Delaying retirement life planning in favour of more urgent financial needs is undoubtedly much more practical. And yet, the more you postpone it, the more difficult it will be to possess sufficient retirement funds to support your desired retirement lifestyle. It is simpler to secure the money you require to live well for the rest of your days if you begin your retirement plan earlier. And contrary to what you would believe, it is indeed much easier.
What Is the Retirement Age in Singapore?
To start planning for retirement, you must first ascertain how much more time you have to accumulate funds for a retirement account. And knowing your retirement age is necessary for this.
In July 2022, Singapore has increased the retirement age to 63, and by 2030, it will be progressively increased to 65. As a result, the employer is not permitted to recommend early retirement or terminate your employment before the age of 63. The mandatory retirement age safeguards you and allows you a bit more time to increase your retirement income before you decide to permanently leave the workplace.
Yet, if you want to continue working and further acquire how much retirement income you wish, you are not required to retire at 63. Singapore, on the other hand, has what we refer to as a re-employment age—a window of time during which your employer is still able to offer you a job. As the current re-employment age is 68, you have the option to continue working for 5 additional years.
What It Costs To Retire In Singapore
Realistically, you would need your retirement nest egg that will cover your monthly expenses until the remainder of your life, so sketch out an estimate as to how long you think you will live out life. The fact that Singapore has the highest life expectancies worldwide might be attributed to its decent healthcare system.
According to the most recent data, Singaporeans can expect to live for 83.5 years on average. Compared to men, who live 81.1 years on average, women live an average of 85.9 years. Then, the planning period for your CPF savings will be between 18 and 22 years, provided you retire at age 63.
How Much Should You Be Saving for Retirement?
What sort of retirement lifestyle are you interested in leading?
A 2019 study found that a 65-year-old single person would require a minimum of least $1,379 per month to maintain the basic necessities of life. While a couple over 65 will require $2,351 to cover both of them. Extra expenses, in addition to any medical and long-term care expenses you might have to pay out of pocket, are not covered.
What you’re hoping to accomplish, how comfortable you are interested in being, or how ready you are to adapt to a more modest lifestyle during your retirement years will determine how much money you must set aside to be able to live out your remaining years in pleasure.
Are there any others you’ll need to support?
It is indeed crucial to factor their costs into your retirement planning if you happen to have any dependencies that will require you even after you retire, such as a spouse who isn’t employed or children with special needs. Obtain a starting point for this amount by calculating how much you currently spend on the living expenses of your dependents. Then, add a small cushion for safety.
A Simple Formula to Calculate How Much You Need for Retirement
As you calculate the basic retirement sum that you will need, then you should already have a rough notion. Unless you’re having problems deciding on a figure, consider starting with your present monthly income and spending. Consider the lifestyle that your present monthly income allows you to live and whether you’ll require a comparable amount as a retiree. When accounting for the costs of supporting your dependents, keep in mind that as you become older, your health will become a bigger issue. To somewhat accurately calculate the sum that you will be needing to retire, click here for more information.
What Is the Ideal Point in Time to Begin Retirement Planning?
There never appears to be a good time to begin saving for retirement because there are so many competing financial needs. The truth is that right now is the ideal moment to begin planning for retirement. Because to compound growth, it will be simpler to save the necessary amount you seek for your CPF life payouts, the sooner you start.
- Why starting in your 20s is the best option. Anyone would likely believe that they have lifetimes to plan for retirement as soon as they reach their 20s. It might be the case, but you’re also in a great position to begin accumulating a respectable retirement fund.
- Why do you still have time in your 30s? Over the years, you would have a lot of financial responsibilities at this stage in your life. Consider that it’s not late to get started if your retirement planning has been overlooked if you’re in your 30s. Also, you must first set aside a portion of your monthly salary as you can for retirement-building investments to start planning for retirement.
- Why it still is feasible to get caught up in your 40s. At this age, you are probably at the height of your earning potential and might be with so much on your plate. The fact that you still have 20 years before you can retire means that retirement planning should be your top priority. In addition to reviewing your spending and looking for ways to save more money, think about increasing your CPF retirement savings.
What Is a 3-Part Retirement Game Plan?
Retirement funds should be placed in a financing method where they may earn enough income to outpace inflation. To ensure that your retirement funds are unaffected in the worst-case scenario, your savings also need to be protected financially from life’s unforeseen tragedies.
Having said that, this three-part game plan helps you determine the types of financial resources you’ll need to guarantee a secure retirement.
Insurance
Although it might not come to mind right away, insurance is a crucial component of any financial strategy. This is avoided by different health insurance schemes, which safeguard your capacity to earn, cover your expenses, and increase your retirement savings if you get severely ill or won’t be able to function owing to a complete disability.
- Health Insurance
The average Singaporean household spends 5% of its monthly income on healthcare expenses, and these prices are expected to keep rising. If you become ill, health insurance will pay for qualified outpatient procedures and hospitalization costs.
