If You Are a Millennial, Can You Save Enough To Survive a 100-Year Life?
When you are a millennial, retirement can seem very far away.
The truth is, you should start thinking about having enough saved for retirement right now, particularly when there is a chance that you may live to 100.
100 years old? That seems very far-fetched. But is it? In the United States, there are currently over 70,000 people who are aged 100 and older. In Japan, that number hovers at some 30,000 persons.
Even in Singapore, as of June 2017, there were over 1,200 centenarians, up from 50 in 1990.
In every decade since 1840, life expectancy has increased by two to three years. So someone born in 1987 in a developed economy has a 50 per cent chance of living to be 98, while those born in 1997 have a 50 per cent change of living to be 101 or 102.
Start thinking about your retirement planning now.
Make longevity a blessing, not a curse
Thanks to improvements in medical care and technology, a longer life can bring new opportunities.
You may decide at age 75 that you want to pick up a new skill that leads you down a new career path. Perhaps you have the opportunity to live in a new country, or decide to go back to school a second, or third time.
But if you do plan to retire in your 60s and live the 100-year life, you need to make sure that you are financially prepared.
Ask yourself these questions:
- How much will I need for my monthly expenses?
- Will my CPF savings provide me with adequate income?
- What proportion of my investments needs to be in growth assets if I’m expecting to live an additional 30 to 40 years after retirement?
- What if financial markets collapse when I do retire, and I don’t have the ability to recoup my investment losses?
- Do I have an emergency fund for unforeseen expenses?
Start saving as early as possible
It can be difficult to have answers to all these questions when you’re still a good 30 to 40 years away from retirement.
But as a millennial, it really helps if you start saving now.
One way to do this is to be mindful of your money choices. Now that the Grab vs. Uber promo code war is a thing of the past, stop hitting that snooze button and justifying the taxi ride in to work. Singapore is often singled out for its high cost of living, but rail fares are amongst the lowest in the world across major cities.
Eating out for lunch is also an expensive habit, so make a bigger dinner the night before and take in the leftovers.
Starting a saving habit does not mean you can’t have fun. If you save money in one area, you may have flexibility to spend in another.
Saving early also means that your savings start growing interest early, and the compounding effect will be greater. Your first 10 years of saving has the potential to be more powerful than the next four decades combined!
Learn how you can invest and save for your 100 year life.
Invest for the long and the short-term
Here’s the other consideration that you need to make when thinking about retirement.
Growing your savings alone will not be sufficient in ensuring financial security in retirement. You should invest part of your money to help you grow wealth as you age to prepare for inflationary changes and the unexpected, like an illness, home repairs, and even the possibility of living to 100.
The trouble is, when you are young, most of your money is held up by other financial commitments and debt repayments. Investing for your pension is rarely a priority at this stage of life.
The recently launched Schroder International Selection Fund (ISF) Global Target Return hopes to help investors meet these competing aims. The fund is focused on growing and preserving investor wealth to meet long-term financial goals like retirement, while also providing regular income to accommodate to more immediate needs.
How is this achieved?
The fund has a clear objective of generating stable returns above the rate of cash (USD Libor + 5%) over the medium term, while minimising volatility and the size of drawdowns to protect capital. It invests across a broad global universe where asset allocation is constantly modified to achieve this objective.
The key difference between the Schroder ISF Global Target Return and other multi-asset type funds is that investment decisions are aligned with meeting investor outcomes, rather than some arbitrary benchmark index or fixed strategic asset allocation.
And minimising losses for investors is an important consideration for the fund.
One of the biggest problems for millennials with little financial or market experience is having the confidence to continue investing when markets are falling or going nowhere. Market fluctuations over your lifetime are inevitable, particularly when you’re only in your 20s or 30s.
The best way to manage the risk of loss is to avoid assets that are vulnerable to drawdown. This requires products with enough flexibility in asset allocation to significantly reduce, or remove, exposure to those assets which are most likely to lose them money.
Asset allocation is typically the most important driver of an investor’s total return and should be the decision to which most time and resource is directed.
How can you prepare for a 100 year life? Find out how Schroder ISF Global Target Return can help you.
If you do not have the time or the expertise to continuously review or adjust your portfolio allocation, we would suggest that investors outsource this important decision to flexible asset allocation products like the Schroder ISF Global Target Return and let a professional manager navigate through difficult market conditions.
The team that manages the fund has a long and successful history of delivering stable returns above the rate of inflation, and avoiding market drawdowns such as those that occurred during the European debt crisis and the taper tantrum.
It is worth noting however, that everyone’s individual financial needs vary, so you should seek professional help from a financial advisor who can offer advice based on your specific circumstances.
Schroders is a global investment manager with assets under management of US$604.7 billion. If you invest in a fund managed by Schroders, you can be assured that your money is in good hands. The company has a 200-year-old history and has been active in Singapore since the mid-1970s.
Find out more about the Schroder ISF Global Target Return here.
 ”The 100-Year Life”, Lynda Gratton, Andrew Scott, Bloomsbury Publishing, 2016 edition.