Infographics SG-financial advice (Cover) (1)

Budgeting for Retirement and Old Age

There’s a common misconception that being single means a lighter financial load, but as people age, they often have specific financial requirements and concerns. This emphasizes the significance of beginning the planning process early and including insurance in the mix of financial products. Some elderly people may not have the same level of assistance or protections in place since they do not have dependents or a partner. This highlights the need for retirement preparation and making sure one has enough money to live comfortably in their golden years.

It is now more important than ever that we take preventative measures to ensure your financial stability. Protecting one’s financial security and being ready for the unexpected can be accomplished through the wise use of insurance products like retirement plans and long-term care insurance. Taking care of these matters early on would give them peace of mind and allow them to set themselves up financially so that they can enjoy their golden years in Singapore without worry.

To help you start building a better financial future right now, here are some budgeting pointers:

1. Know What You Want and What You'll Need in Retirement

finance, accountancy, savings-2837085.jpg

Establishing what you want and need out of retirement is the first step in creating a retirement budget.

Think about the costs of becoming older and the retirement lifestyle you’ve always wanted. Do you hope to do a lot of traveling, keep up an active social life, or move into a smaller house?

Knowing what you want out of retirement will help you determine how much money you’ll need. Think about things like medical bills, entertainment, living arrangements, and anything else that is important to you. If you know exactly what you want out of retirement, you can save more money and invest it more wisely.

2. Make a Financial Plan for Retirement

business, plan, report-4576778.jpg

Making a retirement budget is the next step after figuring out what you want out of retirement and how much money you will need.

Examine your income, savings, and investment options to get a sense of where you stand financially. Estimate the amount of money you will receive in retirement from various sources, such as social security and your own investments.

Next, make a list of all the money you anticipate spending in retirement. Include fixed items like rent and healthcare as well as variable ones like dining out and entertainment. Think about long-term expenses like healthcare and inflation. You may better anticipate your retirement financial demands and direct your savings and investment strategies with the help of a detailed retirement budget.

3. Optimize Your Investments for Retirement

money, cash, tree-5530537.jpg

Maximizing retirement funds is essential for a comfortable retirement. Make use of Singapore’s retirement programs and investment opportunities.

The Central Provident Fund (CPF) Special Account is a good option for saving money and deferring taxes. If you want to save more for retirement, you should look into making additional voluntary contributions to your CPF accounts.

You should also think about investing in stocks, bonds, mutual funds, and annuities, among other things. You may increase your wealth and secure many sources of retirement income by diversifying your investment portfolio.

In addition, insurance savings plans can help you amass a sizable nest egg for your golden years. This all-inclusive retirement plan may provide you with many saving options for retirement. Depending on the plan, you may gain some advantages such as enhanced coverage against accidental death, and disability, as well as monthly cash payouts upon retirement.

Consult a financial advisor to help you create a retirement savings strategy that fits your needs and comfort level.

4. Assess and Modify Your Plans Regularly

planning, finance, business-4077086.jpg

Planning your retirement finances should be a constant priority. Keeping your plan under constant scrutiny and revision is crucial as circumstances evolve.

Keep an eye on your retirement fund and make necessary adjustments to your contributions and investment approach as time goes on. You should be abreast of any policy or program changes that may have an effect on your retirement savings.

If your health status has changed, it may be time to reevaluate your retirement goals and make some adjustments to your budget. Your strategy will continue to serve you well and adapt to your changing circumstances if you revisit it and revise it on a frequent basis.

Infographics SG-financial advice (Cover) (2)

To Millennials: How To Increase Your CPF Savings

How Have CPF Retirement Benefits Changed Over Time?

The Minimum Sum Scheme (MSS) was established in 1987 with the goal of preventing Singaporeans from spending all of their retirement funds before they reach old age.

This plan required a certain minimum amount to be in the CPF account by the time a member reached retirement age.

Once the member reached age 60, payments began at roughly $230 and continued for around 20 years, with a minimum investment of $30,000.

CPF LIFE was created to replace MSS as a retirement savings system because people are living longer.

Take a look at this handy chart to see how the bare minimum has evolved throughout time:

Reference: https://blog.seedly.sg/cpf-minimum-retirement-sum/

A realistic prediction of our income flows and expenses in our golden years is a crucial aspect of our retirement planning. Thus, we need to separate our wants and necessities, and keep an eye on them.

