Are You Prepared For This Money Time Bomb?

Did you know that there is a greater chance of a child born today reaching 100 years of age than it is for a man who is already 99 years old?

Just think about that for a moment.

The near-centenarian only has to hang on for another 12 months and he could celebrate his 100th birthday. But the new-born has to go through a whole lot more before hitting the century mark.

Yet the child still has a better chance of making it to 100.

It’s an extraordinary statistic.

In case you are interested, I reckon that I have a one-in-ten chance of reaching 100.

Good and bad

That could be both a blessing and a curse.

On the one hand, I could still have some way to go before I have to shut down my laptop for the last time.

The downside, however, is that you might have to put up with me for a whole lot longer.

Being able to live longer is certainly one of the greatest achievements of the healthcare industry. That is thanks to advances in medical science and pharmaceutical discoveries.

So, diseases that were once deemed to be terminal can now be either treated or prevented, altogether.

That is fantastic. But there is problem.

Work until 70?

As we live longer, we also have to work for longer to pay for our lengthy retirement. And it is not just you and I that will have to work longer.

According to the World Economic Forum (WEF) employees in developed countries should continue to work until they are 70.

The increase in retirement age is necessary as the number of people over 65 could more than triple by 2050.

It is reckoned that the number of workers for every person who retires at 65 could halve to just four.

There just won’t be enough productive people to support those who are enjoying the longest holidays of their lives. To put it bluntly, we are sitting on a ticking demographic time bomb.

But let’s be brutally honest – do we really want to work until we are 70? Do we want our children to work until they are 70?

Lucky us

According to the WEF, governments need to start immediately to make it easier for workers to save for their retirement.

Here in Singapore, we are lucky. Most of us are required by law to save for our retirement through our Central Provident Fund (CPF).

But the CPF has its limitations.

It’s like the old saying about leading a horse to water but not being able to make it drink.

It’s not a case of what the CPF can do for us but what we do with our CPF that counts.

The WEF pointed out that individuals need to not only increase their personal savings but to improve their financial literacy too.

Know our numbers

Financial literacy means knowing where put our money to reach our financial goals, better.

Put another way, earning a return of 2.5% a year is just not going to be enough.

It might seem like the safest thing to do with our money. But it may not always be the smartest, if we want to enjoy a decent retirement.

At a rate of return of 2.5% a year, every dollar that we invest today will take nearly 29 years to double in nominal terms.

But if we can improve the returns, then so too could the size of our retirement pots.

Risk free

Over the long term, Singapore shares have delivered a return of around 8% a year. With that higher rate of return, it could take nine years to double every dollar we invest today.

That’s a whole lot better than waiting nearly three decades for our dollar to double.

But investing is not free of risk.

So how do we avoid the pitfalls?

How do we pick our way through the stock market minefield and defuse the time bomb that is ticking below us and our children?

Please let us show you how. Just click here.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.