Reverse Mortgaging and why it failed in Singapore
3880B: Economics of Ageing
Reverse Mortgaging:
Why did it fail in Singapore?
Hew Shi Jun Victoria A0098871
1. Introduction
Population-ageing will be one of the most challenging social phenomena in Singapore, being one of the fastest ageing countries in the Asia-Pacific region. As post-war Baby Boomers turn 65 years old from 2012 onwards, Singapore will experience an unprecedented age shift. Over a quarter of the current citizen population will retire from the workforce and enter their silver years. Given low fertility rates below replacement rates and increased life expectancy, Singapore faces the prospect of a shrinking and ageing population and workforce.
According to the Life Cycle Model (LCM), the young borrows, the working age saves and the elderly dissaves. With increasing share of elderly coupled with increasing life expectancy, elderly have to accumulate enough savings for their retirement during their working age years. There is an even greater need for females to do so, given their longer life expectancy.
However, are Singaporean elderly financially prepared for retirement? And how does one go about assessing the old age income adequacy? It is not easy to measure as people have different characteristics and living standards are subjective. There are numerous measures of old age income adequacy in existing literature. One of which is the concept of Income Replacement Rate (IRR), which represents retirement income relative to pre-retirement earning.
Generally, if retirees are able to replace 70% of pre-retirement earnings, they would be able to maintain their standard of living after retirement. (Scheiber, 2004 and McGill et al, 2005) Bear in mind that there are limitations in using IRR to measure old age income adequacy. For instance, an individual working full time with minimum wage may have 100% IRR. However, this does not necessarily imply a decent or comfortable standard of living.
Nevertheless, this paper
Reverse Mortgaging:
Why did it fail in Singapore?
Hew Shi Jun Victoria A0098871
1. Introduction
Population-ageing will be one of the most challenging social phenomena in Singapore, being one of the fastest ageing countries in the Asia-Pacific region. As post-war Baby Boomers turn 65 years old from 2012 onwards, Singapore will experience an unprecedented age shift. Over a quarter of the current citizen population will retire from the workforce and enter their silver years. Given low fertility rates below replacement rates and increased life expectancy, Singapore faces the prospect of a shrinking and ageing population and workforce.
According to the Life Cycle Model (LCM), the young borrows, the working age saves and the elderly dissaves. With increasing share of elderly coupled with increasing life expectancy, elderly have to accumulate enough savings for their retirement during their working age years. There is an even greater need for females to do so, given their longer life expectancy.
However, are Singaporean elderly financially prepared for retirement? And how does one go about assessing the old age income adequacy? It is not easy to measure as people have different characteristics and living standards are subjective. There are numerous measures of old age income adequacy in existing literature. One of which is the concept of Income Replacement Rate (IRR), which represents retirement income relative to pre-retirement earning.
Generally, if retirees are able to replace 70% of pre-retirement earnings, they would be able to maintain their standard of living after retirement. (Scheiber, 2004 and McGill et al, 2005) Bear in mind that there are limitations in using IRR to measure old age income adequacy. For instance, an individual working full time with minimum wage may have 100% IRR. However, this does not necessarily imply a decent or comfortable standard of living.
Nevertheless, this paper
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