How Much You Will Actually Need to Spend When Retiring in Singapore

Despite affordable hawker food and subsidized public housing here in Singapore, the majority of Singaporeans are living from paycheck to paycheck with hardly any money left-over for savings. 

That’s why retirement planning is ultra-important and highly valued in our society today. 

“But we already have CPF what? I can simply live off the monthly payouts no?”

While it is indeed true that CPF is there to help provide a basic retirement income, the money is actually only enough to act as a safety net – to sustain us for food and utilities. 

For many of us, retiring means being able to travel overseas and enjoy the fruits of our labour. After all, most of us will spend the good part of life working long hours and climbing the corporate ladder.

To afford all these things, you need to start planning for your retirement early. Below is a quick look at how much you will be expected to spend in your retirement years. 

Average Retirement Spending

According to research done by the Lee Kuan Yew School of Public Policy, a single elderly household will require $1,379 a month while an elderly couple will need $2,351 a month just to meet the basic needs. 

Combined with the compound effect of inflation and the extra costs of all the luxury holidays, retiring comfortably would mean that saving an average of $1,400 per month of retirement per person might still not be enough for you. Furthermore, you will still have to take into account any unforeseen expenditure (e.g. medical bills). 

Imagine if you retire at the official Singapore retirement age of 62. With all your planning, you come down to an average of $2,000 monthly spending (say, you would like to spend more on some tech devices and plan for a yearly getaway while you can still travel). With the CPF monthly payout starting at 65 years old, you would need $72,000 just to sustain your lifestyle before the monthly payout kicks in. 

Doesn’t seem like much right? But you will have to factor in the retirement sum that you have to keep in your CPF when you reach 55. In order to get a monthly payout of $2,000 starting at age 65, you will have to have the enhanced retirement sum of $264,000 in your CPF at 55 years old (according to data compiled by the CPF board in 2019). In total, that means that you will need $336,000 just to cover your expenditures. Unless you are willing to compromise on your lifestyle after retiring, it seems that retiring is something that you really have to plan for. 

And you have to realise, all of that is for a single person to retire. 

That’s why wealth planning is really important in Singapore. If you’re still unsure, why not click here to schedule a free call with us to see what steps you can take to prepare for retirement. 

The Difficulty of Saving Up

While it seems that simply saving $336,000 is enough to retire comfortably, the truth is that reaching this amount of savings is really difficult in reality. 

Say you start saving for retirement at 30 years old. To retire at 60, you will have only 30 years to save up the $336,000. This works out to $11,200 a year or $933 a month. Even if you start saving at 30, a huge chunk (close to $1,000 monthly) of your salary has to go into retirement saving monthly.

Furthermore at 30 years old, many of us will have other financial commitments that make saving up for retirement consistently difficult.

Paying off housing loans, putting money aside for emergency funds, increased family spending for those with children and maybe even the need to financially support your retired parents might cause you to be unable to begin planning for your retirement.

And in reality, most of us aren’t thinking about retiring at 30 years old, believing that it is still too young to plan for retirement. If we begin to save up at 40 instead, the average monthly amount rises to $1,400. 

The True CPF Monthly Payouts

The true difficulty behind saving up for retirement is reflected in the average amount of CPF monthly payouts. 

When we look at data compiled on the Household Expenditure Survey 2017/18, the average retiree only got a measly $361 for their monthly payments. Even those living in landed properties only got an average of $867 monthly.

That’s peanuts compared to the targeted amount of $2,000.

This means that in reality, we cannot simply depend on saving up for CPF monthly payouts and relying on it for our post-retirement spending. We need to begin wealth planning and prepare ourselves for retirement instead.

If you’re interested to read more specifically into this, check out what you should be doing in your 30s and 40s to retire comfortably in Singapore.

The Compound Effects of Inflation

To make things even more difficult, we have to consider the fact that with inflation, the true value of our money decreases. After saving $1,000 monthly religiously for 30 years, you might still find that you didn’t manage to save enough for retirement. This is due to the compound effect of inflation.

For example, say that you managed to put aside $100,000 for retirement by the time you reached 40 years old. In 20 years, assuming that Singapore keeps to MAS’s core inflation rate of 1.7%, you will only be left with about $71,000. 

In order to have $100,000 in 20 years, you would actually have to save up around $142,000 at 30 years old. 

Being Invested to Beat Inflation

With the difficulty of saving up combined with the effects of compound interest, it might seem difficult for you to achieve your retirement goals.

However, not all hope is lost. When we look at the individuals who manage to retire comfortably, investments make up a large portion of their retirement income. That’s why it is important for you to begin looking at investing your money smartly too.

After all, wouldn’t it be great to have your money work for you so that you can retire early and comfortably. 

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