How many more years do you have before your retirement? About 20-30 years? The retirement age in Singapore today is 62 years old. But we may see an increase in the retirement age soon.
The reason I asked is to remind you to start saving and growing money for retirement. But how much do you really need if you wish to retire early or comfortably in Singapore?
How much do you need to save to retire in Singapore?
I can’t give you an exact number because it all depends on your future retirement plans. For instance, at what age do you wish to retire or what kind of lifestyle do you wish to have after retirement?
In 2019, a study suggested that it takes about $1,721 a month for a person aged 55 to 74 who has no chronic illnesses to meet basic needs such as food, clothing, and shelter. If you wish to have a more comfortable retirement, you will need more than $1,721 a month. Again, it all depends on you.
And even if you retire early, you must understand that CPF LIFE payout only commences from age 65 onwards. This means if you retire at age 55 you must find other ways to cover your living expenses.
Funding for retirement
1) CPF payout
CPF is one of the most effective ways of retirement planning in Singapore. Once you reach the age of 55, you can start to withdraw some of your CPF savings with a minimum of $5,000. But you can only receive CPF LIFE payout at age 65.
For someone who is retiring this year, they will need at least $415,300 in their CPF savings if they wish to receive the $1,721/month basic income. If you set aside $279,000 of the Enhanced Retirement Sum (ERS) by age 55, you will start receiving a monthly payout of about $2,155 at 65.
Annuity refers to retirement plans that you buy from insurance companies. You can either pay a certain amount of money on a monthly or yearly basis over a certain number of years or make one single payment. After certain years, the annuity will give you income and can also supplement your CPF payouts.
Depending on how much you need to pay your annuity, you will need to inform your Financial Consultant on how much income you wish to receive after retirement and let them work out the numbers for you.
3) Passive income
There are many types of investments that can produce a steady income for you. You can rent out a spare room or get started with property investments. But how much do you need exactly to achieve your desired income?
It all depends on the yield of the investment! An investment like REITs usually gives around 5% to 8% a year in dividends. But of course, as with all investments, your income may fluctuate because there is no guarantee. So, be sure to balance out any investments that generate passive income with lower-risk products like CPF LIFE and annuities.
To conclude, the best way for you to plan for retirement in Singapore is to utilise multiple retirement products. Use CPF LIFE as a base of your retirement income, private annuities to increase your payouts, and if you want, generate some passive income to ensure a comfortable retirement!
As we mentioned before, the amount you need to save to retire comfortably or early depends on you. But if you’re still unsure, you can always talk to me!
Send me a WhatsApp message if you have any questions.