Saving For Retirement

Most Singaporeans hope to live comfortably after retiring, seeing friends and doing activities they enjoy. For many, however, that hope can be shattered by financial concerns.

More than half of residents here feel their financial preparations for a comfortable retirement are inadequate, according to the latest HSBC Future of Retirement Survey, with many saying they haven’t saved enough or have too much debt. The Blackrock Investor Pulse similarly found that 72 per cent of Singaporeans are concerned about not being able to retire comfortably, while research by NTUC Income showed that 33 per cent of non-retirees haven’t even started planning for retirement.

Yet life doesn’t need to be this bleak. By taking small steps today, you can start on your way towards saving enough to retire comfortably.


The first step is to figure out how much you actually need. As national financial education program MoneySense puts it, “first things first – identify your retirement needs and goals so you know what you are planning for.” A good way to do this is to visualise your retirement and ask yourself what you want to do when you retire.

Once you know your goals, you can use simple estimates or more sophisticated financial calculators to determine how much you need. Many experts estimate that retirees will need 60-to-70 per cent of their pre-retirement income to live comfortably. For example, a person with the average household income here of $2,500 per month would need $1,500-$1,750 per month.

Financial calculators can help you determine even more precise amounts. A calculator from insurance company Aviva estimates that a 50-year-old who plans to live a simple lifestyle after retiring at age 65 would need to save about $499,000 so that they have $2,775 per month, for example, while a 25-year-old would need to save about $977,000 because inflation will result in their needing $5,482 per month. The calculator asks about the lifestyle you prefer and then gives details about how much you’ll need for food, transport, clothing and other expenses.

While these amounts might seem daunting, investment management company Vanguard says that “getting to a million might not be that hard if you know the secret: time. If you give your savings enough time to grow, you’ll only need relatively small investments of money to wind up with a pretty big balance.” Vanguard calculated that you can have $1 million by age 65 if you save $4,500 each year starting at age 20. You’ll need to save $9,000 per year if you start at age 30, though, and a hefty $18,000 per year if you start at age 40.


The key to a comfortable retirement, then, is to start saving early. Yet saving is often much easier said than done.

The NTUC Income survey also showed that although two-thirds of non-retirees between 25 and 59 years old have started financial planning for retirement, prioritising saving amongst the young is impeded by short and mid-term financial commitments as well as a lack of knowledge. Tips from experts can overcome the inertia.

Vanguard, for example, suggests setting up automatic transfers from your salary or bank account every month to ensure that you save consistently, and then looking at your account only once or twice a year to make sure you are sufficiently diversified.

NTUC Income suggests avoiding debt, saying that “debts are one of the biggest threats to your retirement plan. The more you spend on repaying your debts, the less you have to save up for retirement.”


Making the most of your money is important too. If you save $500 per month starting at age 25, for example, you would have about $295,000 by the time you’re 65 if you earn 1 per cent per year on your money or about $766,000 if you earn 5 per cent per year.

Rather than just putting money into a time deposit that may earn less than 1 per cent, then, DBS Bank suggests that a wiser way of investing is to divide your money among a variety of safe and risky assets. “Safer assets (like our CPF and bonds) can help to offset losses from the riskier assets like stocks.” Putting at least part of your retirement funds into higher-yielding investments can indeed help you earn higher returns and have enough money for retirement.

Investment management firm Blackrock similarly suggests considering different fund products to diversify your assets. “Singaporeans demonstrate a preference for purchasing equities and bonds directly but could be missing out opportunities to easily achieve a diverse portfolio through exchange-traded funds (ETFs) and mutual funds.”

An easy way to invest is to put a fixed amount each month into several ETFs, such as the ABF Singapore Bond Index Fund or the Nikko AM Singapore STI ETF, which you can easily do through banks or brokerage firms here.

By starting to save early and consistently investing some of your funds in assets with higher returns, you can overcome the concerns about not having enough and start on your way to a retirement you’ll truly enjoy.


Source: TODAY Online

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