FIRE in Singapore While Managing Rising Living Expenses

This post was originally posted on Planner Bee.

Early retirement isn’t just an idealistic goal anymore. The idea of Financial Independence, Retire Early (FIRE) has gained traction among millennials and Gen Z, even in the face of high living costs, inflation, and a fast-changing job market.

But what does FIRE really look like for Singaporeans? Is it possible to work towards it without giving up holidays or surviving on instant noodles? Here’s a look at how you can take a realistic approach to FIRE, the challenges that may come up, and the main steps involved.

What is FIRE?

FIRE stands for Financial Independence, Retire Early. The idea is simple: build enough wealth so that you no longer have to work unless you choose to. That way, you can retire much earlier than the usual retirement age.

To achieve FIRE, you typically need to save aggressively, invest wisely, and be deliberate about your spending. There isn’t a one-size-fits-all solution. In fact, there are three main versions:

• LeanFIRE: This involves retiring on a tight budget. You cover only the essentials and maintain a frugal lifestyle after retirement. It helps you reach your savings goal faster but leaves little room for extra spending.
• FatFIRE: This is about retiring while keeping a more comfortable or even luxurious lifestyle. It requires a larger savings goal and a more aggressive approach to both saving and investing.
• BaristaFIRE: A middle-ground option. You achieve partial financial independence and continue working part-time or in a less demanding job. This provides some income and benefits while still giving you more freedom than a full-time role.

Challenges of FIRE in Singapore

Singapore’s high cost of living can make FIRE feel out of reach, but it’s not impossible. There are, however, some unique challenges that may slow things down:

• High housing and living costs: Housing is expensive. For many dual-income households, it can take 10 to 15 years to fully pay off a HDB loan. Private properties cost even more, often two to three times as much. Everyday costs like transport, food, and healthcare also add up quickly, making it difficult to save substantially.
• CPF structure: The CPF is a great retirement tool, but early access is limited. You generally can’t withdraw most of your CPF savings until 55. While the interest rates are stable at around 4-6%, they may not be attractive to those aiming for faster growth.

To help you stay on track, you can use the retirement calculator on Planner Bee to estimate how much you’ll need and how to plan for it.

• Family and social responsibilities: It’s common in Singapore to support ageing parents or younger siblings financially. These commitments can delay your savings goals or reduce the amount you can set aside each month.
• Inflation and lifestyle creep: As your income increases, it’s easy to spend more, sometimes without noticing. Rising costs and the desire to upgrade your lifestyle can gradually push you off track unless you stay focused and disciplined.

Practical steps to achieve FIRE

With the right mindset and tools, you can work towards financial independence and early retirement without needing to live extremely frugally. Here are some practical steps to help guide you.

Step 1: Know your FIRE number and burn rate

Your FIRE number is the total amount you’ll need to retire early. Your burn rate refers to your monthly expenses. The lower your burn rate, the faster you’ll reach your FIRE target.

A widely accepted rule is the 4% withdrawal rule. It suggests that you can withdraw 4% of your investment portfolio each year to fund your retirement sustainably.

For example, if your annual spending is S$36,000 (S$3,000 monthly), your FIRE number would be S$900,000 (36,000 ÷ 0.04).

However, this rule is based on a 30-year retirement period. If you are seeking an earlier retirement, the 4% rule might not be sufficient on its own.

Step 2: Build a strong investment strategy

You can’t rely on saving alone to reach FIRE. Your money needs to grow, and investing is key.

It is essential to start investing early. Compounding interest works best over time, so beginning in your 20s gives you a clear advantage. Diversifying your investments with a mix of equities, ETFs, and REITs can aid in spreading out market risks.

Consider using low-cost investment platforms or robo-advisors to automate and manage your portfolio efficiently. Consistently investing a fixed amount over time helps to reduce the impact of market ups and downs.

You can also use the Supplementary Retirement Scheme (SRS) to gain tax relief and build up long-term investments.

Read more: 5 Steps To Help You Start Investing for Retirement in Singapore

Step 3: Have solid insurance coverage

Good insurance protects your savings from unexpected costs, especially medical expenses, which can disrupt your FIRE plans.

Once you begin working, prioritise these key policies:

• Integrated Shield Plan (IP): Covers major hospital bills. This is essential for everyone pursuing FIRE.
• Critical illness coverage: Pays a lump sum if you are diagnosed with certain serious conditions like cancer or stroke, helping cover income loss during recovery.
• Term life insurance: Offers high coverage at a lower cost. It’s important if you have dependents relying on your income.

Reevaluate your coverage regularly. As your life circumstances change, such as having children or paying off debts, your insurance needs may shift. Avoid over-insuring, as it can eat into your savings and slow your progress.

Read more: Must-Have Insurance Policies in Singapore

Step 4: Make housing choices that support your FIRE

Housing is one of the largest expenses in Singapore. The choices you make here can help or hinder your FIRE journey.

Public housing from the Housing & Development Board (HDB) is usually cheaper than private housing. HDB also offers grants for first-time buyers and those living near family, which can significantly lower your costs.

Owning your home adds stability in retirement. If you have extra rooms, generate passive income by renting them out. Later in life, consider downsizing, selling a larger flat and buying a smaller one can free up funds for retirement.

Step 5: Watch out for lifestyle inflation

As your income grows, it’s easy to start spending more. You might feel the urge to upgrade your home, buy a new car, or treat yourself to expensive gadgets. While it’s fine to enjoy some rewards, unchecked lifestyle inflation can quietly delay your FIRE goals.

Try to keep your fixed expenses stable, even as you earn more. Redirect salary increases into savings or investments instead. Hold off on big purchases until you’re sure they’re necessary and you’re financially ready.

Also, factor in inflation. Singapore’s core inflation typically sits around 3–4%. That means your current S$3,000 monthly spending could become S$4,000–5,000 in ten years. Your FIRE number should reflect this.

Read more: Understanding Lifestyle Creep and How To Break Free

Step 6: Review and adjust your FIRE plan regularly

Your life, goals, and the economy will change over time. Your FIRE plan should adapt accordingly.

Review your investment performance, insurance, expenses, and lifestyle changes at least once a year. Keep an eye on tax rules and consider strategies that suit your evolving situation.

Later in life, you might choose BaristaFIRE, a version of FIRE where you take on a lower-stress, part-time job to supplement your income. This approach can offer flexibility while still giving you financial independence.

FIRE is challenging, but it can be done

Reaching FIRE in a high-cost city like Singapore isn’t simply about cutting expenses to the bare minimum. It involves making thoughtful and deliberate choices now that align with the future you want to create.

FIRE doesn’t have to mean giving up work entirely. It’s about gaining financial independence and having the freedom to decide how you use your time, money, and energy. Your 20s and 30s are a good time to begin building that freedom.