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It's never too early to start preparing for your future, but planning your retirement may not be as simple as you think. 

Plan for my retirement

The world of work is changing, which is having a big impact on our retirement. Technology and changing social norms have made the work environment far more flexible. Many of us can now enjoy sabbaticals, work remotely or even decide to shift careers in mid-life. While the dream of retiring early is still a major goal, others plan on working past the normal retirement age. There is no longer a ‘’normal’’ retirement plan.

Plan for my retirement

Semi-retirement is a growing trend as employees realise they still enjoy working but still want to free up more leisure and family time. 

 

Volunteering is also becoming popular. One size doesn’t fit all and what’s right for your colleague may not be right for you. However you envisage your retirement, it’s likely you will need an alternative source of income to supplement a drop in your salary. That’s where your savings come in. Although you are saving with a long time horizon, the same principles of saving apply. The early you start the easier it becomes and the bigger your nest egg. (also here are five things you need to know before you start).

Given the shifting sands of retirement, you may not have a specific retirement date in mind. So make sure you choose a retirement plan with flexibility over your retirement age. This means that whether you decide to go for early retirement at 30 or 40 – or stay the course until 62 (the official retirement age in Singapore currently), you are in complete control of your retirement plan.

To help you establish a plan for your retirement – at any of the ages mentioned above – we have a bit of advice for you.

 

Speak to one of our financial consultants

How to plan your retirement

Ideally, you want to be contributing to your retirement pot as early as possible, but in the real world, it’s not always that easy. You’ll likely have other financial commitments – student loans, bills – and desires, such as getting on the property ladder, starting a family or having that much-needed vacation.

Planning ahead is important but, according to research, Singaporeans under 40 still tend to “brush aside their plans for retirement1. Studies show that most Singaporeans don’t even think about their retirement until 38 – of which 2 out of 5 are confident of saving enough1.

It isn’t until later in life that many of us start retirement planning seriously and start contemplating just how much we’ll get when we sign off from work one last time. That said, some of us do start early, so here are a few retirement planning tips to give you guidance and a bit of assurance.

Also, you can make sure you avoid these mistakes when developing a retirement plan.

 

Set aside a percentage of your income

How much should you be setting aside for your retirement? Well, as much as you need to be comfortable when you retire.

It’s a well-known fact that the cost of living in Singapore is high; monthly expenses for single man or women aged 65 and above is $1,379 SGD a month2 to sustain basic standard of living based on a survey on people aged 55 and above.

This, in conjunction with studies that Singaporeans start saving for their retirement around 38 (and 60%1 feel that they won’t save enough even if they do), means that thinking about saving money sooner rather than later is absolutely crucial.

And if you’re thinking about setting aside only the basic retirement sum of $85,500 SGD – you can expect a monthly income of only $700-750 SGD, so starting as early as possible is in your best interest if you feel it’s not enough. 

Put your savings into a retirement account

All Singaporeans and Singapore Permanent Residents are likely to be familiar with the Central Provident Fund (CPF). This social security system helps working adults set aside funds for their retirement. It includes…

  1. An Ordinary Account (OA): for housing, insurance, investment and education
  2. A Special Account (SA): for retirement income and investments in retirement-related financial products
  3. A MediSave Account (MA): for hospital fees, approved medical care and medical insurance
  4. A Retirement Account (RA): on your 55th birthday, a fourth account, the retirement account, is automatically created

Singaporean citizens – when employed – make monthly contributions (along with their employer) that go into the first three accounts mentioned above.

However, Singaporeans should also consider diversifying their savings portfolio with investments to lift and protect returns.

Investments (ways to boost your savings before retiring)

Another retirement tip: grow your savings through voluntary contributions to your CPF account and/or a diversified portfolio of investments, i.e. shares and other assets (like property) that continue to increase in value. This is a key part of retirement planning.

 

Option 1: Voluntary contributions to CPF

As referenced above, CPF can be a great way to boost your retirement nest egg. The CPF LIFE payouts form your basic monthly income during retirement (and is determined by the type of CPF LIFE plan you choose and how much you contribute) and you can boost your retirement nest egg by making voluntary contributions to your OA and SA during your working years.

To bolster your retirement nest egg and supplement your retirement planning, consider a diversified portfolio of investments to go alongside your CPF LIFE payouts when you retire.

 

Option 2: Singapore Savings Bonds (SSBs)

Issued by the government, Singapore Savings Bonds (SSBs)3 offer a risk-free investment option and you can withdraw your money if you really need it. You can start one with as little as $500 SGD.

You can use the Monetary Authority of Singapore’s SSB calculator to see how much you’ll earn each year depending on your investment.

 

Option 3: Third-party savings and investment plans

There are plans offered by other financial institutions that may be viable alternatives for you. These plans are less flexible, often requiring you to hold them for a fixed term to get the promised returns. Also, depending on when you start and your risk appetite, you may want to consider short, medium and long-term investments. However, those that offer higher returns come with higher risks!

