Forgive me if I sound morbid.
But death can come when we least expect it.
In a twist of events, I’ve attended two funerals the past four months.
Both funerals commemorated relatives aged 80 and above.
Reflecting on these solemn occasions kindled some contemplation.
Singaporeans, on average, live to around 84 years old.
Life expectancy has been increasing.
In 1980, Singaporeans would typically live till 72. Today, you are expected to live longer, and thus, have to save more for your retirement.
Enjoying longer, healthier lives
The long lifespans in our country have not gone unnoticed.
In fact, Netflix’s (NASDAQ: NFLX) documentary “Live to 100: Secrets of the Blue Zones” identified our city state as one of six “Blue Zones” globally.
A Blue Zone is defined as a region with a notable concentration of centenarians, or individuals aged over 100 years.
There’s a difference.
Unlike the other five, Singapore is classified as an “engineered” Blue Zone.
Healthcare Minister Ong Ye Kung said that the Lion City has one of the highest lifespans and health spans in the world, an anomaly by any standards.
And what’s a healthspan?
Here’s a hint: Out of the 84 years that the average Singaporean lives, about 74 are expected to be in good health.
So, not only do residents live longer, it’s also a longer, healthier life.
The statistics are flattering.
However, with longer lifespans comes financial considerations: ensuring the money you have saved up during your working life can sustain you throughout your retirement.
The current retirement age is 64 with plans to increase it to 65.
Think about this statistic for a moment.
If you live to 84, you will have a significant period of 19 years to cover financially if you retire at 65.
Securing sufficient funds to maintain a reasonable quality of life is crucial.
Evaluating your investment options
If you agree with the above, it is time to assess your options for accumulating enough money to cover your retirement.
Bonds are the first option, offering a decent return with capital protection.
Currently, Singapore Treasury Bills offer a 3.54% yield for a one-year term, while the latest Singapore Savings Bond provides a 3.04% annual return over a decade.
Although bonds are secure, they barely keep pace with February’s core inflation of 3.6%.
Hence, your purchasing power may erode in the future.
Among the myriad choices available, investing in shares stands out for its superior long-term returns.
According to wealth manager Ben Carlson,, the S&P 500 Index has delivered an average annual return of 11.1% over the last five decades, as of the end of 2023.
These returns outpace Singapore’s February inflation figures by more than three times.
Hence, investing in shares presents the best opportunity to grow your wealth and secure a worry-free retirement by beating inflation.
There are downsides to stocks, of course.
Along the way, there will be volatility as share prices fluctuate, sometimes sharply.
But if you stay the course and remain vested in strong businesses, you will eventually see the fruits of your labour.
Growing your stocks portfolio
If you agree that shares can provide a comfortable retirement, you can continue reading.
Let’s focus on two key factors.
Firstly, it’s important to grow your portfolio by investing in a diverse range of stocks.
Secondly, if you are like me, you’ll want to build a dependable stream of dividends to provide passive income to support you through your retirement.
The universe of dividend stocks is extensive, encompassing technology giants like Apple (NASDAQ: AAPL), Meta Platforms (NASDAQ: META), and Microsoft (NASDAQ: MSFT).
Established blue-chip companies such as Visa (NYSE: V), Nike (NYSE: NKE), and Mastercard (NYSE: MA) offer long-term capital appreciation along with modest dividend yields.
In Singapore, investors can explore growth opportunities with companies like iFAST Corporation Limited (SGX: AIY) and Sembcorp Industries Ltd (SGX: U96).
The key is to ensure diversification by spreading your investments across different sectors.
Thematic investments
A useful approach to identifying suitable long-term investments is to focus on enduring themes that are expected to persist over decades.
One such trend is healthcare, underpinned by an ageing global population.
According to the United Nations, the number of individuals aged 65 and above worldwide is projected to more than double to 1.6 billion by 2050, up from 761 million in 2021.
Companies catering to this ageing demographic are positioned for sustained growth.
For instance, Smith & Nephew (LON: SN) develops medical devices like hip and knee implants for damaged or worn joints.
By aligning your investments with themes, your investment portfolio can benefit from steady, long-term capital appreciation.
Creating a stream of passive income
Growth is one thing, and you want the businesses to share the spoils via dividends.
For retirees, dividends provide a dependable cash flow to maintain their quality of life.
Take real estate investment trusts (REITs), for instance.
REITs are required to distribute at least 90% of their profits as dividends, making them attractive income instruments for dividend-seeking investors.
Established large-cap REITs such as CapitaLand Integrated Commercial Trust (SGX: C38U) and Mapletree Industrial Trust (SGX: ME8U) can help you build a resilient stream of passive income.
Additionally, many local blue-chip stocks are known for their dividends.
Blue-chip stalwarts like DBS Group (SGX: D05), Singapore Technologies Engineering (SGX: S63), and Singapore Exchange Limited (SGX: S68) pay quarterly dividends.
Owning a mix of these stocks can jumpstart your effort to build a passive income stream.
As you consistently invest in these stocks, your dividend income will naturally grow over time.
Reinvesting these dividends back into the same dividend-paying stocks will gradually increase your passive income into a meaningful source as the years go by.
Get Smart: Start today
The best time to start investing was 20 years ago. The next best time to get started is today.
When you’re young, retirement might seem far off.
However, it’s crucial to start investing early to harness the power of compounding.
Remember that it is never too late to begin investing your first dollar.
The act of investing may kick-start a virtuous cycle that can help you to enjoy a blissful retirement.
By investing in growth stocks and reinvesting your dividends, you can steadily build a strong retirement portfolio that brings peace of mind.
Note: An earlier version of this article appeared in The Business Times.
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Disclosure: Royston Yang owns shares of DBS Group, Singapore Exchange, Apple, Meta Platforms, Visa, Mastercard, Nike and iFAST.
