Retirement planning in the age of disruption

Shorter business cycles, disruptive technology, and demographic changes have rendered single-employer careers a near impossibility.

The need to learn, unlearn, and relearn to forge new career paths is now an accepted inevitability.

As people move into a new industry mid-career, sometimes at little more than entry-level pay, meeting immediate financial commitments such as mortgages will require financial recalibration.

Perhaps more importantly, paying for long-term health insurance policies that guard against the obliteration of a lifetime's savings in the event of a serious illness becomes an afterthought, exposing one to possible financial ruin.

In a recent panel discussion, "Work, Money and Retirement Puzzle: How to solve it?" Bryce Hool, Dean of the School of Economics at Singapore Management University (SMU), argues for "an entire life cycle approach" and governmental commitment to tackle these interconnected issues.

"It's not just as a safety net but I think it's also to guide decisions and develop institutions that are appropriate to the circumstances," explains Hool, who is also the director of SMU's Centre for Research on the Economics of Ageing (CREA).

"Insurance for healthcare and insurance for long-term care are two prime examples, and the (Singapore) government is clearly taking these things seriously.

"This has to be something that's thought of not just for people who are now desperately in need but right from the start. There's got to be an entire life cycle approach."

Referring to research subjects at the CREA, Hool reveals that 60 per cent of them - mostly in their 50s and 60s - believe their economic preparation for retirement to be 'fair' or 'poor'.

He said: "These people have a tendency to underestimate their life expectancy and the risks associated with living longer. They are also underinsured. They are underinsured for the risks, the major risks, healthcare and long term care. They're also challenged, in simple financial terms.

"We're also seeing that both men and women are working to older ages, past 65, past 70. This has been happening for some time and the data suggests that this is going to continue, and is especially true for women."

Mary Ann Tsao, chairman of the Tsao Foundation, highlights the need for women to plan given their longer lifespans.

Research, however, shows women to be less than prepared.

"We found that from a 2009/2010 study that women across all socio-economic backgrounds tend not to plan, particularly the married ones. They think their husbands will plan," she said.

"I'm (also) looking at the single daughter (who) tends to be caregivers to their parents. They end up quitting their job, making less money, spending more on their parents' care. Who's going to take care of them?

"I think that's more of a societal issue, not just in women or family alone, but…the broader landscape. We have to think about how to provide for women who have worked and provided care but not necessarily getting paid."

PREPARING FOR THE FUTURE

From robots in assembly lines decades ago to self-driving cars in the near future, how does one deal with disruptive technology that could wreak havoc on financial planning for retirement?

Girish Ramachandran, president of Tata Consultancy Services in Asia-Pacific, suggests the need to re-examine the meaning of work and retirement.

"The next generation will probably have to go to school three times in their career," Ramachandran said.

"If you look at each of the (First and Second Industrial Revolutions) that we've gone through, everybody worried that there will be loss of jobs but the contrary happened. More jobs were created even when computers came into being. I'm an optimist and I think that more jobs will be created.

"If you look at the future of the workplace, all of us need to start looking at re-training and probably unlearning. We need to unlearn what we have learned and pick up a new skill. And as long as we are tuned to the market and we see what is in the market and we're able to keep ourselves up to date with that, I'm pretty sure that we will have more jobs even with automation."

Heng Chee How, Deputy Secretary-General of Singapore's largest confederation of trade unions, the National Trade Union Congress (NTUC), touched on what could be done on a governmental level.

"What if you get prematurely displaced from a career that you might have invested 10 years in and if you restart, you say they might actually start off at a lower pay? The (macroeconomic situation) is actually very dynamic.

"In other words, staying put is not necessarily very safe either. So in this dynamic situation…you could either have strategies to try to protect the jobs as they are or you try to protect the worker by investing in the worker so that the person is able to carry a package of skills and attitudes that make him or her employable. I think the latter strategy is better.

"In terms of people needing to go for retraining but they have commitments and family and all that, how can you support them in between? Those are the kind of things that the country can do more (to help)."

Bryce Hool, Mary Ann Tsao, Girish Ramachandran, and Heng Chee How were part of a discussion panel, Work, Money and Retirement Puzzle: How to solve it?" for the SMU-Channel NewsAsia programme Perspectives that was recorded at the Singapore Management University School of Law.

This article was first published on Perspectives@SMU on April 30, 2018.