5 Money Facts To Know Before You Retire

Photo: Candida Performa. Licence:

Retirement is what many people look forward to after years of slogging away at work. But, it can also be a daunting period in people’s lives.

On top of lifestyle changes, retirees need to adjust to a life without a wage. With people living longer nowadays, it is all the more important that retirees have enough financial strength to see them through their lives. To ensure that you are prepared for the financial challenges of retirement, it is vital you equip yourself with as much information about retirement as possible.

I have listed five money facts about retirement that may be important for retiring in Singapore.

Fact 1: Singaporeans can make use of the CPF LIFE scheme

With the life expectancy of Singaporeans having increased over the years, many retirees are today expected to live for more than 20 years after their retirement. The CPF LIFE Scheme, which stands for CPF Lifelong Income for the Elderly, provides monthly payouts for as long as a scheme-participant lives.

The scheme provides a minimum payout of $700 a month to participants; the payout comes from the participants’ CPF retirement savings. You can find out more about CPF LIFE scheme from the CPF website.

Fact 2: Cost of health care is on the rise

Last year, the Straits Times reported that by 2030, each senior in Singapore would need to spend $51,000 a year on average on healthcare. This is more than four times what the average healthcare expenditure was in 2015.

With such a drastic increase in health care costs, retirees need to be prepared financially to ensure they have enough liquidity to pay these additional expenses.

Fact 3: An increase in life expectancy

As mentioned earlier, a higher life expectancy makes it even more important for you to plan for your retirement as it may consist of a great number of years.

Singapore’s life expectancy at birth has risen to 82.4 years as of 2014. Singapore is now ranked fifth in the world, together with Spain and Lichtenstein, for life expectancy, which is an amazing achievement for our young nation. To put this in perspective, a person with a life expectancy of 82.4 years in Singapore who is retiring at the age of 60 years old will need to prepare enough money to tide her through 22 years.

Fact 4: There is the option of delaying retirement

As the life expectancy increases, many people are opting to delay retirement. There are benefits that come with delaying retirement for a few years. The benefits include saving more through the additional income, and letting your retirement fund accrue more interest as you delay dipping into it. This is also a good option for people who wish to keep physically and mentally active.

Fact 5: Retirement and your health

Retirement can have a negative effect on your health. There are reports that retirees are more susceptible to loneliness, which leads to depression and other mental health problems. Retirees are also prone to less physical activity, which in turn is a risk factor for other medical conditions. These can all lead to expensive medical bills.

It is important that as we prepare ourselves for retirement, we take necessary measures to prevent these negative health effects by keeping active or joining a community club to meet people and keep our minds active.

The Foolish bottom line

Singaporeans work tirelessly in the office, in the hopes of enjoying their golden years when they retire. However, retirement can also be a period of great stress as we acclimatize to lifestyle and financial challenges.

A good way to prepare for retirement financially is to start investing at a younger age. Investments in stocks, for example, can provide retirees with income through dividends. Investing at a younger age also allows your investments a longer period of time for compounding to work its magic. This means you will be able to enjoy a much greater return on your investments, preparing you better for a stress-free retirement.

For more investing insights and to keep up to date on the latest financial and stock market news, you can sign up for a FREE subscription to The Motley Fool's investing newsletter, Take Stock Singapore

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.