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My mum wakes up at 4am every morning to cook for our family of five. She would then go down to the wet market to do the grocery shopping for the day, before coming home. She would take a bath, tidy her hair in the mirror, before spraying on some perfume.
She’s always excited to go to work. You see, she’s a preschool teacher. Even though she has to do some pretty unpleasant things (think diapers), she still tells us how she loves her job. She’s done that for the last 14 years. She started part-time, whilst we were still in school. I still remember how she would make this desperate rush to end work so that she could pick up my sisters from school.
But what that also means is that 14 years of part-time income and low wages is not enough for her retirement. She’s barely halfway there to her Basic Retirement Sum (BRS).
It got me worried.
I realised I had to do something, before my mum reached an age where she had to still work to support herself even though she should be enjoying retirement. I started taking more of an active effort to understand CPF and how my mum could better leverage the returns so that her retirement is better secured.
The mindset shift
When I first thought through my mum’s retirement, it seemed like a mammoth task. After all, we weren’t talking about one or two thousand dollars. We were talking in the ballpark of around $80,000 to reach her cohort’s BRS. As a 20-year-old, that was more money than I had ever earned, spent or seen in my life.
It was easy to feel overwhelmed, and to simply procrastinate.
But then I remembered something a teacher said once.
“If you want to eat an elephant, you can only eat it one mouthful at a time.”
I used to think that we had to take big, significant shifts to secure our retirement, or the retirement of our loved ones. But that quote reminded me that it wasn’t the big things that counted.
It was the small shifts. Any transformation starts tiny.
Seeing it that way made it easier to think of the practical actions I could take. As BJ Fogg shares in his great book, Tiny Habits, very often, we approach change without distinguishing between aspirations and actions.
We may have aspirations like ‘have enough for retirement’. But that’s far removed from the action you can take right now to move you towards that goal. In other words, even if you know your goals, it may be difficult for you to understand how to reach them without breaking them down into the small actions you can take.
That’s what this article is for. To share the small steps I took to help my mum move towards a better retirement. But before that, I would like to address a misconception I used to have – that we are left on our own.
The government IS helping
Whenever I read online comments on how the government isn’t helping older workers enough to build their retirement adequacy, I used to be angry. Especially as a volunteer in the social services, I used to think that the government could do more. But it was not until I moved to the U.K. for university that I realised that what our government does to support the building of income security of older people… wasn’t done elsewhere.
Seeing how the government matched my voluntary top-ups to my mother’s Retirement Account last year (up to $600) helped me to see that at least something is being done. Or how there’s Workfare contributions that top up one’s CPF. Or how you get tax benefits for topping up your CPF (or your loved ones’).
But these policies by the government also reveal a wider assumption beneath retirement adequacy for our loved ones - family is still the first safety net for retirement. As children, you and I must take responsibility for the retirement adequacy of our loved ones.
Most of us find it troublesome to learn about retirement, especially when you’re young. We have better things to do than to trawl through CPF and personal finance sites trying to understand how to get better returns.
But I always remember this.
My mum gave her best years so freely when we were growing up. This is the least I can do. So what did I do?
Leverage higher returns
As a 20-year-old, it started with reading everything I could about the CPF. I realised the risk-free interest rate of up to 5%* per annum in the Special Account, was simply unmatched. Which bank would give those rates?
The first step was transferring whatever was in her Ordinary Account (which was earning an interest rate of up to 3.5%*) to her Special Account before she turned 55 (top-ups made to my mum after she turned 55 went to her Retirement Account.). This is an irreversible process. As we already paid off our home, doing this would leverage the higher returns in her SA. It may sound like little. After all, a 1.5% increase in interest rate doesn’t seem like a lot. But when you compound over 10 years… it’s a lot. Thousands of dollars more.
Top up CPF
My mum is great with food. But not that great with finance. Convincing her that I was going to redirect part of the allowance I gave her into her CPF, rather than as cash in hand, took a long time.
In the book “Nudge”, Richard Thaler and Sunstein share about how better outcomes can be designed with simple shifts in behaviour that reduce the friction needed to do something. We see it play out in our own retirement. As a student social worker in the U.K., where up till 2012, there was no automatic enrolment into a pension plan, there was more freedom to decide over which pension one wanted to use. I saw how this often resulted in older people not having any pension, beyond the State Pension. Why? It took too much time to decide.
Automating your top-ups to your loved ones via a GIRO deduction reduces the need for you to remember and then manually do so.
Making it regular, rather than once-off, can increase the long-term financial commitment that you make, and save the time needed.
There’s a reason why my mum still works in the preschool. She hopes that when we have grandchildren, she can take care of them in the preschool. Honestly, I hope that doesn’t need to happen. I hope she works because she wants to, and not because she needs to. But for that to happen in future, it means taking charge of the tiny changes needed today.
Any transformation as huge as ‘retirement adequacy’, especially for your loved ones, can seem scary. But start small. Start simply.
*The first $60,000 of your combined balances (capped at $20,000 for OA) earns an extra 1% interest per annum. Terms and conditions apply.
Information in this article is accurate as at the date of publication.