When doing a thorough analysis of your finances, don’t forget to factor in the cost of insurance, particularly medical and long-term care coverage. If you look at them on a regular basis, you may visualize and plan for your ideal retirement.

How much money do you expect to come in to cover all of your demands and needs? When will they start, and how long will they last? With an annuity insurance payment, for instance, you can take money out of your SRS account tax-free over a period of ten years or more. You can begin penalty-free withdrawals from your SRS account for as early as the age of 62 if the statutory retirement age was 62 when you made your initial deposit.

We expect to spend more on travel during our first decade or so of retirement since we want to explore the world while we’re still healthy and able to enjoy it. Some people might wish to try their hand at entrepreneurship, but they lack the initial funding.

The timeframe in which we can attain financial independence and enter the decumulation phase with confidence and peace of mind can be better determined with the help of a realistic projection and the ongoing monitoring of our assets and liabilities.

Similarly, the minimum age for receiving payments has risen through time to account for improvements in longevity.

Reference: https://blog.seedly.sg/cpf-minimum-retirement-sum/

The CPF allowed members to ‘opt-in’ to receiving retirement payouts at age 65 beginning in January 2018.

If no applications were received, benefits would be paid out to members beginning when they turned 70.

These CPF savings will continue to earn 6% per year in interest even if a later payout age is selected (for example, at age 70).

CPF Retirement Benefits for BRS, FRS, and ERS

There are three main retirement sums you can withdraw from your CPF account: the Basic Retirement Sum, the Full Retirement Sum, and the Enhanced Retirement Sum.

When you turn 55, you’ll be sent a packet of CPF paperwork, on which you’ll be asked to specify whether you want to save for your Basic, Full, or Enhanced Retirement Sum.

Reference: https://blog.seedly.sg/cpf-minimum-retirement-sum/

You must pledge an asset you own or have adequate property charge to qualify for the Basic Retirement Sum (BRS).

Don’t worry, pledging your home won’t change your ability to sell or rent it out; ownership will remain unchanged.

In the event of a sale, the CPF account will be credited with the pledged amount plus any interest that has accumulated on the CPF funds used to purchase the asset.

In addition, it was announced in Budget 2022 that the BRS would be increased by 3.5% year from 2023 to 2027 in order to offset inflation and rising costs.

Retirement Sum (FRS) is defined as double the Basic Retirement Sum (BRS), in case you were wondering.

Furthermore, the Enhanced Retirement Sum (ERS) is triple the Basic Retirement Sum (BRS).

Here is how much we could need in our CPF accounts based on a projected 3.5% annual rise before we can withdraw the surplus funds when we are 55 years old.

Please keep in mind that the projection may shift as a result of changes in the economy.

If you were 28 in the year 2023, you would need roughly $486,410 to reach the FRS.

How to Maximize Your CPF Investments

This is certainly not a modest amount of money right now.

Nearly half a million people.

If that sum seems excessive right now, try not to worry about it.

If you start early and contribute as much as possible to your CPF account, you may be able to reach this goal by the magic of compound interest.

Scheme for Increasing Retirement Sums

Although our CPF accounts are fantastic additions to our retirement savings, we shouldn’t rely on them alone in old age.

The hefty sums needed for retirement and the increasing costs of life mean that a safety net of more money is always welcome.

Especially if you’re interested in researching the topic of early retirement and the fact that we wouldn’t be able to begin withdrawing it as a monthly distribution until we turned 65.

Despite the fact that the CPF is an obligatory savings scheme, we should still plan to save as much as possible in order to ensure that we live a comfortable retirement.

Utilizing Your CPF Money Wisely

In the meantime, you could work on diversifying your sources of income and expanding your personal savings and investments.

You may also put your CPF money into safer investments like Treasury Bills or a fixed deposit 

The Central Provident Fund Investment Scheme (CPFIS) is an alternative way to invest your Ordinary Account (OA) and Special Account (SA) funds. 

Increase Your Retirement Savings by Contributing Extra Money to Your CPF Special Account (SA).

Infographics SG-financial advice (Cover) (2)

Maintain A Comfortable Retirement By Decumulating Your Assets

The Covid-19 epidemic is an effective stress test to see how resilient and long-lasting our passive income flows are. For those on the cusp of retirement and those already enjoying their golden or freedom years, this is of paramount importance.

For instance, if you count on rental income to support your retirement lifestyle, and your tenants start asking for rent reductions or giving you notice because they’ve lost their jobs, you could find yourself in a difficult financial bind.

