‘How much do I need for retirement?’ is a commonly asked question yet one in three working Singapore adults are not planning for their retirement, according to a survey by Nielsen commissioned by NTUC Income. It seems straightforward but complicated at the same time. Everyone has different expectations of the kind of life they have in their golden years therefore there is no magic formula or empirical figure that can guarantee us a comfortable retirement. As reported by Channel News Asia, the basic monthly expenses post-retirement costs approximately $1,200. With that in mind, how much do we have to save in order to meet the basic monthly expenses? In 2016, data from Department of Statistics Singapore indicated that the average life expectancy of males and females in Singapore are 80.6 and 85.1 respectively. Assuming that we work until the official retirement age of 62, there is still 23 years of post-retirement life to take care of. If we do a simple calculation using the median salary ($4,232) of Singaporeans, without factoring salary increment and inflation, we will still need to prepare $331,200 for retirement in order to meet the monthly expenses of $1,200. Given that we start preparing for retirement at the age of 30, we have 32 years to save up. In simpler terms, this means that starting from 30 years old, you will need to save $862.50 in order to meet the retirement amount. On top of your personal savings, CPF Life will contribute towards your retirement pool as well giving you a greater peace of mind. It is a life annuity, meaning that you will receive a regular stream of income for as long as you live. Based on the amount of savings in your CPF retirement account at the age of 55, you will receive different payouts from age 65 onwards. For instance, if you have $85,500 in your retirement account at age 55, you will receive monthly payout between $720 and $770 under the standard plan. Greater payout will be made to those with more funds in their retirement account. Besides CPF Life, you can also consider alternative sources to ensure a sustainable stream of income post-retirement. Getting insurance and savings plans or investing in capital markets and property are alternative ways to ensure post-retirement revenue source. There is absolutely no one-size-fits-all solution but you can always seek advise from your financial consultant to find a solution that best fits your risk appetite. If you are still unsure of what to do, start saving now. The effect of compound interest is astonishing! Alternatively, make use of online planning tools such as the CPF Retirement Calculator and free online financial calculators to help you find your magic number.
With proper financial planning, retirement is not as daunting as it seems even if we are not from the top 1% of high flyers in Singapore.