To varying degrees, we all struggle to put away enough money for retirement. It’s possible that some of us are nursing an illness, taking care of aging parents, or finding a way to pay for the education of our children.
There is no simple or obvious answer to this question, which is why many people put off retirement planning in favor of meeting more immediate financial obligations. No one can really give you a precise figure that you need to acquire or save up to in order to retire comfortably. That’s because each person has a different financial situation and needs.
Some people may have tried to get a handle on retirement planning, only to be daunted by the sheer amount we’ll need to retire in comfort. The fact that we can’t predict what will happen next only adds up to our worries.
Whenever we consider our retirement needs, these are convenient reasons to put off making decisions. Yet, doing nothing is the worst option. In this article, we’ve listed some helpful steps you can take to get a handle on how much money you’ll need to retire comfortably in Singapore.
How much money do Singaporean retirees need for day to day living expenses?
According to a study (2019), conducted by a group of researchers from Singapore’s Lee Kuan Yew School of Public Policy (LKYSPP), $1,379 per month is the average amount needed for an elderly person living alone whereas, $2,351 is needed for elderly couples.
In addition to this, AIA reports that in 2017/18, the 20% lowest-income households in Singapore spent an average of $2,570 on their monthly budgets. That means if you want to get by on the MIS, you’ll have to cut your spending to the level of the lowest 20% of Singaporean households, which might be tough to do after saving and investing for the past four decades.
Calculate Your Regular Monthly Expenses
The first step you need to do is to make a rough budget of your monthly costs. No matter how careful you are, this will never be a perfect science, but it can give you some useful information about your purchasing habits.
Starting out, don’t spend more than you earn each month. Doing so can also help you identify several of the monthly costs you are incurring that are completely unnecessary. You won’t just learn where you can make cuts; you’ll also have to consider whether or not the kind of spending you’re planning for retirement is realistic.
An easy method to get a ballpark figure without doing the math is to take around 70% of your present income. While it is true that many experts rely on this amount, you should be cautious of doing so because it may be too simplistic and general.
What you’re spending each month now may look very different from what you’ll be spending on during retirement. You may have made substantial payments toward your mortgage, personal loans, the cost of your children’s education and living expenses, and the premiums for some types of insurance. However, you shouldn’t count for your monthly expenses to drop by a significant amount.
The primary reason for this is your regular monthly spending habits. It’s possible that retirement would lead to an increase in non-living costs, including those associated with leisure, travel, and medical care.
Sum Up Your Investments for Retirement
This refers specifically to retirement savings. It doesn’t matter if you’ve started a college fund for your kids or if you’ve already got a sizable chunk of funds stashed up for your ideal vacation overseas.
It’s important to figure out how much money you’ve put away for retirement so far and how much you can put away each month. Once you have a better idea of your costs, this step should be less difficult.
You’re doing this so you can get a rough idea of your financial standing when you turn 65. The total amount you plan to save over time is only part of the picture; compound interest on investment gains over time is also factored in.
If the numbers your financial planner or insurance agent has given you for your retirement savings seem daunting, you can stop your worries in knowing that you don’t have to save every last cent. Having a solid investment strategy in place can be a big help.
With a comprehensive coverage on your investment plan, you may rest easy knowing that you and your loved ones will be taken care of in the event of your untimely demise, permanent disability, or the onset of a series of life-threatening illnesses that will prevent you from contributing to your retirement savings plan.
Add layers of safety nets to your retirement plan
Your CPF is your primary and most apparent safety net you have. You put away a sizable portion of your pay each month, and in your golden years, you can start withdrawing from CPF LIFE. Its primary purpose is to ensure that you have at least a minimal level of support once you reach retirement age.
Additionally, your home is another major asset to which you are likely to make significant contributions over your working years. In retirement, there are multiple options for accessing this asset. You can a) sell back unused portions of your HDB housing lease for cash, b) rent out unused rooms in your home, or c) move into a smaller home once your children have moved out and started their own families.
Working also means having money to spare at the end of each month. You should invest some of it to provide for your retirement. You don’t want to have to learn this the hard way in the twilight of your career. The best time to begin is with your very first paycheck.
Maintain a Low Cost of Living
You can get a fuller understanding of your retirement situation by performing these calculations. You’ll have the knowledge to make informed decisions about your current lifestyle that will have a long-term impact on your ability to save for retirement. You’ll also come to terms with the possibility that your standard of living in retirement will be different from what it is now.
Having a solid strategy for investing your money is also crucial. You can retire sooner and have more money for discretionary spending each month in retirement if you generate interest on the money you’ve placed away for retirement.
Working over the traditional retirement age is a great way to increase your retirement savings and ensure you have enough money to live comfortably in your later years.
The comfort of your own home is another option. If your children have grown up and moved out, you may decide to downsize to a more manageable home in your retirement years.
Last but not least, you can find out if you have enough money set up for retirement. In order to avoid undue worry once retirement time rolls around, you can start making preparations as early as now.