Mind the retirement gap to secure financial independence

What does it take to retire with confidence? As people live longer than ever before, it is a question of rising importance, one that pushes us to rethink how we save, invest and plan.

- Tan Min Lan

For Asia, this longevity spike reflects the flip side of a wildly successful development story, fuelled by long-term socioeconomic development, an enduring middle-class boom and advanced healthcare.

In the region, people aged 60 and above accounted for 13.5 per cent of the population in 2022. The Asian Development Bank expects this to nearly double by 2050.

Retiring well thus demands a hard and honest look at one's financial reality and assessing whether sufficient funds exist to cushion the life they're used to living as they age.

After all, cost-of-living concerns - amid rising aspirations to live longer and age better - add to the multitude of risks that could lead to depleted nest eggs. So, how can people afford their extra years?

BRIDGING THE PENSION SHORTFALL

Retirement systems provide one solution. The UBS International Pension Gap Index analysed 25 mandatory retirement systems worldwide to assess the "pension gap" - the additional private savings needed to maintain an accustomed standard of living in retirement.

Invariably, the findings show that pension gaps are often exacerbated by rising costs of living relative to median wages, extended life expectancy and low retirement age thresholds.

Indeed, mandatory retirement schemes are not a catch-all safety net. While they help cover basic needs, it is more prudent to consider them as a single component of one's retirement strategy.