 

Phase of accumulation

Most of us are aware of the importance of making our money work harder so that it can keep up with inflation and generate profits so that our wealth can be accumulated over time while taking advantage of the power of compounding. Equity, unit trusts, robo-advisors, and investment plans all qualify as investments.

 

Phase of decumulation

When we reach retirement age, we transition from saving for our future needs to spending from our current assets. We want to do this as efficiently as possible so that we don’t deplete our savings too quickly. On the other hand, we want to be able to reward ourselves for our hard work and careful financial preparation with a decent standard of living. It’s possible that some of us would like to amass resources that will last well beyond our deaths and provide for our families.

You’ve probably heard of “decumulation,” which means turning our assets into income streams to cover our expenses once we stop working. The complexity of decumulation planning is becoming apparent to many. By the time we reach the decumulation stage, we will have either fully or partially retired. If we lost our jobs, we would have to rely more heavily on the passive income flows we can generate from our savings and investments. By then, we may be too old, have the wrong skills, or be too sick to work, all of which reduce our job prospects.

A higher life expectancy has prompted calls for retirees to keep their money working for them by investing it. However, it’s wise to remember that not all investments are created equal, and to diversify your holdings, create numerous streams of income, and think about the time horizon of your investments. The danger of a lesser return when withdrawing money from assets during a downturn can be avoided or mitigated in this way.

Invest in a method that allows your savings to grow while still allowing you to decumulate efficiently for a more stable financial future.

Consider these 5 things  when decumulating.

1. Cash Flows and Expenses in Retirement

A realistic prediction of our income flows and expenses in our golden years is a crucial aspect of our retirement planning. Separate their wants and necessities and keep an eye on them. When doing a thorough analysis of your finances, don’t forget to factor in the cost of insurance, particularly medical and long-term care coverage. If you look at them on a regular basis, you may visualize and plan for your ideal retirement.

How much money do you expect to come in to cover all of your demands and needs? When will they start, and how long will they last? With an annuity insurance payment, for instance, you can take money out of your SRS account tax-free over a period of ten years or more. You can begin penalty-free withdrawals from your SRS account as early as age 62 if the statutory retirement age was 62 when you made your initial deposit.

We expect to spend more on travel during our first decade or so of retirement since we want to explore the world while we’re still healthy and able to enjoy it. Some people might wish to try their hand at entrepreneurship, but they lack the initial funding.

The timeframe in which we can attain financial independence and enter the decumulation phase with confidence and peace of mind can be better determined with the help of a realistic projection and the ongoing monitoring of our assets and liabilities.

2. Income flows with and without guarantees

Determining the nature and sustainability of your retirement income flows is one method of decumulation. How much of it will be guaranteed, and how much won’t be? How much of your essentials can you expect to be covered by stable income? And how much of your demands will be met by unpredictability in your income? If you are particularly risk averse, you may desire a bigger portion of your passive income flows to be guaranteed and/or reliable to be able to cover all your requirements and perhaps some of your goals.

Cash and near-cash assets such as Singapore Savings Bonds, some bonds, annuity and/or retirement income, money market funds, index funds, and so on are examples of liquid assets that can be quickly converted into cash and provide a steady stream of income. While rent collected from tenants may seem like a sure thing, keep in mind that it depends on the market and the availability of properties.

Equity, some bonds, alternative assets like commodities, private equity funds, and so on are all examples of high-risk financial instruments with potentially high rewards.

3. CPF payments

Many of us rely on our CPF funds as the backbone of our retirement strategy. Maximise your CPF savings by learning how the various CPF schemes work. The CPF Board, for instance, allows us to add to our own and our loved ones’ CPF accounts through the Retirement-Sum Topping Up scheme.

If we enroll in CPF LIFE, these payments will guarantee greater monthly payouts for the rest of our lives. If we are enrolled in the Retirement Sum program, our monthly payments will increase, and we will get payments until age 90. We (and our loved ones) can also benefit from personal income tax breaks of up to $8,000 annually if we add funds to our accounts in this way.

4. Preparing an Estate

Don’t forget to include an estate plan in your retirement preparations; it will help to prevent your assets from leaking away in the event of your incapacity or death. Wills, CPF Nominations, Lasting Powers of Attorney, Trusts, and Advance Medical Directives are the most typical estate planning documents.

