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60 Second Guide To Retirement

Life expectancy on our tiny island is increasing day by day – so if you’d prefer to be sunning, not slaving when you hit your golden years, the time to start planning is now!

Singapore has around 300,000 individuals aged between 50-54 who will be due to retire in the next 10-15 years. At least that’s their hope. The trouble is, without adequate savings and investments in place many of those citizens could find themselves financially unable to retire.

Add on the fact we’re having children later in life and you realise it’s not unfeasible to still be supporting kids in education when we’re well into our sixties!

Come to think of it, how much do you need in your retirement pot? Would S$500k, provide a comfortable lifestyle? How about S$700k – or maybe $1m?

It all depends on your age, lifestyle, income, and circumstances, of course. But  no matter how old you are or how little you have stashed away, remember – it’s never too late to start saving for retirement.

0:60 How much do you have?

If you are a Singaporean (or Permanent Resident) contributing to the CPF (Central Provident Fund) log in and work out how much you have (note that the CPF currently pays 2.5%AER). Do the same for any retirement funds. Do you have any shares earmarked for the long term?

If things continue as they are what are you likely to have when you hit your ideal retirement age?

0:40 Maximise it!

It’s time to maximise every cent. If your employer matches your CPF/pension contributions up to a point and you aren’t maximising this, you’re turning down free money. It’s like ordering fishball noodles then saying, “Hey, I don’t need 3 fishballs – give me two, and you can flog the extra one to your next customer,”. Or something like that.

If you have pensions or retirement funds, are they earning as much as they could be? A little work now could mean you reap a lot more cash in the future.

0:20 Alternatives

While the CPF does pay a decent rate, it’s worth remembering there is always the option of investing your money in shares, via the CPF Investment Scheme. You need to be over 18, with $20k or more in your Ordinary Account and $40k in your Special Account.

It’s certainly tempting when you realise that while $1,200 saved in your CPF would merrily increase to $3,222 in 40 years, if it were invested in the stock market it could become a whopping $37,691 in the same time.

But before you rush to withdraw all your cash, stockmarket investing is of course not without its risks – hence the warnings on the CPF website. If you’ll be retiring in the next 10 years your CPF cash should arguably remain safely tucked up in its account.

0:10 Am I saving enough?

Aha, the million dollar question. It all depends on what sort of income you will need in retirement, and how many years you reckon you’ll be retired.  Have a play with this calculator from The Motley Fool US (just try to prevent your chin smacking the table when you’ve worked out the actual sum). By subtracting what you reckon you’ll have by retirement you can work out how much extra you need.

Feeling depressed now, right? But the good news you’ve found out now – and there’s still time to do something about it. Remember, the earlier you start saving or investing – with the magic of compound interest you can turn meagre savings into something really special.

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