How much do I need to retire in Singapore?
This article is updated as of 09/11/2024
Still confused on how much you need to have a comfortable retirement life? How can you acheive a comfortable retirement life?CPF life payouts coupled with an annuity/retirement plan can help you work towards a better and more fufilling retirement lifestyle.
What other benefits does an annuity policy or a retirement plan provide besides an income stream? Do your long-term financial plans allow you to have a secure and meaningful lifestyle when you reach your desired retirement age?
According to J.P. Morgan, 9 out of 10 investors are making changes to their finances due to increasing life expectancy. Most are expected to make changes by adjusting their spending habits and taking a broader view of long-term wealth allocation.
From the same report, 97% of Singaporeans are looking or already made financial changes in view of an increased life expectancy.
Read also: Financial planning for your health and insurance coverages
Why let your lifestyle be compromised, when you have decided to stop working?
Overall view on retirement planning
Studies by the World Health Organisation (WHO), has placed the average life expectancy of a Singaporean at 83.1 years¹. In fact, Singaporeans live longer than most other nationalities and in full health.
While health is the greatest wealth, no doubt having additional material wealth would enhance your lifestyle. Who wouldn’t agree that enjoying your desired retirement requires both health and wealth?
This is where retirement planning comes in place to ensure that your finances can last you for all your intended purposes when you are retired. When structured according to your financial goals and objective, a retirement plan can provide a combination of income, principal liquidity, long-term care, and wealth accumulation.
Take charge of your health and let a retirement plan take care of your finances.
With all its benefits, an annuity is not a guaranteed fail-safe towards all the financial issues you may encounter after your retirement (Risk and benefits in later sections).
Read about: When should you start saving for your retirement?
Read about: 3 things to consider before taking up a new financial product
How to prepare your financials for life after retirement?
Assuming you wish to stop working at age 60, you would have to ensure you can fund your desired retirement lifestyle until your demise. As a general guide, it would be reasonable to minimally cater funds for 25 years with inflation accounted for.
Suppose your current annual lifestyle expenses is $30,000, you will require $750,000 over the course of your retirement from age 60 to age 85. And we have not even cater for inflation!
Ensuring that your finances will last exactly till the age of 85 is by no means a wise choice either. The average life expectancy may not be a fully accurate indication of the age of your demise. You may still very well be alive beyond your late 80s, without being financially prepared for what comes next.
Now suppose you set a specific age that you wish to retire at, do you have a reasonable answer to the following?
Questioning your financial situation based on the following:
- Are you accumulating wealth at a stable and reasonable rate of returns?
- Are you sure that your accumulated wealth can provide sufficient payout through your retirement years?
- Can you ensure your future retirement income will not be disrupted if you are strike down with a medical condition as you save towards your retirement?
- How much are you setting aside for additional expenses if you are physically disabled during your retirement?
Are you getting sufficient yield on your savings to fund your lifestyle expenses when you stop working?
Read about: Effects of compounding returns on your savings
How are you currently accumulating your wealth for retirement?
The way you are accumulating your wealth affects the rate of returns you can potentially achieve on your funds. Efficient management of your finances would allow you to generate higher returns, allowing for earlier retirement.
At this moment, are you
- Setting a number of years to accumulate and compound your funds while you are still working?
- Constantly accumulate funds until you decided to quit working and retire?
- Have no fixed wealth accumulation target, saving as and when there are excess funds?
If you are accumulating your wealth via the first 2 option
A financial commitment can be set based on your budget you are willing to set aside. Alternatively, a budget can be determined based on the amount of income you are looking to receive during your retirement.
In return for your disciplined approach, you can expect a certain guaranteed rate of returns and/or a constant rate of payout at the age you choose to start receiving an income.
If you are accumulating your wealth via the last option
For the last option, as there is no fixed commitment or budget set aside, the accumulation would be generating minimal or negative growth until the reality of retirement sets in. The allocation or portioning of the final sum of savings will be entirely based on the absolute sum of funds saved.
For the ease of saving as and when you like, there will be lesser financial returns due to low compounding on the funds set aside. Consider starting off with a habit of committing a small but regular sum every single month.
Thinking that setting aside a small amount of $200/month for retirement makes no difference whether you start now or 5 years later? You will be completely wrong.
Investing $200/month in the right instrument or plan can yield impressive results over time!
