5 Questions You Need to Answer When Planning for Your Retirement in Singapore

Almost everyone dreams of blissful retirement years when one can find pleasure in one’s hobbies, travel to beautiful places, and enjoy the company of family and friends without worrying about work responsibilities and finances. Unfortunately, this perfect picture will remain a dream for many people in Singapore.

According to a recent survey by St. James’s Place Wealth Management Asia (SJP Asia), 48 per cent of Singaporeans believe they do not have enough money saved to experience a comfortable retirement. Moreover, 46 per cent are expecting their families to take care of them in their retirement years.

If you do not want to suffer the same fate and become a burden to your loved ones in your golden years, it is crucial to plan your retirement well, especially while living in one of the world’s most expensive countries. Note that part of preparing for your future is setting clear direction and goals. As such, you may want to begin your retirement planning journey by answering the questions below.

What Kind of Retirement Lifestyle Are You Envisioning?

A crucial part of building a prudent retirement plan is defining your goals or the kind of lifestyle you want to live when you retire. Do you want to spend most of your time travelling, pursuing hobbies, or spending time with family and friends? Perhaps you want to live abroad or relocate to be near family members?

You may not realise it, but your life will be completely different once you stop going to work. Your network will change, no more overtimes and beating deadlines, and you will have a lot of time on your hands. Imagine how you want to spend your retirement years considering all these things. Remember that your desired lifestyle will impact how much retirement funds you need to save.

At What Age Do You Want to Retire?

Determining your retirement age is another crucial factor in retirement planning since it will give you an idea of how much time you have to save and build your retirement fund. Just subtract your current age from your desired retirement age to know how many years you have until you stop working.

For example, if you are 25 years old and you want to retire at the age of 57, you only have 32 years left until you retire. That means you have to work doubly hard, make serious sacrifices, live a frugal lifestyle even if your peers are abiding by the YOLO mantra, and do everything you can in a little over three decades to have enough funds for your golden years.

How Much Savings Will You Need to Sustain Your Lifestyle?

Once you answer the first two questions, it will be easier to estimate how much saving you will need to fund your retirement lifestyle. You can use your current level of expenditures to approximate the funds you need, but remember to make the necessary adjustments depending on how you wish to spend your retirement years.

You can also use the CPF Retirement Estimator and similar tools to compute the amount of savings you need to fund your future lifestyle. If your estimated amount seems too challenging to realise, you may want to consider a more practical standard of living.

What Is Your Current Financial Situation?

Knowing where you stand financially is another critical part of a sound retirement plan. You must review your finances to assess your savings gap and to identify needed adjustments in order to reach your retirement fund goals. Here are several ways to evaluate your financial health:

  • Keep track of all your income and expenditure to know whether you tend to spend more than you earn.
  • Calculate your net worth by subtracting all your liabilities from your assets (bank savings, investments, property).
  • Determine your debt-to-income ratio by adding up your total monthly debt repayments and dividing it by your gross monthly income. A debt ratio of over 35 per cent is a sign that you need to manage your debts as soon as possible. Otherwise, it will negatively impact your retirement goals.

How Can You Save Funds for Retirement?

After coming up with a realistic estimation of how much funds you need to save up for your retirement, the next question you need to figure out is how you can accumulate wealth for your golden years. Although you can expect CPF LIFE payouts monthly when you reach 65, the amount may be enough to cover your basic needs but not your desired retirement lifestyle.

To ensure a comfortable retirement, you may want to find other means to boost your retirement fund. Here are some ways to do so:

  • Build your CPF savings by making cash top-ups to your Special Account (SA), transferring your Ordinary Account (OA) funds to your SA to earn higher interest, and choosing not to withdraw at age 55 so you can continue growing your CPF funds.
  • Reduce your spending and save more money.
  • Get a suitable retirement insurance plan.
  • Acquire investments.

If you want to enjoy your golden years without burdening the people you love, you cannot merely rely on your CPF savings and live frivolously. Instead of waiting until you are in your 50s to start thinking about your future, it is prudent to start retirement planning today. Build your plan based on your answers to the questions above so you know exactly where you are, where you plan to go, and the means to get there. Keep in mind that a comfortable retirement is a fruit of proper planning and many years of hard work and wise financial decisions.

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