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Julian
Aug 3, 20213 min read

Retirement

Updated: Aug 6, 2021


Retirement is an important milestone in life. Retirement planning, therefore, is a process that should not be left for the later stages of your life. The key to a successful retirement plan is to evaluate your retirement needs, set a financial goal, start early, stick to the plan, and, last but not least, go for products that will not only help you achieve your targeted goal but also protect your money from the volatility of the market. See introduction to planning for retirement. (hyperlinked) #1


There are many reasons why we need to plan for our own retirement. The list below is only a starter and not exhaustive.


  1. Life expectancy has increased. Especially in Singapore where we have one of the best medical care in the world, as long as we can afford it (pun intended).

  2. Medical emergencies may take away our lifelong savings.

  3. Inflation will “eat away” if we only save in savings account or fixed deposits.

  4. Shortfall in CPF funds. We may have used too much of our CPF to repay our mortgages or we may be self-employed and did not contribute much to our own CPF accounts.

  5. Worst of all, we may be forced to retire or take on less strenuous / stressful jobs due to our own poor health in old age.

  6. By planning for your own retirement, you take away the burden from your children. A good number of my colleagues belongs to the sandwiched class. Having to work harder to pay for kid’s child care and tuition fees while supporting their elderly parents. Luckily, my parents are still working and intends to work beyond retirement age. Not everyone can say that.

Nevertheless, this topic is not new to any Singaporeans or Permanent Residents in Singapore. It is constantly featured in Straits Times. CPF board will spend millions of dollars to host roadshows to educate Singaporeans on the importance of planning for retirement. Even politicians will use it as an election topic to swing voters away from the ruling party.



When we talk about retirement, we cannot avoid talking about our national pension scheme, CPF LIFE. (https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/cpf-life) The CPF Lifelong Income For The Elderly (CPF LIFE) Scheme is a national longevity insurance annuity scheme that insures you against running out of your retirement savings, by providing you with a monthly payout no matter how long you live. Sounds good? That is provided you have enough for the (ever increasing) basic retirement sum at the age of 55. If you turn 55 on 2021, you will need to have at least $93,000 in your CPF OA and SA account to make up this basic retirement sum. With $93,000, you will start receiving an estimated $770 per month from 65 years old. So, the questions to ponder here are, is the payout amount too little ($770 per month) and too late (65 years old)?


Although there are so many exposures on retirement, Singaporeans are still ill prepared for it. Refer to this 2021 article by ChannelNewsAsia #2. From a survey by DBS, 76% of the respondents says providing for retirement is a priority. However, only 49% have a financial plan.


To make things worse, recently, Singapore is experiencing inflation like every developed country. During the Covid-19 pandemic, people are losing job. Central banks around the world are busy making interest rates low and giving out aids to help their citizens to tide through the difficult period. Low interest rate environment created a K-shaped economy leaving the less rich harder to save for retirement. (The rich can invest easily in shares and properties which also safeguards their own retirement) “Today”, an online newspaper, also noted that inequality makes it more difficult for the poorly prepared individuals to retire. #3


To combat all the headwinds, the easiest way is to get individuals to work longer. By working for more years, one will need to save lesser and be able to save more for one’s own retirement. In press release by Ministry of Manpower and published by Business Times on 3rd March 2021#4, official retirement age will increase to 63 years old and re-employment age to 68 on 1st July 2022. Don’t get me wrong. I am not saying this is a bad thing for us. I meant to say that this is a good move by our government. At least, employers now cannot ask us to leave just because we hit the magical age of 62.


After writing so much, I wish to say that I do not like others or leave it to circumstances to plan for my own retirement. It is my life. I work towards my own realistic target date and plan for my own retirement. No one should have a say in this except for myself. I hope you can also join me in this journey that you will enjoy and look forward to retiring at your own terms.



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