If you invest $200 every month and achieve a 10% annual return, here’s what you could accumulate:
- In 20 years: Over $150,000.
- In 40 years: More than $1.2 million
Source: Smart Asset
Whatsapp us today for a non-obligated discussion to kickstart your retirement journey!
How can CPF LIFE supplements your retirement income?
The CPF LIFE Scheme was introduced in 2009 to provides a monthly income for as long as you live. For Singapore Citizen or Permanent Resident born in 1958 or after, CPF LIFE is compulsory.
When you reach the age of 55, Your CPF Ordinary Account (OA) and CPF Special Account (SA) will be transferred to your Retirement Account (RA) to form your retirement sum. The amount to be set aside from your CPF Ordinary Account (OA) and CPF Special Account (SA) will be adjusted upwards yearly by CPF Board to cater for inflation.
Assuming you are Age 55 as of 2024, you would need to set aside $205,800 under the Full Retirement Sum (FRS) to your Retirement Account before you can do any cash out from your CPFOA and CPFSA.
The funds being set aside will then entitle you to receive a lifetime of income payout from CPF LIFE.
Source: CPF
How much from your CPF account do you have to set aside for CPF LIFE?
The sum to be set aside towards your CPF LIFE are made known to you ahead of time and may increase to cater for long-term inflation. Currently, the Basic Retirement Sum (BRS) will be increased by 3.5% from the previous year amount, for those turning 55 from 2023 to 2027.
The remaining cash balances in your CPF Ordinary Account (OA) and CPF Special Account (SA) can then be withdrawn or accumulated in your CPF account for an attractive interest rate.
If you are turning 55 in 2024, your retirement sums are set at
- Basic Retirement Sum (BRS)* – $102,900
- Full Retirement Sum (FRS) – $205,800
- Enhanced Retirement Sum (ERS) – $308,700
Note: Full Retirement Sum (FRS) and Enhanced Retirement Sum (ERS) are set at two times and three times of the Basic Retirement Sum (BRS).
What are the available schemes under CPF LIFE?
With the Escalating plan introduced in January 2018, there are now three CPF LIFE plans to choose, depending on how you wish to receive your monthly payout. The Standard Plan, Basic Plan, and Escalating Plan each have their own payout amount and options based on the same amount set aside for CPF LIFE.
Source: CPF FAQs
Want to know how much you will receive monthly from your CPF Life based on the different plans? Check your monthly CPF Life payout here.
Is CPF LIFE payouts sufficient to cover all your lifestyle expenses?
With the Basic plan scheme that allows the highest initial monthly payout, you would be receiving about $1450 monthly for the rest of your life starting from Age 65.
Now working backwards, the future value of $1,450 would be worth the present value of $1,000 to an individual age 55 based on inflation at 3.5% p.a.
The real purchasing value of $1,450 at Age 65 for an individual currently age 55
- Utilities – $150/ $211
- Telecommunication – $50/ $71
- Daily meals ($20 x 30 days) – $600/ $846
- Other basic needs (transport, clothing, daily household, etc) – $200/ $282
- Total cost of the above – S$1,000 (Now)/ S$1,450 (10 years later)
As seen above, the purchasing power of $1,000 will be translated into a figure of $1,450 in 10 years time. Sure, it can cover your basic daily needs, but will it be enough for your non-essential lifestyle needs?
What is the purpose of a retirement plan?
Simply put, the main objective of an annuity or retirement plan is to provide an income payout to supplement your desired retirement lifestyle. Depending on your personal lifestyle goals and objectives, a retirement can be structured to provide for the following
Multiple income payouts options such as:
- Single lump sum upon reaching your retirement age
- Monthly or yearly payout for a specific number of years
- Monthly or yearly payout for a lifetime
Product specific features such as:
- Additional non-guaranteed monthly or yearly income
- Partial lump sum bonus upon reaching the start of the retirement age
- Increased income in the event of disability
- Additional lump sum bonus upon reaching the end of the retirement payout period
*The features above does not represent the full features and benefits found in each individual retirement plan across all insurance company. Product specific features and benefits will be discussed in later sections.
Read about: Brief introduction to retirement plans and annuities
Now then, suppose you agree that a retirement plan can add financial benefits to you as your income declines after your retirement.
What happens when you outlive or meet your demise before the maturity of your retirement plan?
