Saturday, September 15, 2007

People are living longer

REVISED: People are living longer. Many people do not realise the significance of this statement.

Based on the current death rates, a male at age 65 has an average life expectancy of 16.8 years. Most people think that the chance of surviving past 81 years is about 50%. Actually, the chance is much higher.

I looked at the death rates of people in various age groups, as reported in Population Trends, published by the governemnt's Department of Statistics.

Over a period of 25 years, from 1980 to 2005, the death rate fell by about an average of 3 percent yearly. For example, the death rate for 40-45 years was 2.9 per 1000 popuation in 1980. It fell to 1.4 in 2005.

If less people die in each year, more people will live longer. If we assume that this improvement of 3% continues yearly over the next 30 years, the average life expectancy of a male at 65 is 22.7 years (as compared to the current 16.8 years). You can expect to live 6 years longer.

Here is something for you to ponder. You should plan for your CPF savings to last beyond age 85. This is why the Government wants to encourage people to buy life annuity - so that their minimum sum can stretch over a lifetime.

10 comments:

Harro! said...

Hi Mr. Tan,

Becareful to represent it as a % of the total population, because SG population is also shrinking right?

Anonymous said...

Mr. Tan,

The assumption made is obviously erroneous. You assume that the improvements in longevity in the previous 10 years are the same as the next 10 years. Why is medical science able to perform this magic in a straight line manner?

Just to give another example. Improving my 2.4km runs from 11 minutes to 10 minutes is easy, but, to go from 10 to 9 minutes is pretty difficult. Go figure that out.

Anonymous said...

Thank you for researching into this important concern . Hope that people will realise how urgent is to take hold of their financial future, and not leaving it to the government. The financial future is in our hand. How you want to live in your retirement depends what you do today. With the revelation of a longer life expectancy it is even more urgent that something is done today about your finances and not looking to quick fixes, just like a Chinese the expression, look for a toilet only when you need it.
To get it right is to start right.
To start right is to get a proper, qualified and competent financial adviser to draw up a plan to guide you from now to your retirement and beyond.

Anonymous said...

For compulsory annuity, if premium is collected at 55 years and payable monthly after 85 years, inflation (30 years) may make the payment meaningless.

High value money is collected upfront and repaid by low value money monthly 30 years later, if you are still alive. If this is the case how can this be good?

Loh Hon Chun said...

Not all Singaporeans will need to buy compulsory annuities when they turn 55 years old.

- Those with chronic diseases may be excluded, since they may not live long enough to enjoy the life insurance payouts.

- Those who are adequately covered and the policy which they bought fulfils a certain requirement may also be exempted.
More details on the scheme are expected when Parliament sits on 17 September.

From below link
http://www.channelnewsasia.com/stories/singaporelocalnews/view/298784/1/.html


Cheers
Loh Hon Chun

Anonymous said...

Nothing is ideal when it comes to money. Not all will benefit from this scheme. It is scheme like the other social security schemes. Example, those who work will be heavily taxed to fund those who retire and every body has his turn .Today because of aging population fewer working people supporting more retirees. What is fairness?
Look from this angle that you are supporting those who "died"(at 85) who are making claims.Surely when you buy insurance you don't hope to make a claim. If there no claim dismiss it as an expense.
But it isn't that bad. Setting aside about $3000 at 55 from minimum sum and let it compound for the next 30 years and if you happen to live beyond 85 and for next20 years and you get about $300 each month, it works out that you get $72,000 in total when you hit 105 years old.Well, maybe it is farfetched and you say I won't live to that age.That is the problem, people plan for early death. It is good that we can die as planned but you know this is not possible. When you come to this age you change your mind; what happens then; money no enough. This is exactly the headache for the government.

Anonymous said...

Revosave's return in any of the options is miserable.
1.If one chooses the yearly refund of the premium the return is less than 2%
2.If one chooses to keep with Income the return is 3.12%
3. If one chooses to invest in the ILP at 5% rate of return , the actual return is 3.32%.
Alternatives as below.
1. If one chooses to save in a money market for liquidity the return can be 3.5%(capital guaranteed)
2. If one buys a plain endowment the return is 4.4%
3.If one chooses to invest in a regular ILPs the return can 5% to ?
So reading Doctor Money I am convinced that Revosave is another scheme to reward their insurance agents with high commission at the expense of the customers.
Who pays the high commission to insurance agents? YOU, THE CUSTOMER.

Anonymous said...

To Anonymous above,

You seem to miss the fact that the $300/month you could receive in 30-40 years' time is NOT adjusted for inflation. You are viewing this $300 in today's context.

Do you know that a bowl of noodles costs as little as 50 cents 25 years ago???? The puny $300 would just be rounding error in 30-40 years' time. Welcome to the world of inflation!!

Anonymous said...

There are some things in life that are better to be left to the individuals. It must not be forced onto people. A better approach is through education. In all other first world countries and even some third world countries, the citizens work when they are young and contribute to the country. When they are old, the country takes care of them. This is fair. Why should Singapore be different. When the citizens are young they work hard and contribute to the country, despite the fact that we have no minimum wages and our wages are low. When we are 18, we serve National Service, when we are twenty something, we work with low wages and they tell you that is because we do not have enough experience. Then at thirty something, we ask why the wages are still low and the answer is that we need to upgrade our skills and education. So we did that. When we are forty something, with our education, experience and skills we ask why our wages are still so low and they tell you that there are twenty somethings and foreigners who will work for less. I believe when we are fifty something, they would not even talk to you. Then now this? What is going on? Why must we leave our own country and work overseas before we can get decent wages? And now that we have slogged the major part of our lives and whatever money we have in our CPF are just taken away so that we do not become dependent on the country. We earned it! Why deprive us of our rights?

Anonymous said...

Our senior civil servants have become too lazy. They tend to go for easy solutions that any fool can come up with (i.e. making this or that compulsory, raising GST, raising public transport fares, etc).

So the question is why we are paying them top private sector dollar for mediocre performance??? If they want to peg their salary to the top private sector pay percentile, they better produce worldclass solutions. Otherwise they are just charlatants.....the useless ministers should resign.

We can always retrain those lousy ministers to be security guards. They have been talking about retraining....so it's time they eat their own medicine.

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