How Gen Zs, Millennials Can Build Their Retirement Nest Eggs

Financial advisers suggest asset classes such as equities, ETFs and unit trusts

- Chor Khieng Yuit

People between the ages of 25 and 44 – the so-called Gen Zs and millennials – are investing less than those in other age groups and not taking enough risks to grow their wealth, a new report found.

Their investments are skewed towards more conservative instruments like Singapore Treasury Bills (T-bills) and Singapore Savings Bonds (SSBs), noted the study, which analysed data of about two million anonymous retail customers of DBS Bank/POSB.

It is certainly a safe and sure approach, but financial advisers say that young investors can afford to take more risks by investing in asset classes like equities, exchange-traded funds (ETFs) and unit trusts, given their generally longer investment horizon.

This will also put them in a better position to meet their desired retirement lifestyle, which can cost them more than $1 million.

DBS did an analysis and found that a 60-year-old person retiring in 2030 will need $550,000 to meet basic living expenses for the next 20 years.

The bank used data from a 2023 Department of Statistics survey of household expenditure and assumed an annual inflation rate of 2.5 per cent.

If this retiree wants to go travelling, for example, or make charitable donations, he or she will need as much as $1.3 million in savings.

This could comprise liquid assets such as cash, Central Provident Fund (CPF) savings and income from other sources such as payout from retirement income insurance, dividends from equities or rental income.

A retirement pot of $1 million in liquid assets is "a bit daunting" for some, including manager Kelly Chiew, 32.

Ms Chiew, who has a two-year-old son, is aiming for "savings of upwards of a few hundred thousands" for her family's retirement.

She says she is "extremely worried" that she will not have enough due to rising costs and inflation so she is doing what she can by investing in safer options such as SSBs.