The Millennial's Dilemma: Housing or Retirement

You often hear people around you saying that their goal in life is to be financially independent. But what does that even mean and what does that even entail? In simple terms, financial independence means having enough wealth to live a life of comfort. However, a life of comfort is a subjective concept which can differ according to different individuals. Some would desire the ability to travel the world, while others would simply want to be free from any debts.

According to a survey commissioned by Manulife, majority of the millennials in Singapore prioritize the buying of their first home over saving for their other financial goals. While it is not necessarily a bad thing, more millennials are now faced with the dilemma as saving for one’s retirement may have been a better option.

Saving for a house

The Singaporean Dream nowadays is to get married along with a BTO flat that is renovated according to your needs and comfort. Owning a property is definitely a huge milestone in any young adult’s life. With the limited land in Singapore, the value of property has been steadily increasing over the years. Even when Singapore is faced with one of the worst recessions due to the pandemic, the property market has shown no signs of slowing down. Therefore, saving up for a property in Singapore can be a great investment that grows with time.

Also, having a dream home that you can relax in at the end of the day is definitely something we all can look forward to. As mentioned, every individual’s definition of a comfortable life is different, some millennials may feel that living the dream life is being in the present moment. Getting one’s house renovated into their desired form is more than enough to achieve that goal. After all, you cannot put a price on one’s comfort and happiness.

Saving for Retirement

Contrary to popular belief, millennials are actually super savers as compared to their older generations. Based on the survey, 55% of them have already started saving up for their future. However, only half of them are confident about their retirement.

One of the reasons that millennials are holding off on their retirement planning is because most of them feel that it is not applicable to them as it is still far from now.

Planning for one’s retirement does only have to start at a certain age. In fact, the earlier you start planning for it, the greater the amount of savings you may have at the end. A common regret found amongst current retirees is that they did not start earlier. The effects of compounding returns are greater given a longer period of time. Starting earlier can allow an individual to take greater risks in investing their income to gain greater returns on their savings.

Another reason that millennials are not planning for retirement is simply because they are unsure of how much is needed to retire. Compared to housing and renovation which has a much more calculated cost, retirement is subjected to an individual’s needs. An estimated amount of at least 1.4 million dollars is needed for millennials to lead a comfortable lifestyle in Singapore. Fortunately, planning for it at an earlier age would help you to gain greater returns and bring you closer to that goal.

Moving forward

With that said, both housing and retirement are both incredible milestones in an individual’s life. As a Singaporean, to live a life of comfort would be to achieve both. Therefore, rather than focus on one area, it would be wise to plan and even save for both of these. In order to reach these two milestones, it is important to first assess an individual’s situation and needs based on different life stages.

For millennials who are starting their career, it is important to first build up your savings and emergency funds. After which, they should consider getting proper health coverage through basic health insurance. As mentioned, it would be wise to start investing in certain products which have the potential to grow and compound over a long period of time. This would be the first step in planning for your retirement.

For those who are in their mid-career, it is when they would start thinking about having a family and providing for your parents. Given that one has already been saving up for a while, one can think about buying a house. However, it is important to note that this is a stage with greater financial responsibilities, therefore one should act more prudently. This means that you should not overextend yourself when it comes to buying a house.

Furthermore, buying a house does not entirely mean that one is not saving up for their retirement. It is common to have multiple streams of income as a part of your retirement plan. A potential stream of income would be monetizing your property or house. In the event that your home is able to spare a room, you can actually rent it out and receive extra income to sustain your lifestyle. As mentioned, the property market is potentially rising in Singapore and saving up to buy a property can be a good investment that can be a part of your retirement plan.

Conclusion

In conclusion, there is no right decision when it comes to housing or retirement as both are overlapping goals which are not mutually exclusive. However, millennials should take advantage of the long investment horizon that they possess and plan ahead.

Over the years, your needs will change and so should your financial plan. Although budgeting is an effective method, it is important to first define your goals and priorities at different stages of your life. Make sure to use the resources available to you, seek help from finance professionals who can help to review and provide strategies to achieve your goals. It is never too late to start, all you need to do is take the first step.