Potentially yes, but as I’m fond of saying on this site, potential is meaningless. Potential is you could win the lottery tomorrow and be a multi-millionaire, or that you’ll find $50,000 in a plastic bag on the road in a few minutes. Potential is a pointless fantasy, and what matters is probability. So to refine the question: what’s the probability of the typical Singaporean becoming a single digit millionaire by 65?
Let’s look at a median-income Singaporean, who starts saving at age 35
We’ll assume our Singaporean starts worrying about retirement, and saving, by around the age of 35. This isn’t an arbitrary number: 30 to 35 is when you start making most major financial decisions, like the first home, marriage, contributing to ageing parents’ retirement, etc.
We’ll also assume that our Singaporean earns $5,197 per month, because that’s apparently what reports claim.
We’ll also use a yield (return) of 5% per annum, which is typical for most balanced portfolios. Over 30 years (age 35 to 65), here’s how much you need to set aside to reach around $1 million:
| Percentage of median income saved | Approx. amount saved per month | Yield | Approx. amount accrued at age 65 |
| 10% | $520 | 5% | $432,524 |
| 15% | $780 | 5% | $648,787 |
| 20% | $1,039 | 5% | $864,716 |
| 25% | $1,299 | 5% | $1,081,103 |
While this is doable, note that the approximate amount saved is higher than the usual rule of thumb: most conventional financial wisdom suggests setting aside just 20%, which seems to fall short.
What about median-income Singaporeans who start later in life?
This is where the pain really starts. Unless you ascend past median income toward later life stages, the amounts required can become unrealistic. Let’s look at Singaporeans who start at the age of 40, using the same median income and yield:
| Percentage of median income saved | Approx. amount saved per month | Yield | Approx. amount accrued at age 65 |
| 10% | $520 | 5% | $309,665 |
| 15% | $780 | 5% | $464,497 |
| 20% | $1,039 | 5% | $618,734 |
| 25% | $1,299 | 5% | $773,567 |
| 30% | $1,559 | 5% | $928,399 |
| 35% | $1,819 | 5% | $1,083,232 |
You can see where we’re going with this. If you start from 40, the odds become much slimmer, as you need to commit to $1,819 per month; and if you start even later at 50, you need a whopping $3,742 per month to reach $1 million+ by age 65 (that’s committing around 72% of your monthly income).
Given that you tend to have higher costs as you age (mainly due to healthcare issues), and income can decline, this can make it outright impossible to hit $1 million if you start late. At that point, you’d need a much higher return on your portfolio; but taking risks at that age is the last thing you want to do.
Contrary to what a lot of what a lot of finance gurus claim, it’s actually quite difficult to end up with even the first million
Now I know some of you are going to say this next thing is “duh, obvious,” but bear in mind median income still means half of Singapore earn less than that. That’s why so many of you reading this are probably a little pissed at seeing that figure.
And as I mentioned in my intro, I don’t really care about potential – I care about probable. And for half the Singaporeans below median wage, the chances of them reaching $1 million are not great, whatever finance guru X or The Secret claims.
Besides this, Singaporeans have to deal with an ageing population, so more of us are sandwiched and need to look after parents’ health issues. Coupled with rising inflation, and the cost of raising our own children, I’m not sure how many “average” Singaporeans can put aside a quarter of their income at 35, let alone 35% or more for those who start late.
So what are the odds for the average Singaporean? The answer is “uncomfortably low.”
If you want better than 50-50 odds, it pays to look into ways to grow your income faster than 5% per annum; and also to ensure your portfolio won’t get derailed. At the most basic level, that means you don’t need to drain it early to pay for things like medical emergencies*, cover a period of retrenchment, or just plain bad luck.
Perhaps most importantly, it’s about psychological readiness. If you want to reach even a single-digit million, then the answer to questions like:
- Will it affect my ability to pursue my passions?
- Will it disrupt my work-life balance?
- Does it cost me my social life or having to live in discomfort?
Then the answer is yes, yes, and yes. Because the harsh reality is that you’re asking a lot, and it’s going to cost a lot – so forget the cheery optimism claiming it’s easy if you “follow a few basic steps.”
The only “easy” way to reach a single-digit million (if you’re on average income) is to have rich parents and inherit it. Otherwise, getting there is going to take a big chunk out of your time, hobbies, and more.
And if you do get to a million by age 65, I have more depressing news for you:
at today’s rising cost of living, chances are you won’t be comfortably well-off even then.
You’ll be okay, because in 30 years or so, a million dollars may be little more than middle-class. So aiming for that million dollars isn’t even about being super-ambitious; and it’s not about wanting luxury. At this point, it’s just having an okay retirement. If any of this concerns you, follow us on Single Digit Millionaire, as we try to figure a way through.
*Even if you’re insured by the way, are your parents or other immediate family members?