5. Get your head in the game

Expect to shift your focus from saving to spending or depleting your possessions. This is a significant emotional challenge for savers. If we are unable to make this transition, we may never get to enjoy the benefits of our accumulating phase savings and investments. And we may risk leaving excessive wealth to our beneficiaries to a level that might not benefit them if it results in them leading irresponsible lives.

Ready to get going?

Get in touch with a financial advisor immediately to get advice on improving your financial situation and making plans for the future.

Infographics SG-financial advice (Cover) (1)

6 Things You Should Invest More In

It is well recognized that being thrifty is a virtue because it will probably keep us out of any financial difficulty.

But if something is done excessively, it can be bad to have too much of a good thing.

Sometimes it makes more sense to invest in quality than quantity.

Think of it as an investment for the future. Despite having to pay more up front, you can profit from your purchase for a longer period of time, which will increase your return on investment.

In the near term, you might be spending more, but you might gain more in the long term. 

Having said that, here are 6 things you should invest more in:

6 Things You Invest More In

1. Food

As the old adage goes “You are what you eat”.

You will start feeling, looking, and developing bad habits if you consistently consume unhealthy foods.

This is mostly due to the fact that what you eat has an impact on your energy, emotions, health, and general well-being.

According to the National Institute of Diabetes and Digestive and Kidney Diseases, Eating foods that are good for you and staying physically active may help you reach and maintain a healthy weight and improve how you feel.

Therefore, purchasing fresh foods like whole grains, fruits, vegetables, fish, etc. at a higher price is worthwhile.

Health is riches, after all. You won’t have to spend as much on medical expenses if you are in good health.

2. Exercise

Similar to this, you ought to invest more money in your health and exercise.

Here too, eating well has its advantages. In actuality, both work together to enhance your health and wellbeing.

This may be something we all used to take for granted, but now that we’re aging, our  metabolism has slowed, and our wealth has increased.

But we should make  the commitment to live a healthy lifestyle, steadily increasing the amount of workouts we do each week from zero to five this year.

Not even a membership to a gym is required.

Nearly everywhere, including areas like the fitness center near your house, is a good place to perform the exercises.

3. Dentistry

Sadly, our teeth and gums cannot grow back. We only have adult teeth, which are the ones that are currently in our mouths.

You should therefore take care of your dental health by brushing, flossing, and using mouthwash at least twice daily. You should also see the dentist roughly twice a year.

4. Clothing and Footwear

Clothing creates a man. People who are naked have little to no social impact.

Consequently, invest in a few sets of truly high-quality clothing and footwear rather than purchasing clothes and shoes of medium quality.

Yes, the initial cost may be twice as high or tripled.

However, these high-quality things usually last longer, are more comfortable, and also leave your home with less clutter.

You may find discounted off-season merchandise at these outlet stores in Singapore to save even more money.

5. Education

According to Warren Buffett, who is unquestionably one of the top investors in the world:

“Investing in yourself is by far the best investment you can make.”

Instead of concentrating on investment optimization, your creativity and energy would be far better employed on developing your career and increasing your income.

We don’t want to imply that making smart investments is unimportant. However, you should prioritize developing your job and earning more money.

To advance in your work, one method to achieve it is to upgrade yourself by enrolling in the necessary courses and certifications. Start by upgrading your skills to its fullest potential.

6. Time

Although you can’t purchase happiness, you can ‘buy’ back your time and lower your stress levels so that you may spend it on the things that are really important.

You are saving time, which is debatably more precious in my opinion, rather than money.

How so?

Several instances include:

  • If you don’t have a car, you can increase your Grab, GoJek, ComfortDelGro, etc. budget.
  • Getting help from a part-time maid or cleaner to help you with the housework
  • paying full retail price as opposed to spending hours looking for bargains online
  • dining out as opposed to cooking.

The list continues.

Don’t feel too bad about working hard if you’re overworking yourself like the majority of Singaporeans.

The most valuable resource we have, after all, is time. We cannot get anything back once it is lost.

Final Thoughts

Even while these are generally beneficial for the majority of people, you should exercise caution before splurging on them.

Why do I say that?

Some people view enrolling in fitness courses, getting frequent massages, purchasing an expensive car, or traveling abroad to learn about other cultures as overspending.

Find something that is significant and valuable to you as a general rule when deciding what to indulge on. More importantly, it must stay inside your spending limit.

When you splurge in this way, spending more money than usual is regarded as cost-effective.