guidance or employ relevant tools tend to have better financial outcomes.

For example, nearly half (46%) of investors who consult with financial institutions for advice are on track to achieve their investment goals. Conversely, only 35% of those who do not seek advice from financial institutions are on target.

Investors who have sought professional financial advice report an average return on investment 3.3 times higher than the national average. In contrast, those who haven’t sought advice report an average loss.

Analyzing personality types, Singaporeans whose dominant financial personality trait is “Emotional” have the lowest average Index score (54), particularly struggling in areas like generating passive income, investing consistently, and planning for retirement.

Conversely, those with “Conscientious” as their dominant financial personality trait boast the highest average Index score (64). While the average annual return on investment for Singaporeans is 0.4%, this figure drops to -0.8% for those with a dominant “Emotional” trait and surges to 1.4% for those with a “Conscientious” disposition.

Despite these differences, OCBC highlights that using financial tools significantly improves the scores of individuals with an “Emotional” dominant trait. For instance, the average score for someone with this dominant trait who utilizes a digital tool to manage their finances across multiple financial institutions is 57, compared to a lower average score of 51 for those who do not use such a tool.

Tan Siew Lee, OCBC’s Head of Group Wealth Management, acknowledges the challenging economic climate, stating, “2023 has been another difficult year, marked by persistent high interest rates, inflation, and volatility in the financial markets. These factors are evident in this year’s results, with the Index reaching its lowest point since its inception in 2019.”

However, she also points out a positive trend: “The encouraging news is that Singaporeans are managing their debt more effectively this year and are maintaining healthy saving habits. These practices are crucial for Singaporeans to sustain, particularly in light of the uncertain economic outlook.”

She suggests, “Another straightforward step Singaporeans can take is to enhance their self-awareness. Our survey this year reveals a correlation between personality traits and financial well-being. Therefore, it’s essential for individuals to dedicate time to understanding their own traits, recognizing both the strengths and weaknesses associated with them. Only then can they identify the appropriate digital tools and solutions to address their shortcomings.”