You pass away before the retirement payout ends
If your demise happens before the said age, you will lose out on the promised payout you could have potentially continue to receive. An unfortunate event but nevertheless, the plan meets your objective of providing you with your desired income payout until your final days.
Hey, what happens to the promised future income?
What happens to the payout when you meet your demise?
You would have passed on a lump sum for your beneficiaries based on the death benefit of your retirement plan. Your spouse or children may benefit with the financial relief from the stated death value payout in your retirement plan.
You outlive your retirement payout
You underestimated your longevity and now you have to pay the price of bad financial management. Social and public support may assist with the essentials of daily living.
Why does social support only provides for basic needs of living you ask?
Let put it this way, your level of comfort and benefits should not be above those that have carefully planned for their retirement cash flow and expenses.
How can you solve the issue of outliving your retirement plan?
Few would complain about living a long life when in possession of both health and wealth. Here is what you could have done on ensuring your income stream does not end before you do.
- Set a longer payout period on your retirement plan, if you only plan on having one
- Have some of your retirement plan set to payout for a longer number of years
- Take up a retirement plan with a lump sum maturity payout at the end the payout period
- Opt for a lifetime retirement plan at the cost of a lower monthly payout
In either case of your demise or outliving your retirement plan, wouldn’t you be glad of the financial certainty it has provided to you along the way?
Do you really need a retirement plan?
Your CPF LIFE payout will supplement your income during your retirement. While the payout is expected to assist with your basic living needs, it will not be realistic to expect CPF Life to provide a high level of comfort for your retirement.
Exactly what are the different types of retirement plans and how do they add value towards your retirement planning? Are there additional benefits that can enhance its purposes of just providing an income during your retirement?
Based on your current financial standing, how confident are you towards achieving your retirement funds?
Compare the different types of retirement plans today via our friendly advisors. We can assist to find out your needs and cater the most suitable plan for your retirement journey.
How do you determine if you need a retirement plan
It is unlikely that based on your current standard of living, life after your retirement is only about survival. Unless you are scheduled to receive a lump sum or have other forms of recurring income, CPF LIFE is unlikely to provide more than fulfilling basic life needs.
Consider the following question about your retirement lifestyle and income:
- Are you looking to still have a high and stable income despite a lower workload as you ages?
- Are you still preparing your financials to sustain your lifestyle when you stop working?
- Are you seeking to accumulate wealth to draw upon when you retire?
- Is maintaining a specific lifestyle important even as daily costs go up?
- Does your ideal retirement lifestyle involve discretionary spending such as frequent overseas travelling?
A retirement plan to cater to the above, when structured to meet the changing needs when your income level declines with your workload.
Do you have other insurance plans that was taken up a long time ago and you do not remember do you actually hold a retirement plan? It is important to review your insurance policies yearly to ensure your plans are up to date.
Read more: Why an insurance portolio review is essential on a regular basis
Benefits and risks of a retirement plan
The is no free lunch in this world. Similarly, it is impossible to make a claim of extraordinary high financial returns with minimal risk.
It is necessary to understand that a trade-off occurs with every financial decision made.
- If you seek absolute liquidity and principal guaranteed features, you are certain to suffer a loss of purchasing power over a period of time.
- If you seek above-average market returns, you are certainly undertaking a higher risk of potential loss compared to the average market participants.
Remember that returns and stability are inversely correlated to each other, you have to give up one of them to gain the other.
Benefits of taking up a retirement plan
When enhancing your wealth via a retirement plan, are you seeking higher financial returns or stability of your principal investment?
What if you do not have to compromise on the financial return or the stability of your principal investment by investing time instead?
Time is money, and how valuable it is is based on how you use it.
By setting aside your money in a retirement plan, you transfer the risk of generating financial returns to the insurance company by letting them manage the insurance premium you are willing to pay. You have given up “time” also known as “opportunity cost” of what your money could have potentially achieved if it is invested for higher returns somewhere else.
In returns, your accumulated funds with the insurance company will compound over time to provide you with financial returns and guaranteed financial stability by the time of your retirement.
What are the types of retirement plans available to you?
There is no single retirement plan that meets the differing goals of all to its policyholder. Instead, compare retirement plans based on its features, benefits, and payout to find the best retirement plans that suit your needs.
Whatsapp us today for a non-obligated discussion to kickstart your retirement journey!
Retirement plans with high-income payout
The primary objective of high-income payout retirement plans is to provide the highest level of income payout over a set number of years. As the plan offers a higher rate of payout, it can be used to boost your income over a number of years, when you desire it the most.
