Retirement Planning Singapore
Retirement Planning Singapore
Simple Analogy For Retirement Planning
“Does it make sense to build a house first or buy furniture first?”
From what I have observed, there are many people who have collected all kinds of financial furniture with first having a retirement blueprint. All these financial types of furniture have no meaning to you as they are merely numbers.
Retirement Planning In Singapore, What Is It About?
The textbook’s definition of retirement planning is being to lead the lifestyle that you truly desire at your desired retirement age through a systematic way by implementing various strategies.
And my definition of retirement is not ” Stop Working”
My definition is to “Stop working for money” This means that we can choose to work or not, without any consideration for money.
The whole idea is being financially free upon your retirement age hence able to lead the lifestyle you desire without worrying about money.
There are a few questions that you will need ask yourself with regards to retirement planning:
#1. When do you want to retire or what is your desired retirement age?
At age 55, 60 or 65? At what age do you want to take a step back and enjoy the life you truly desire.
#2. The kind of retirement lifestyle you want?
Basic, comfort and luxurious lifestyle? There are 4 type of basic expenses that we can expect for retirement. Want to know how much you do need when retire?
#3. How much monthly income do you need for the kind of retirement lifestyle?
#4. Till when do you want to receive this monthly income?
With all these answered, we will be able to work out a retirement strategy based on how much you are willing to set aside for it.
A simple rule of thumb is 20% of your annual income should be set aside for your retirement planning if it is being planned early and properly.
Something to give a thought about for your retirement planning:
“If money is not a concern from now till the end of life, what will you be doing everyday?”
How To Plan For Retirement In Singapore?
You see, in my time as a financial strategist, I’ve come across countless clients who plan for their retirement by doing one thing:
Buying into as many financial instruments as possible from various financial institutions and that is their way on how to plan for retirement in Singapore.
Most of the time the big problem comes, they don’t know the exact benefits and potential drawbacks of the instruments.
A retirement blueprint that will map out your finances through your golden years. Read this article on how the I have created the retirement blueprint that allows one of my clients to retire 5 years earlier than expected.
It includes a drawdown plan from your retirement “pot”, making sure to cover your potential income gaps when you stop working.
It will also give you a more accurate timeline of when you can stop working and being financially free.
How Much Do We Need To Retire Singapore?
The #1 question I always get from my clients when it comes to the topic of retirement planning…
“How much do I need for retirement?”
First, We need to know what and how much to spend when we retire. You can check out the expenses we can expect during retirement. From there we can calculate the total amount that we need before we retire.
They are mainly
#1. Utility and phone bills
Above excludes health expenses and mortgage loans and inflation.
When it comes to the retirement planning, I use a simple Rule of thumb:
2/3 of the expenses before we retire.
What Is Singapore Retirement Age?
Below is the simple timeline to show the retirement age in Singapore from various aspect!
|Age||What you can do in term of retirement|
|55 years old||If you meet the full retirement sum scheme for your Retirement account (RA), you can start to withdraw the balance from CPF Account.|
|62 years old||The MOM’s retirement age|
|65 years old||The CPF LIFE monthly payout starts|
|67 years old||The age where their employer can recontract you till|
And at age 55, The Retirement Account will be set up. Once you meet your Full retirement or basic retirement scheme if you pledge your property, you can choose to withdraw the remaining balance from your CPF account.
If you did not meet the amount required to set aside for full retirement scheme, you can withdraw up to $5000 of your ordinary and special account. You can read more from CPF website.
According to the Ministry of Manpower (MOM), the minimum retirement age is 62 years based on the Retirement and Re-employment Act (RRA). This would mean that the employers cannot ask you to “retire early to spend more time with your family” before the age of 62.
This applies if you:
#1. You are a Singapore citizen or Singapore Permanent resident
#2. and you joined the company before you turned 55
Retirement Planning Calculator
Here is a mini tool (CPF Retirement Calculator) which you can use to know how much money you need to retire based on your age, when you want to retire and the retirement lifestyle that you want to have. These would answer questions like..
How much to retire at 55 in Singapore.
How much do I need to retire comfortably: All depends on your definition of comfortably.
How much should you have saved for retirement by age 50?
In the calculation, it also factors in the inflation, how much do you need every month which depends on the retirement lifestyle you want.
CPF Life provides a monthly payout annuity scheme for a life starting for your eligibility age. For more information, you can check the CPF website here.
CPF Life Payout Calculator
Want to find out how your CPF funds in your retirement account or the ordinary account and the special account can help in your retirement goal after meeting the full retirement sum scheme.
Currently, there are 3 CPF life plans catering to different needs of users.
#1. Standard plan
#2. Basic plan
#3. Escalating plan (new added)
You will have the option to choose your choice of plan for the CPF life when you start your payout from eligibility of your payout until age 70.
Use the CPF life payout calculator to calculate the amount of payout you will get during your retirement. This is a tool provided by Central Provident Fund Board (CPF).
Knowing the CPF LIFE payout, it would be easier to know how much you will need to retire together with your CPF life payout.
In this section, we list out content that can help you know more about retirement planning
#1. How retirement blueprint helps one of my clients retire 5 years earlier than expected
#2. How to plan for retirement in Singapore ( 3 things you can’t do without)