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Anonymous

Asked 2d ago

How to know whether we have save enough for retirement?

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Hey!

That is the question we constantly ask ourselves. How much exactly is enough for us to retire?

We can break down readiness to retire into three parts:

  • How ready are you to deal with unexpected expenses?

  • How many assets do you have? How much do you have in the bank?

  • Are there excess savings to spend on happiness?

Let me explain.

As we age, it is common that we start having problems with our health. This is a very common phase in life, and while we can try our best to be in really good shape, age will end up catching upon us.

Hence, you need to have enough coverage for those unexpected expenses such as medical fees and any form of infrastructure renovation you may need around the house to make your life easier.

How Much You Need in The Bank?

Now that you got your safety net covered, we look at the amount you need in the bank.

According to Lee Kuan Yew School of Public Policy, a single elderly household needs $1,379 per month.

A couple needs $2,351 per month in total.

Elderly, in this case, refers to age 64 and above.

I did a bit of a projection back then and we end up with a total amount of:

  • $157,206 for Single Male

  • $244,910 for Single female

  • $134,007 for Married male

  • $208,768 for Married female

This is money in the bank, for basic needs.

The difference is due to the difference in life expectancy of both genders. Women live longer than men.

Take note that the above calculation assumes zero inflation. Hence, the final amount should be higher.

Of course, our CPF can help us with the above.

Spend on Happiness

The above calculation is only going to cover your basic needs.

Nobody works their whole life just to cover their basic needs. We ultimately aim to be able to pursue our hobby, live comfortable, go on holidays.

Hence, the excess savings you have will be to cover these "happiness expense" of yours. And for this part, it depends on what you really want to be doing upon retirement.

Will it be drinking coconut by the beach in Phuket or having some beer in Amsterdam? Both come with different price tags.

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