The Reality of Retirement

The first 15 minutes of the 2009 film, Up, is a masterclass in filmmaking. The movie begins with a montage of the protagonist’s life. Carl, as a young boy, befriends a girl named Ellie and falls in love. The two eventually grow up, get married and live together in a beautiful little house. Then (spoiler alert!) the bad news begins.

First, Ellie suffers a miscarriage and is never able to have a child again. To get over the incident, the couple decides to save up for a trip to Paradise Falls, a fictional waterfall in South America. However, no matter how hard they try to save for the trip, they repeatedly end up spending the money on more pressing needs. Finally, just as an elderly Carl finally makes the necessary arrangements, Ellie becomes ill and dies.

And that’s just the first 15 minutes of the movie!

Save for a Rainy Day

The rest of the film is actually a fun, adventure story, where Carl literally flies his house to Paradise Falls with the help of balloons. Still, the opening sequence perfectly illustrates the importance of savings, which the couple most likely didn’t have.

Retirement is not always about cashing in your savings to drive big cars or, in Carl and Ellie’s case, travel to South America. Sometimes, it is also about covering healthcare bills, not to mention the very real possibility of disabilities. The fact of the matter is that things change, be it your health, financial status, or lifestyle needs.

Here are a few other factors that may derail your retirement plans:

1. Health Alarms

With world-class tertiary healthcare, Singapore is excellent at keeping people alive. In fact, our life expectancy now stands at 83 years old — that’s about 10 years above the ASEAN average. However, falling sick is an inevitable part of life, and Singapore is no different. In the case of the movie Up, it is likely that Ellie’s miscarriage drained the couple’s savings, causing their dream holiday to become a distant dream.

2. Disabilities

In the opening montage, the couple had to dig into their savings to pay medical bills incurred when Carl accidentally broke his right leg. Disabilities like that can be a huge financial burden on not just yourself, but your family members also. This is especially true in Asia, where family members are often the primary caregivers to those who require intermediate or long-term care.

3. Needs of Family Members

For some people, retirement is about spending less and scaling down in terms of their lifestyle and expenditure — but what if we want to do something nice for our partners in retirement? Before Ellie’s untimely death, Carl’s plan was to pamper his wife with the trip to South America, which would have no doubt cost them an arm and a leg. In times like these, scaling down in every area of life is simply not a possibility.

4. Inflation

The $1 coin in your pocket now may not have the same purchasing power 30 years down the road. In fact, $500,000 today will have a value of only $206,000 in 30 years’ time, assuming a flat inflation rate of 3% per annum.

These are just the tip of the iceberg!

There are a myriad of factors that may impact your retirement adequacy. Sudden drops in housing prices, for one, may affect your ability to monetise your home. Changes to public policies may very well affect the financial position of retirees.

The reality is that, when it comes to retirement, the only certainty is uncertainty. What we can do, however, is to set aside a small sum of money every month to enlarge our financial safety net by the time we retire. That way, it doesn’t matter if it is a health or financial shock, because we would be more than prepared for it.