- Long-Term Care Insurance
If you become seriously disabled, long-term care insurance can help pay for your healthcare expenses.
- Life Insurance
To secure your loved ones’ financial life, you might purchase life insurance coverage, and the earlier, the better. Life insurance provides a lump payment that will enable your family to cover monthly expenses, if you pass away, are given a serious medical diagnosis, or just become completely disabled.
- Term Life Insurance. Policies for term life insurance are comprehensible, reasonable, and simple. It is a basic protection plan with no monetary value, and the payments you pay will help to increase the insurance coverage available to you.
- Whole Life Insurance. In contrast, with whole life insurance policies, you can decide how long you want to continue paying premiums.
Regular Savings Plans
In essence, monthly savings plans are among the simpler methods for growing and preserving your money. With this, you can choose to pay a single premium, or many premiums on a monthly, quarterly, semi-annually, or annual basis. All of these payments are invested for growth during the insurance policy. Depending on the benefits of the policy, you can then choose whether to get your financial benefit in a fixed amount or as monthly payouts.
Investments
By boosting your money’s long-term growth, investing enables you to take a more proactive approach to achieve your retirement goals. The most fundamental form of investment offers compound interest. Despite being straightforward, compound interest can enable your money to grow much more quickly than you might expect. Going to invest in a thing that enables you to recycle your profits to hasten the accumulation of your money is one approach to taking advantage of compound interest.
Other Income Sources You Can Rely On
CPF Life
Every Singaporean is automatically placed into the CPF Life annuity program to guarantee that they have sufficient funds to last them through retirement. Typically, CPF Life works so that if you make a lump sum contribution at age 55, you’ll start receiving a monthly stream of investment income at age 65.
Generally, the payouts you would acquire at age 55 will differ based on how much you donate at that time. By 2023, $2,370 monthly will be the maximum payout available under CPF Life. And only if you top off your retirement fund to the Enhanced Retirement Sum of $298.200. Also, your Ordinary and Special Accounts are combined into your Retirement Account when you reach the age of 55. Furthermore, you will have the option of three plans: the Basic Plan, the Standard Plan, and the Escalating Plan, each of which has a distinct structure for CPF Life payouts. Taking account of your wants and needs, you must decide on the most suitable plan.
Annuities
An annuity plan functions similarly to CPF Life in that you make a lump sum contribution at the outset and get payments after such a waiting period. Also, you can customize a number of features using CPF Life, but not all of them. In contradiction to CPF Life, which has a payout age of 65, you can decide when you wish to begin receiving annuity payments. If you do not need the money right away, several annuity plans also enable you to reinvest the monthly repayments. As a result, the payouts will have a chance to compound, giving you a huge benefit when you finally decide to retire.
Fixed Income Securities
Treasury bills and governmental and retail bonds include a few examples of fixed-income securities, which are financial instruments that pay investors a defined rate of interest, widely recognized as a coupon. The Singapore Savings Bonds (SSBs), issued by the Singapore Government, have become the preferred investment among buyers in fixed-income securities. The bond issuer, generally, is required by law to return the principal sum when the bond reaches maturity. Hence, it is a perfect investment strategy for those who have a limited tolerance for risk because it is practically impossible for buyers to experience capital losses.
Dividend Stocks
Singaporeans particularly enjoy dividend investing, which has become a prevalent approach to earning passive income. This seems to be particularly understandable given that Singapore does not tax dividend income, whereas American stocks would be subject to a 30% withholding tax should we choose to invest in them.
Unit Trusts
The risk-return profile and investing methods of the fund should match your own financial goals before you decide to purchase a unit trust. To determine the number of fees you are forking over to the fund manager, you need also to check the unit trust’s cost ratio. Perhaps the fundamental advantage of using this strategy is that it makes it possible for you to effectively hire investment firms to handle your retirement portfolio. Also, this perk appeals to people who prefer to use their free time for other activities, particularly in comfortable retirement.
Rental Income
Real estate, indeed, is a great retirement resource because it provides a steady stream of rental income each month. But having a rental property as a retirement income source has a number of drawbacks.
Hence, if you want to rely on real estate investment for your retirement, property owners need to be prepared to cope with challenging tenants. Also, you must maintain the property and address any issues raised by the tenants. There may likely be times when the housing market is poor, making it difficult to rent your unit, and leaving you with extended periods of lacking income.
Embrace the Moment and Start Planning for Retirement Now
There is an awful lot to learn about how to retire in Singapore to take in just before you begin, even though preparing to retire might be straightforward. Not grasping everything right away is acceptable, as it can take some time to fully grasp your alternatives and the next course of action after becoming informed, which is the first stage in retirement planning. Yet, we can assure you a relaxed, enjoyable retirement with the guidance of Retire Genie.
