When Singaporeans think of retirement, travelling the world and pursuing hobbies and passions immediately come to mind. Many believe that it is the time in one’s life to enjoy the pleasures of the world because ideally, one should be done with work and family responsibilities at retirement. Although there are retirees who get to live the dream, many others are set for disappointment.
A recent poll by digital wealth manager Syfe on Singaporeans’ retirement readiness found that 69 per cent do not think they can retire comfortably and 60 per cent are not adequately prepared for retirement. These results clearly show that while people dream of enjoying their retirement years to the fullest, only a few take the necessary actions to achieve this goal.
It’s probably worth asking: are you planning for retirement this early or are you procrastinating? Keep in mind that preparing for retirement cannot be done overnight. It takes many years of careful planning and making wise choices in savings and investments to retire comfortably in one of the most expensive countries in the world.
If you want to be ready for this stage in your but are unsure of what to do, read on. Below are four crucial steps that you may want to take to prepare yourself for retirement in Singapore.
Estimate Your Retirement Budget
The first thing you need to do to plan your retirement successfully is to calculate how much retirement money you need each month to live the lifestyle you desire when you retire. Make sure to consider the following when estimating the amount:
- Living expenses. This component includes various expenditures that will allow you to live comfortably in Singapore, such as payment for accommodation, meals, utilities, groceries, telecommunication, and transportation.
- Lifestyle spending. This component covers the costs of pursuing your hobbies, travelling, engaging in physical activities, and other miscellaneous expenses.
- Preferred retirement age. You need to know when you want to retire and how long you expect to be in retirement to estimate how much fund you will need.
- Retirement goals. Your goals and aspirations are not free, so you need to include them in your retirement budget.
Manage Your Finances
Once you have an idea of how much money you need for retirement, the next step would be to keep your finances in check to ensure you will have the amount you need before you retire. Create a budget to prevent overspending and incurring debts.
It is also ideal to start saving 20 per cent of your monthly income in a separate savings account with a high interest rate. Try saving more by cutting down unnecessary expenses like riding a taxi to work or splurging on fancy meals every weekend.
Find Ways to Grow Your Retirement Fund
Besides creating a separate savings account for retirement, you should also find other means to ensure you meet your target fund. After all, you do not want to run out of money when you are just in the middle of retirement. Below are three ideas that can help expand your financial buffer for a comfortable retirement:
Build-Up Your CPF Savings
It is practically impossible to discuss retirement without bringing up the Central Provident Fund (CPF), as it is a vital pillar of Singapore’s social security system to meet your retirement needs. If you often ask yourself “how does CPF work” but your knowledge is limited to getting monthly payouts when you retire, you should know that you can actually grow your CPF savings to increase your income when you retire. Here are several ways to do so:
- Transfer the money from your Ordinary Account (OA) to your Special Account (SA) to earn higher interest.
- Make voluntary cash top-ups to your SA.
- Invest your OA and SA savings in suitable investment products through the CPF Investment Schemes.
Create Other Sources of Income
Make sure that you have enough funds to splurge on the things you want during retirement by exploring and creating supplementary sources of income. For instance, you may consider renting out your spare bedrooms once all your children have moved out of the house. This way, you are guaranteed at least SGD550 a month per room, depending on your location.
Buy a Retirement Insurance Product
There are numerous retirement policies available in Singapore that offer a consistent stream of income from your preferred retirement age. Find a plan with payment terms and payout periods that suit your financial needs, and supplement your retirement lifestyle.
Protect Your Wealth
While you cannot prevent unfortunate events from happening, you can do something to protect yourself from financial loss in case you go through such incidents. Do not let unexpected illness or loss of income due to disability leave you penniless. Protect your retirement fund by buying comprehensive health and life insurance policies that address your needs.
The items above are essential steps that you need to take if you want to retire comfortably in Singapore. Forget the idea that you can get by through CPF alone or get financial support from your children. Ultimately, it is crucial to start building enough financial buffer as early as possible so that you can continue to live independently and with dignity even in your old age.