Retirement Planning In Singapore

Born and bred in Singapore, we tend to have the idea that it takes at least $1 million for us to retire comfortably here.

I don't really know where this concept of $1 million came about - maybe it was popularised by the 1M65 movement founded by Mr. Loo Cheng Chuan.

In any case, it has been entrenched in our public perception and private fears.

In fact, a Seedly blog post that makes reference to a study conducted by Fullerton Fund management states that Singaporeans think that they need more than one million to retire well, with older millennials (people who are 30-40 years old) declaring that they need a whooping $1.8 million!

Now, aiming high is well and fine since it fuels our drive to accomplish our targets.

But I think when such an ambitious goal has become a part of our national consciousness, it may generate anxiety in those of us who do not have a strong sense of self.

We may be blindly led by what other people feel is right, get ourselves worked up and fail to consider our situation rationally.

In a worst case scenario, we may be rendered paralysed by such anxiety, throw our hands up in the air and just surrender, for what's the point of trying when the goal of $1 million is so, so far away in the other galaxy?

But if we don't look at $1 million, what numbers shall we look at? Let me suggest some alternatives.

First, Fidelity, a retirement planning firm headquarted in Boston, recommends that we aspire to save 10 times our annual income by the time we reach 67 (https://www.fidelity.com/viewpoints/retirement/how-much-do-i-need-to-retire).

Now, I don't know about you, but reading this made me heave a huge sigh of relief. Fortunately (or unfortunately), my annual income is nowhere near $100,000 (yet).

Not having $1 million hovering above my consciousness affords me a teeny weeny bit of breathing space, you know?

Second, since retirement is still decades away, many of us don't have an acute sense of awareness of the money we really need during our retirement years. But when it comes down to it, for some inexplicable reason, many of us will venture a monthly income of $3000 that can be sustained throughout 20 years (https://www.straitstimes.com/business/need-13m-to-retire-depends-how-you-live).

This figure itself sends shivers down our spines because even if we were to hit the Enhanced Retirement Sum, we would only get anything from $2080 to $2230 as our CPF Life payout (https://www.cpf.gov.sg/Assets/members/Documents/RetirementPayouts.pdf) .

This means that we need to account for a shortfall of $1000 every month. How not to be kan cheong, like that?

But what if we employ the rule of thumb that roughly 2/3 of our last drawn salary be our spending benchmark during our retirement years (https://www.moneysense.gov.sg/articles/2018/10/determine-your-retirement-needs)?

I did calculations for my case and arrived at a sum that's close to ten times my annual income. Yup, not $1 million!

Third, knowledge is power and sometimes, we just got to bite the bullet and crunch some numbers. Let me introduce to you the Retirement Calculator on the CPF page (https://www.cpf.gov.sg/eSvc/Web/Schemes/RetirementCalculator/CoverPage).

You do need to key in all your numbers - savings, investments, income sources, expenditures and all that jazz - but the number you will eventually arrive at is tailored to your unique needs.

Hopefully, this sum will be less than $1 million, but even if it crosses the $1 million mark, at least you know for sure why this $1 million (or $1.8 million) is what you need to aim for!

Now, excuse me while I hustle away to increase my annual income!

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