No one likes to be confronted by a financial crisis. If you let credit card bills pile up or spend more than you earn, eventually you will run out of money. Pensions are another financial headache: How much you need to save in order to have a good quality of life in retirement is not clear.
Last week, Citibank Taiwan Ltd shed some light on how much savings Taiwanese plan to have after retiring, and the great discrepancy between expectation and reality has shocked many people.
According to the bank’s survey, which was conducted in October last year among five Asia-Pacific countries — Taiwan, Australia, Indonesia, the Philippines and Singapore — about 58 percent of Taiwanese respondents said they might need NT$10 million (US$318,000) in savings to be able to live in comfort after retirement, up from 49 percent in the previous survey a year earlier.
What has especially caught people’s attention is that the average “ideal retirement savings” those 58 percent of people expect is NT$78 million. In the 2013 survey, the figure was NT$48 million, and it was NT$27 million in 2012.
Regarding the sharp increase in people’s ideal retirement savings, Citibank said it suggests that Taiwanese would feel more comfortable with a bigger savings buffer in retirement. However, this figure is simply too high and sounds far-fetched; it reflects a lack of security among Taiwanese respondents that has prompted people to dream big — very big.
Still, with the average monthly wage standing at NT$38,208 per month last year, having NT$10 million in savings means that an average worker would have to save their entire salary for more than 21 years in order to live in comfort after retirement.
Other financial advisers have different estimates for how much savings are needed in order to live comfortably in the future, ranging from NT$12 million to NT$24 million. However, how is it possible for most people to save this amount? According to the Citibank survey, ordinary Taiwanese believe their savings would last only 13 weeks if they lost their job, and just 45 percent of them have confidence in their retirement savings.
Faced with an aging population, where people live longer and are much more active in their later years, the harsh reality is that most people will not have enough savings to fund their retirement needs. Of course Taiwanese want to have a good quality of life in retirement, but their savings are insufficient and interest rates remain low, while wages have stagnated and the cost of living has increased.
Most importantly, Taiwan’s working-age population — people aged 15 to 64 — is undergoing a major transformation given the nation’s declining birthrate, the low participation rate of middle-aged workers and a continued outflow of skilled personnel. The National Development Council recently said that the working-age population is expected to reach its peak this year at 17.37 million and is then set to decrease at a rate of 180,000 per year.
That Taiwan’s society is aging at an alarming speed, and its working-age population is shrinking faster than expected, underscore the increasing burden for working family members. This trend also represents increasing challenges for the nation’s social welfare and fiscal health.
Therefore, the government must reform the nation’s pensions system, develop a vibrant lifestyle for retirees and build a better social welfare network for senior citizens — or face pain later.
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