Keeping a Roof Over Your Head?

One of the most interesting insights that I’ve gathered from Singaporeans is the way of proposing for marriage. Singaporeans are pretty creative people and they usually propose by saying, “Let’s register to buy a HDB flat!”

In Singapore, it’s pretty common to regard the home that they live in as an investment for retirement. Real estate has the benefit of appreciating over time and it’s a pretty good tool to hedge against inflation.

The very success of the CPF system contributed to Singapore having one of the world’s highest number of homeowners. However, this has also rendered Singaporeans as “asset-rich but cash-poor” during retirements. This saying is pretty common because most of Singaporeans’ savings are locked up in their property and they may faced with the possibility of selling their property upon retirement if they do not have other sources of funds to rely on.

For those who wish to monetize their property in their golden years in order to fund their retirement, two options with respect to their properties are available.

Option 1: Downgrading
The first option is to cash out the existing property by downgrading to a smaller one. The potential cash obtained from the property downgrade will be channeled to an investment portfolio to optimize returns from the cash for retirement needs.

Option 2: Reverse Mortgage
The second option is to consider a reverse mortgage. A reverse mortgage is a financing vehicle that allows a homeowner access to his home equity – the amount of cash the homeowner would receive if he were to sell his home. It involves a loan against the equity of the home where the mortgagee gets a monthly cash payout.

Financial Planner’s View?
My view is that the above two options may not necessarily be the best way to fund one’s retirement. Throughout my career, I’ve never met a person who do not yearn for a golden retirement.

Our Asian values also result in us wishing to leave our property to our children. The best approach is to start young by seeking the assistance of a professional financial planner to work out a personalized financial plan. With a financial plan and regular review throughout one’s different life stages, you are en route to a more secure retirement.