Singaporeans are demonstrating improved debt management amid economic uncertainty, high-interest rates, inflation, and increased consumption taxes. However, retirement planning and investment activity have seen a decline, according to the 2023 OCBC Financial Wellness Index. Amid financial market turmoil, the Index showed that 64% of homeowners are staying on track with their mortgage payments, a significant increase from the previous year and a 4% rise compared to the previous report.
However, loan sustainability issues may force 9% of working adults to sell or downgrade their properties. The rate of unsecured debt has decreased from 31% to 28%, with only 40% of debtors borrowing what's necessary. Despite these positive strides in debt management, the ability of Singaporeans to afford non-essential purchases has dropped to a mere 40%. OCBC noted that while there was an increased focus on debt management, less preparedness for emergencies was apparent.
The Index also revealed that readiness for unexpected costs and family commitments is slightly above average at 46%. However, it hit an all-time low score of 60 due to excessive speculation and lack of rigorous research among investors. Alarmingly, only 42% felt they had enough funds to meet their family's financial needs for at least a year, marking an 8% decrease from the previous year.
Retirement planning has seen a severe drop from 47% to 40%. There was an age shift in retirement planning, with those in their 50s planning to start at age 60 while those in their 20s began at an average age of 42. Around 79% of Singaporeans either lack a retirement plan or are veering off track, leading to delays in retirement plans. This delay was observed across all age groups. Alternative strategies being considered include working beyond retirement age (37%), contemplating retiring overseas where living costs are lower (28%), or relying on children for support (9%).
Investment activity has also seen a decrease from 85% to 79%, a 6% drop compared to the previous year. The average rate of returns for investors halved again to just 0.4%. Gen Z and young millennial investors experienced the highest proportion of losses due to the poor performance of international stocks. Young investors have been hit hardest with negative investment returns and are increasingly seeking investment advice from social media channels. Some even resort to daily trading for short-term profit.
The report also indicated changes in savings habits among Singaporeans. Around 23% can only afford basics, while another 36% need to save for anything beyond that. This comes as only 40% of Singaporeans can afford more than basic necessities most of the time, down eight points from last year. OCBC observed a drop in the percentage of Singaporeans saving at least 10% of their salary, indicating insufficient emergency funds among respondents.
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