It is not a big surprise to many of us that retiring in Singapore is not at all cheap. As this thriving city is a rather expensive one to live in, it also makes retirement a bit of a challenge for most people who have come from a job with an average income. You want to make sure that once you have decided to leave your workplace, you can live comfortably while enjoying the kind of lifestyle you are already used to.
At the same time, there are some people who have not thought much about their retirement, only to realize that they are only a few years away from this stage in their life. So, without much funds for retirement, they go through financial issues and end up taking out one loan after another from a money lender or a bank just to get by with their rising expenses. In the end, they suffer the consequences of having to pay off these loans and not being able to put much money into their savings account. Thus, the plans of retiring in flying colors become more and more grim for them.
Manulife and the DBS Bank conducted a survey to take a look at the situation retirees have in terms of their finances. According to this survey, just 36 percent of Singaporeans between the ages of 40 and 60 are able to retire comfortably with the money they have in their investment and bank savings. On the other hand, 30 percent of these research participants are thinking about downgrading their lifestyle once reaching retirement. Sad to think about these things, but these do happen to some people because of a lack of foresight prior to leaving their jobs.
But you do not have to be one of those people who have to tighten their belt and be frugal by circumstance during retirement. Yes, it is a challenging feat to plan for retirement in Singapore, but it is not at all impossible. You can make your life much lighter once you retire by keeping your finances in check and saving up for your future.
The amount of money you can save depends largely on your spending habits at present. How much do you normally spend on a daily basis? Meanwhile, how much is left from your paycheck that you can put in to your savings? You need to be aware of these numbers as this can reveal how much you can save for your retirement funds even if it is several years from now.
Based on researchers, the average Singaporean aged 40 to 60 has an average monthly expenditure of $4,699. Meanwhile, these people make a little over $8,300 monthly. Thus, they can have under 50 percent of their money saved and placed in investment if they wish to. For someone who has this kind of earning and spending profile, the amount that can be saved for their retirement is at least $3,600 in a month.
As to where this amount of money goes to, there are several things that middle-aged to older Singaporeans spend on. These may include their rental fee, mortgage payments, credit card bills, food expenses, utilities, leisure and entertainment, and so on. If they have kids, then there are education expenses to take care of in addition to their basic needs.
But as for others who may not have kids, it can be quite surprising to know that they spend this much on an average month. Common reasons why their expenditure reaches this much include shopping, dining, movies, and splurging on the latest gadgets and devices. The temptation of hitting the mall during payday and eating out too often are major obstacles to your goal of boosting your retirement funds before you even reach this stage.
Your Income Vs. Your Expenditure
The income of an average Singaporean that was presented earlier is not just the amount earned from their employment, but it already includes the CPF contributions of the employer. This is why if we look at the numbers once again, their gross salary is only at $7,160. Then, there is the 20 percent CPF contribution deducted, which makes their take home pay at $5,728. This gives us a total of $2,650 for the CPF contributions per month.
Also, it is worth noting that monthly contributions may possible be made to several CPF accounts in varied proportions such as 23 percent to the CPF Ordinary Account ($1,647), 8 percent to the Medisave Account ($573), and 6 percent to the CPF Special Account ($430).
In these examples, a 30-something couple may end up using $1,100 monthly taken from the CPF Ordinary Account to cover payments for their home mortgage. They may also decide to transfer some remaining cash to the CPF Special Account, so there is a higher interest to be earned per year projected at around 4 percent. Thus, with a $977 monthly contribution, the same couple may end up saving as much as $502,000 once they reach the age of 55.
During this age, they may be qualified for the CPF Enhanced Retirement Sum. The ERS cost about $241,500 each. Then at age 65, each person can expect to receive a payout monthly of at least $1,770 to as much as $1,920. If you have your spouse making the same amount, then there is a total of $3,800 coming in monthly. For empty nesters with children who are already independent and earning their own income, this amount of money should suffice for their basic needs.
Retiring at 55
You see, if you are 65 years of age and ready to retire, then the projected money you can receive for the payout should be more than enough. There should be plenty to spend on your food and other basic expenses. But then, do you plan on retiring earlier, say at 55 years of age?
In this case, let us come up with a different computation for this age group. If we look into the take home pay of the average Singaporean couple, the sum is at $5,728. But then again, this amount is used for funding the typical expenditure in the household, which is at $4,699 monthly. With a total savings of $1,029 in a month, you are probably wondering what this may be used for.
If the couple plans on building their emergency savings during the first 2 years or at 30 years of age and so on, and supposing they reach $24,000 by this time, along with an investment with 4 percent per annum returns in 23 years, we can expect them to save a total of $452,158 at 55 years of age. As for the potential monthly income, it may be at $3,768 from 55 to 65 years of age. Meanwhile, the CPF Life payouts should eventually start by this time.
This is why we can say that even if you are only making an average income in Singapore, you can retire at 65 and even at age 55 without a problem. Your goal is to live simply and within your means to make sure you have money in the bank and investment, while being capable of supporting your basic needs.
You see, it all depends on how smart and practical you are with managing your money. Every financial decision you make is important as this has a massive impact on your savings. Perhaps you have some money that can suffice for funding a new car, but then you need to think twice before giving in to this temptation. Learning to prioritise your needs and what you buy are important elements that can give you a secure and comfortable retirement.
So, if you are wondering if retiring in Singapore is not going to be a tough financial issue, then the answer is YES. As long as you prepare for your future by being mindful about how you spend and save your money, then you can surely have an easy retirement while enjoying the simply pleasures in life.