Charming Women and Rich Retirees
By TAN Kee Wee
(MediaCorp 938LIVE’s Money Talks, Thursday, 30 August
2007, 7.45 am and 7.20 pm)
Singapore men are in high demand, especially by foreign
women. Last week, we read of one Vietnamese woman who liked
Singapore men so much that she married three of them,
committing bigamy in the process.
A year ago, there was this Chinese woman. She also
liked three Singapore men. But she was law-abiding. She married
one and made the other two her lovers. One of her lovers was a
celebrated university professor.
Actually, these examples are not the exceptions.
Everyday, this courtship is played out in Geylang and in our
On one side, we have more than 40 Singapore men who
turn 55 every day, and who can withdraw part of their CPF
savings. On the other side, we have charming foreign women who
are bent on befriending them.
The outcome is expected. Based on anecdotal evidence,
many bonds are formed and then broken. Soon, these retirees run
out of money, and are impoverished.
It is always assumed that we manage our money better
as we grow older. Apparently not. Studies in the field
of behavioural finance, which is a branch of economics,
tells us that we are not always rational, especially when it
comes to saving for our old age.
There is this tendency to seek immediate gratification
where possible, even when we know it is better to delay it. On
the other hand, we make good decisions when we have no choice
but to delay our gratification.
For instance, if we put a person in Situation A,
whereby he has to choose $1,000 now or $1,200 next year, he
will take the money now. But if you put the person in Situation
B, whereby he has to choose $1,000 in twenty years’ time or
$1,200 in twenty one years’ time, he will choose twenty one
Behavioural finance suggests that when we put people
in Situation B, where immediate gratification is not possible,
they will make better choices and all will benefit.
Before I say another word, let’s refresh ourselves on
what is an annuity. Basically, it is an insurance product in
which a person pays a premium in return for monthly payouts
In Singapore, the latest proposal is to make it
compulsory for younger CPF members to buy annuities using a
portion of their CPF Minimum Sum at age 55. In return, we will
get a monthly payout from age 85 till death. Since this
proposal puts us in Situation B, all will benefit.
Compare this with current CPF rules, which basically
put us in Situation A. At age 55, we have the choice of a
monthly payout of about $800 for 20 years, starting from age
62. The other choice is to buy an annuity, and get a lower
monthly payout of about $500, but for life. Given these two
choices, people choose the higher payouts. Perhaps, this
explains why so few CPF members sign up for
If behavioural finance is any guide to what is best
for our pensions, perhaps we should make buying regular
annuities compulsory, and early on in our careers. Our CPF
Special Accounts could be used for this purpose. This will put
us in Situation B, and all will benefit.
Some Singapore men might welcome these compulsory
annuities. This is because, with perpetual payouts, foreign
women would find them attractive much longer. And it would be
in the interest of these women to keep these men, up and