The initial years of your retirement will be the most enjoyable, as you have secured both wealth and health.
High-income payout retirement plans may be suitable if you are
- Age 50 and below
- Looking to accumulate retirement funds over a period of years
- Looking to receive your retirement funds over a period of years
- Seeking the highest income payout consisting of Guaranteed and Non-Guaranteed returns
- Concern that your retirement plans will be disrupted by sudden health conditions during the period you are paying premiums
High-income payout retirement plans may not be suitable if you are
- Expecting an income payout for a lifetime
- High or Guaranteed principal sum upon surrendering the policy at any point in time
- Planning to leave a lump sum payout or legacy upon your demise
Understand that a high-income payout retirement plan draws upon the cash value you have accumulated into the plan. Hence, while it offers the highest income stream, there is usually no additional lump sum payout at the end of the retirement plan.
Consider hedging the possibility of longevity risk by ensuring that your income stream does not entirely stop upon the last payout from your high-income payout retirement plan.
Notable retirement plans with high-income payout includes
The following retirement plans pay out a high level of income over the course of its payout period. The income payout may consist of a guaranteed and non-guaranteed component.
The plans are not ranked in any order of income payout or product features.
Click on the individual retirement plans above to access a detailed review. For a comparison of features and payout on the plans stated above refer to:
Whatsapp us today for a non-obligated discussion to kickstart your retirement journey!
Retirement plans with a high withdrawal of guaranteed principal
Expecting to receive most or all the premiums you have paid as a guaranteed lump sum, at any time you decide to terminate and stop receiving a monthly payout? In theory, this would make such a retirement plan perfect regardless of your financial goals and objective.
In reality, a retirement plan that guarantees to payout most or all of your of your principal as an additional lump sum withdrawal anytime you like is bound to have its shortfall too. Your income payout is likely to be the lowest among the stated category of retirement plans.
A calculated compromise on financial returns, in return for guaranteed liquidity.
Retirement plan with high lump sum principal withdrawal may be suitable if you are
- Age 60 and below
- Placing your funds as a single lump sum or over a short period
- Able to accept a lower income payout
- Seeking the flexibility and minimal guarantee of withdrawing all or most of the funds placed at any point in time
- Leaving a legacy or wealth for the next generation while receiving an income stream
Retirement plan with high lump sum principal withdrawal may not be suitable if you are
- Expecting the highest level of income payout from a retirement plan
For the stability offered, it would not be practical to expect over the top income payout. Nevertheless, the payout would still be significantly higher than bank deposit or short-term government bonds.
Notable retirement plan with a high lump sum principal withdrawal includes
The following retirement plans pay out all or a high amount of the total premium paid as an additional lump sum, in the event that you wish to stop receiving an income payout.
The plans are not ranked in any order of income payout or product features.
Whatsapp us today for a non-obligated discussion to kickstart your retirement journey!
Retirement plans with a lifetime payout
As the name suggests, such retirement plans pay out an income stream over the course of your lifetime. This ensures that there will be any drastic changes in your income stream as you ages.
For those that fear they may outlive the payout period on their retirement plans, a lifetime payout offers the assurance of continual income, for as long as it is needed.
A guarantee of lifetime payout, for limited years of insurance premiums.
Lifetime payout retirement plans may be suitable if you are
- Age 50 and below
- Seeking assurance of a lifetime payout
- Able to accept a lower income payout
Lifetime payout retirement plans may not be suitable if you are
- Expecting the highest level of income payout from a retirement plan
- Leaving a legacy or wealth for the next generation
With a payout stream that lasts for a lifetime, expected a lower income payout compare to a retirement that pays out over a fixed number of years.
However, the overall income received over a lifetime can be significantly higher due to the number of years it can potentially provide a payout for.
Exhausted with too much information at this point? Let the professionals do their job. [show_contact_popup text=”Drop us a message”] or Whatsapp us today for a non-obligated discussion on how to customise your retirement planning based on your lifestyle, needs and budget.
Find out more about retirement plans
Your retirement plans are meant to supplement your lifestyle and expenses in your golden years. Ensure your retirement plans matches the financial goal and objective you wish to achieve when you decided to talk a step back in life.
It is too late to regret once you have made your financial commitment. Specific products features, benefits and payout will differ more than you think across insurance companies.
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