The official retirement age of Singaporeans is at 62.
However, due to the varying living conditions of people, this age can either be stretched out or reduced.
Nevertheless, retirement is still retirement. And we need the money to take care of it.
So how much do Singaporeans really need to retire?
[Free Ebook] How should you invest your first $20,000?
We asked 14 Singapore finance bloggers to share what they would do if they could go back in time and invest their first $20,000. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.
Let us cut to the chase and say the answer here: There is no exact answer. To tell you the truth, the amount of money Singaporeans need when they retire is something no one can straightly answer to.
The retirement money depends so much on a lot of factors. These factors sometimes have their own varying and constant changes which you must also keep note of.
Suffice to say, identifying how much to retire in Singapore is a hard thing to do.
However, this doesn’t mean that we should just let this case rest and settle with nothing in mind; leaving our retirement plans to shame. That is why in this article, we will help you figure out how much you really need.
Read on to learn…
Calculating Your Retirement Budget
The first thing you need to do to know how far you can go with your retirement money is by calculating your retirement budget. In every initial step, one has to assess what one has.
Which is why to fully reach your end goal to save up enough money for retirement; you must first assess what you currently have. You can then allocate this or grow it more.
Calculating your retirement budget entails you to consider these three important things:
Let us begin with the main part of budgeting: the expenses. Your expenses are the key to identifying whether or not you could save enough for your retirement.
By looking into your expenses, you will be able to identify the spending habits you need to improve or correct. Now what will you with this?
The first thing is to make sure that you are not spending more than what you earn. Say for your monthly expenses, you must not exceed your monthly income.
Break down what you usually spend in a month and figure out if it fits or not. Then make adjustments accordingly.
Try cutting out if it is too much. To be more specific, you must, at most, use about 70% of your current income. If you can do better than that, then good. But make sure that your way of living a healthy life is not compromised.
The second thing you need to identify in order to calculate your retirement budget is savings.
But this is not the complex type. You just simply have to identify the money left from your monthly or annual income after deducting what is above: expenses.
This savings will then be added on the calculating process. To figure this one out, you must not include all other savings such as education or a dream leisure activity. Your retirement savings must only be for retirement alone.
Calculate how much you currently have for your retirement as well as the amount you can constantly add to it. Since you have identified your expenses already, this should be easy to do.
Once you have figured it out, multiply it accordingly up until your desired retirement age; if not, try the official one at 62 years old. Through this you can get a rough estimate on what you are currently capable of having.
But before you close in on that, it is important to also regard your CPF retirement savings. Identify how much you have on your CPF retirement account then find out your investment return. Add that on top of your savings.
The third and last thing you must identify in order to calculate your retirement budget is your assets. This includes your net assets as well as the investment returns you get from them.
This can be tricky to identify. But to help you with this, we have provided you some factors to consider:
- The risks/rewards of the options which are usually proportional
- The loans you take for the investments
- The financial stability and security of the organizations you invest with
- The time duration/ maturity dates of the investments.
For net assets outside of investments, it helps to point out how assets that can be sold, reverse mortgaged, etc. should be a last resort. It is dangerous to be dependent on these things for your retirement since it won’t motivate you save more.
How To Increase Your Retirement Budget
Once you have calculated your current retirement budget, you have now a projected amount that you are capable of producing by the time you stop working.
However, if you find it inadequate, then it helps to take in this very truthful advice:
“Live Within Your Means”
Looking for ways to increase you retirement budget would ask you to live accordingly to what you have. That is if working more is out of the question.
With the calculations above, you can now fully grasp your retirement state. From there, make adjustments. Find out about certain lifestyle decisions that affect your retirement savings.
Likewise, keep in mind that the kind of lifestyle you have now will greatly differ once you retire. So look for aspects that are still very flexible. And also make room for certain future needs.
To start, maybe you can cut-off unnecessary luxuries that can only give you fleeting and impermanent happiness. Another thing is being wise with your expenses. Learn how to conserve and save up. You can even try a minimalist lifestyle.
Ultimately, while we can’t provide you with exact answers on how much you need to retire in Singapore, the most important thing is being able to identify how your current lifestyle expenses and decisions could affect your retirement.
By knowing these things, you are least likely to fall short of your retirement savings. You can then be able to have a comfortable and worry-free retirement once you have passed your preparation stage.