Are you in your 40’s but without sufficient retirement funds? Well you are not the only one experiencing it.
According to a survey conducted by St. James’s Place (SJP) Asia, more than half of Singaporeans aged 45 and up have not saved enough for retirement.
Although putting off retirement planning until later means missing out on compound interest in early years, there are still strategies to help your money grow. In this article, we will explain all you need to know.
Calculate how much you need!
If you’re 40 today and hope to retire at 67, you have 27 years to make up for it. In that case , it’s important to have a firm grasp on how much money is necessary to set aside for a comfortable retirement.
To help you plan for your financial future, the Central Provident Fund (CPF) offers a retirement calculator that helps you figure out how much you need for your retirement depending on some factors like age and one’s desired standard of living.
Your health should also be one of the major considerations in your retirement plans. This is an often overlooked factor that will influence whether or not you need to get supplemental health insurance.
The riskier your investments, the less likely you earn a high return
Considering that your current level of savings may be insufficient for now, you should start increasing it through investments in less precarious but nevertheless, profitable vehicles, such as endowment plans.
Basic insurance protection, the opportunity to accumulate savings over time, and the possibility of receiving a lump sum upon the policy’s maturity are just all benefits you can expect from an endowment plan.
You may choose from a variety of policy and premium options that offer early cash payouts annually, starting after the end of the second policy year and continuing on for as long as you keep your policy in place.
It might be tempting to catch up by investing in certain products with higher returns than you’re used to, but you should be aware that this strategy also involves taking on a greater risk. In the worst case scenario, you may lose all of your money and perhaps get into debt.
Downsizing your house can increase your savings
It could be difficult to clean and maintain a big house as you become older and when your kids start getting married in the future. For this reason, it might be prudent to think about downsizing your home in order to invest the proceeds from its property sale. You can save money on property tax and qualify for larger tax credits if you downsize your home.
The Annual Value (AV) of your property is used to calculate your property tax. The following formula is what you can use to calculate your property tax.
Annual Value (AV) X Property Tax Rate = Property Tax Payable
According to the data presented above, IRAS property tax statistics demonstrate that owners of smaller flats pay less property tax, which may lead to bigger savings after retirement.
Put more money into your CPF and get more interest
There are numerous advantages you can expect from contributing more to your Central Provident Fund (CPF). First, if you want to top-up with cash, you can deduct the same amount of tax relief up to $7,000 from your taxable income each year. Furthermore, your Special Account and Retirement Account funds can earn interest of up to 6% each year.
Cut back on your expenses
If you’re used to spending all of your income, the thought of saving even $200 each month may be overwhelming. But saving even the smallest contribution is important. If you start saving $200 a month for over 27 years and keep it up until you’re 67, you’ll have $64,800 saved up. With an insurance savings plan or investment, you can also grow your savings in a matter of time and earn an additional income later on.
You can still save enough for retirement even if you start late. The trick is to save regularly and pick your financial items wisely. Get started right away by consulting a financial expert about the insurance savings programs that are best suited to your specific situation.