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6 factors to consider when building your retirement fund

It's never too early to start planning for your retirement! With discipline and determination, you can be on your way to a comfortable life after years of hard work. Here are 6 tips to help you get started on this journey of retirement planning.
6 factors to think about when building your retirement fund

Are you planning your retirement in Singapore? Building a retirement fund requires one to save enough money to pay your bills and continue living comfortably when you are no longer drawing an income. The thought of it may be daunting; it can feel like an impossible mission. But with early planning, building up your nest egg is more discipline than difficult.

The process of building a retirement fund typically involves a combination of consistent saving and long-term investments, but saving and investing for your retirement can look pretty different during your twenties versus your forties.

Building a retirement fund requires more certainty in your financial planning and less risk-taking. But first, you need to figure out how much you need in order to set a goal.

My Retirement Goal

Setting up a retirement goal requires you to find out how much income you need when you have stopped working. To get an indication of this, use the following questions to help you:

●        At what age do you plan to retire?

●        How many years do you plan to be in retirement?

●        What is your desired monthly retirement income?

One possible method could be using 70% of your last-drawn salary to find out how much you need each month1. If not, you can use an absolute amount you have in mind, taking into consideration the type of lifestyle you will lead during retirement.

First, figure out the amount you need annually before multiplying it by the number of years in retirement. For instance, if you need S$4,000 a month and plan to be in retirement for 25 years, the amount will be S$4,000 X 12 X 25 = S$1.2 million

Remember that this is only an indicative amount, and does not take into account your current liabilities, assets, and inflation rate. It is advised that you work with a financial consultant for a more accurate assessment.

Learn more about planning your retirement goals

Factors to consider about your retirement fund

While you can definitely save your way to a comfortable retirement, but is not the smartest way to do it. Why?

Saving your money in a normal savings account actually erodes its value due to inflation. There are many other better alternatives. More importantly, you want your money to work harder for you, which includes taking a certain amount of risk for higher potential returns. But a retirement fund needs certainty as well - you can't risk losing your savings because you need it as a stable income. So how can one balance between the need for growth and certainty of returns when building a retirement fund?

The key lies in considering these 6 factors:

1. Risk appetite

Your risk appetite would change according to your commitments and goals at different points of your life. Generally, the younger you are, the more risks you could afford to take. This is because you would have fewer commitments at a younger age and more time on your hands to recover possible losses should you take a higher risk in your investments.

With that said, every individual has different life trajectories, and you should always assess your risk appetite depending on your lifestyle and goals before looking into building a retirement fund.

There are a variety of solutions that fits in with your financial needs at different life stages where you have different priorities and levels of risk appetite. A savings insurance plan provides a slow but potential growth of your wealth with relatively lower risks, whereas an investment-linked plan allows someone who is more investment savvy to take some risks to achieve potentially faster wealth accumulation. 

2. Time Horizon

Generally, a bigger portion of your retirement portfolio can be apportioned for higher-risk investments if you start in your twenties. As you progress nearer towards the retirement years, your portfolio should increasingly focus on investments/savings that has lower risk and provide stable returns.

You can consider allocating your investments into products suitable for different investment horizons (short, medium, and longer term) depending on your risk appetite. For example, a short-term investment can include some riskier assets such as single equities or investing in a fast-growing speciality fund. You should always keep in mind that with higher expected returns comes higher risks.

For longer term investments, you can consider a retirement investment-linked plan which utilises dollar cost averaging to accumulate wealth for your retirement fund.

Manulife SmartRetire (III) is designed to optimise your chips on hand – be it time, the premium amount you can spare, as well as the option of free fund switching amongst its suite of curated funds – to help you get to your target retirement goal2.

Take the fast-tracked road trip to retirement with Manulife SmartRetire (III).


3. Inflation

Remember we said that if you choose to save your way to retirement by putting cash in a savings account, the value of your money will be eroded due to inflation?

While the average inflation rate in Singapore from 1962 until 2020 is 2.51%3, the rates are fluctuating over the years, with the last 4 years seeing inflation rates between -0.52% to -0.57%4. With the average minimum interest of a bank's savings account at just 0.1%5, you are definitely losing purchasing power over time.

So in order to ensure that the money you have now preserve its purchasing power during your retirement years, you need to choose savings or investments that give you a higher return.

4. Diversification

Like how you shouldn’t put all your eggs in one basket, it is a better idea to have diversification in your retirement fund portfolio. Diversification not only helps you manage the risk of your investments, but it also involves re-balancing your portfolio to maintain the risk levels over time as different assets react differently to the same economic event.

And with a suitable insurance plan, you are able to protect the capital you’ve amassed from being wiped out by any of life’s unexpected circumstances like retrenchment, critical illnesses, death, loss of independence, etc.

5. Affordability

Building a retirement sum is a long process - a study by Manulife shows that most Singaporeans start planning for retirement only around age 386. This may also be the reason why only two out of five Singaporeans feel confident about retiring comfortably.

By starting late, you may need to set aside a larger amount to get to where you want to be, but there are certainly options available that can fit into your budget without compromising too much on your lifestyle and helps in building up a retirement fund. You can work with a financial consultant to help you take a look at your current commitments to make saving for your retirement a sustainable habit and explore other available products if needed.

6. Payout mode


Many people neglect the payout mode when they do their retirement planning. With investments, you may not have the liquidity you need if you need to lock them in for a fixed number of years.

Thus, you need to consider when you will need the money and whether you have quick access to them. Take for instance, certain insurance savings plans require you to lock in the amount for a fixed number of years before you get a potential lump sum payout, whereas others may provide a yearly guaranteed coupon which you can consider using for a holiday or two.

Speak to your financial consultant to find out more about the insurance plans that can give you a potential stream of cash.

Planning for your retirement can look like a daunting process - this is why you can achieve a stress-free experience with the help of a financial consultant. Keep in mind that there are no hard and fast formulas to how you build your retirement funds but keeping the above factors in mind will definitely help you work successfully with a financial consultant and avoid mistakes.


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    These insurance products are underwritten by Manulife (Singapore) Pte. Ltd. (Reg. No. 198002116D). This advertisement has not been reviewed by the Monetary Authority of Singapore. Buying a life insurance policy is a long-term commitment. There may be high costs involved if you terminate the policy early, and your policy's surrender value (if any) may be zero or less than the total premiums paid. Buying health insurance products that are unsuitable for you may affect your ability to finance your future healthcare needs.

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    Information is correct as of 23 August 2021



    Dependable on how the investments performed throughout the policy term, whether basic premiums are paid on time and full; whether withdrawals are made; or whether dividends are withdrawn from invested funds

    Trading Economics, Singapore Inflation Rates 1962 - 2020

    Inflation rate (2015 – 2019)


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