How do you plan for retirement in Singapore
The retirement age in Singapore is 62 and you should have been planning for it from day one of your first job. The dream for everyone is to have a retirement life where you live comfortable and money is not a major hurdle. Furthermore, you probably have a bucket list of things you want to do when you are retired. You may want to travel the world, perform charity work, or learn something new. Ticking off items from your bucket is surely going to cost you money. Hence, you want to plan for your retirement and plan well. You also have to consider that the average lifespan expectancy of Singaporeans is 82.9, so your retirement funds need to last for at least 20 years after you retire.
Here’s how you can plan for your retirement in Singapore.
How Much do you need to Save?
This should be the biggest question on your mind. If you plan to live a comfortable retired life, then you need to save enough funds. The question is how much is sufficient? It’s estimated that the basic monthly expenses of a retired Singaporean is $1,200 per month. This would include:
- $300 for entertainment
- $300 for utilities
- $200 for transport
- $400 for food
Annually, this figure would round off to $14,400 per year. Of course, this amount would certainly change depending on your living standards.
You also have to account for a certain amount of inflation as the cost of living will continue to go up. However, there is a silver lining here. Singapore is not experiencing a high inflation rate.
In fact, the future forecast of the inflation rate is deemed to go below zero.
Yet, it is better to prepare for some inflation as the world economies are always in a state of flux.
Dependency on Central Provident Fund
As a resident of Singapore, you will have a social security savings scheme which is a Central Provident Fund (CPF). Your employer makes contributions to your CPF account. The contribution and allocation rates vary depending on your current age and your income.
Here’s the allocation rate for private sector employees:
And the allocation rate for public sector employees:
As you age, your CPF account will evolve from the most basic one, Ordinary Account, to a Special Account and finally to a Medisave Account.
CPF is the most basic element in your plan to retire. Is it sufficient enough for you to retire on? The answer depends on your living standards, if you have any financial dependents on you, and the CPF plan. Do you have to pay back any loans? Loan debt can make a significant impact on your monthly expenses.
Additionally, your CPF saving makes an impact on your monthly payout. For example, a CPF fund of $80,000 gives you a payout of approximately $700; while a CPF fund of $160,000 gives you a payout of approximately $1,200.
If you have CPF, ensure you are maximizing it. Here’s how you can do so:
- Increase your amount of contribution to CPF. Don’t depend on the standard contribution. Save more of your income and contribute to your Central Provident Fund.
- Put your bonus in CPF.
- Select the Standard CPF to earn a higher payout during your retirement.
Other Investment Options
CPF should not be your only source of income during your retirement. Earning additional income is vital if you want to live comfortably and check off items on your bucket list.
AXA RetireHappy is an inflation-adjusted retirement plan. Your retirement payouts will increase by 3.5% to tackle inflation. AXA is also one of the most flexible retirement options in the market.
Aviva MyRetirement Plus
Aviva MyRetirement Plus also offers a plan that adjusts with inflation and offers retirement income that increases by 3.5% each year.
A unique feature about Manulife RetireReady is that it doubles your monthly income if you lose out on your income payout period.
Invest in Property
Investing in property is a fantastic idea. Done right, it is guaranteed to give you regular income. Property prices are always on the rise in Singapore. Renting out the property is also a great idea. And, if required, you could sell it during your senior years to earn a lump-sum payment.
Make a Financial Plan
You cannot plan for retirement without having some financial numbers in place. Here are some of the calculations you need to have in place.
- Your current living expenses
- Your current savings and contribution to your retirement investments
- How much income will you receive during your retirement, based on your current investments
If your retirement income is lesser, takes steps to increase the amount. Ideally, your retirement income should be equivalent to your current expenses, but you should also account for inflation.
Planning for retirement is not easy. But, if you do so, it will pay off in your later years.
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