If you’re more risk-averse and want to achieve your financial goals while being protected, we offer comprehensive savings and investment plans in Singapore that grow your wealth while protecting your lifestyle. These include:  

To find out more about our savings plans, click here. For our investment-linked plans, click here.

 

Option 4: Regular shares savings (RSS) plan

A regular share savings (RSS)4 plan allows you to invest a fixed amount of money into a variety of financial products over a period. These investments may be into stocks, exchange traded funds (ETFs) or unit trusts, meaning they come with risks.

 

Take less risks as you reach retirement age

As you reach retirement age, it may make more sense to move your money to lower-risk investments. Also, if you’re a gig worker rather than a full-time employee at a business, you may want to put even greater focus on your retirement planning. Here is a short article on the things you can do to make the process smoother.

 

Growing your wealth

If you’re interested in growing your wealth and diversifying your investment portfolio, that’s definitely something we can help with. Regular savings accounts typically pay relatively low levels of interest offering lower returns, whereas investing in the stock market can lead to much higher returns.

Also, with the help of an expert, navigating the stock market and choosing the right places to invest can be made easy – all you need is a little bit of cash and a long-term strategy. All of which we can guide you on.

Click here and we’ll help grow your wealth.

 

Things to consider and retirement planning tips

As you approach the retirement age in Singapore, there are a few things you need to consider that will help you streamline the process and achieve your retirement goals.

Not thinking about retirement and wondering if you need to save? Our blog answers your questions.

 

1. How much will enable you to retire safely?

Assuming that the basic monthly expenses for Singaporeans after retirement is $1,200 SGD a month5, $14,400 SGD per year (not accounting for inflation, rent and assuming your investment beats inflation every year).

So if you want to be in retirement for 30 years and you need $1,200 SGD a month to retire safely (rather than comfortably), you would need to save $432,000 SGD. Remember, think about how much you need to retire safely and how much you need to retire comfortably – both are two completely different things!

Find out more about why planning for retirement earlier really makes a difference.

 

2. Budgeting for the future

You won’t be receiving as much money as when you were in employment, but you won’t have to worry about travel and work-related expenses. You may have even paid off your mortgage and have other financial investments that are delivering monthly returns.

As for any dependents, they’ll likely be adults by the time you retire and fully capable of looking after themselves – so all you need to worry about are weekly essentials and monthly payments.

If you’re worried about retirement planning, here are 7 common mistakes to avoid that’ll keep you in the clear.

So really you just need to think about your weekly essentials and monthly payments (bills, electricity, water) to try and compile an accurate record of your outgoings. You should try to establish budget plans for your “essential” lifestyle and your “comfortable” lifestyle, as this will help you to see what non-essentials you could do without – if necessary.

Conversely, if you’re here on behalf of your parents and want to help them retire comfortably, we have a few tips for you here.

 

3. Managing debts before retirement

Before retiring, try to get as many outstanding debts paid off in full or at least prioritised in terms of repayment. Credit card debt, for example, should be your top priority as it has the highest interest rates (and are often flexible).

Next, look at mortgage debts or loans as these will have fixed rates and be paid monthly. They’re much more predictable (and therefore easier to plan for), but you should pay them off as and when you can so you don’t have to worry about them later.

If you can’t pay your debts off before retirement, work them into your budgeting plan. These shouldn’t be additional costs but part of your essential payments.

Lastly, try to avoid creating any new debts when you retire. Unless you have any additional income – i.e. property – your budgets will be fixed.

 

4. Deciding when to retire

The minimum retirement age in Singapore is currently 62 years, however, your company cannot ask you to retire before then. This applies whether you are a citizen of Singapore or a permanent resident.

As such, up until 62, the choice of when to retire is yours – the question, however, is do you have the means to do so?

The crucial point is saving enough to live comfortably, i.e. how you would like to – and it’s never too late to start.

 

5. Reviewing your progress

To make sure you’re on track to meet your retirement goals, review your savings and estimate how much income your investment portfolio is likely to generate when you retire. The earlier you review your progress (it would be good to check every few years), the more time you will have to fix any problems.

For example, you may find that after an increase in inflation, your projected retirement savings (based on your current contributions) will be less than what you need to retire comfortably or have enough funds for the number of years you require. This may mean that you have to increase your voluntary contributions to your CPF account and/or add more money to your savings accounts/investment portfolio to cover the gaps.

For more on what to think about as you build your retirement fund, check out our blog on the topic!

 

Benefits of retirement planning

This might sound like a lot to take in right now but planning your retirement now – and preferably early as you can – will ensure peace of mind which is, undoubtedly, one of the most important benefits.

So start saving for your retirement in Singapore today. With our help, you can achieve the savings you need by the time you want to retire.

Just check out our retirement solutions by clicking the link below.

 

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