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Retirement Planning in Singapore – Dos & Don’ts

retirement plans couple

Poor retirement planning could jeopardize your retirement in Singapore. Early planning with the right methods will help you achieve your retirement goals. One of the major goals of sound retirement life is living a money-worry-free life. It is a big change, but it does not have to be an ominous one. So, let us guide you on the dos and don’ts of good retirement planning in Singapore.

Do: Set Retirement Goals

The Retirement and Re-employment Act (RRA) of Singapore states the minimum retirement age is 62 years. But some of us have different goals. Hence, the following questions pop up:

● When do you want to retire?
● What to do (your lifestyle) after retirement?
● How much do you need to retire?

So, how to plan for your retirement in Singapore? Let us begin by setting specific and achievable retirement goals. Calculate the number of years you will need to work and total savings and investments earned before retirement. Next, estimate what your annual retirement expenses could be and how long you will take to cover those expenses.

Do not forget about inflation! The purchasing power of SGD 1,000 today will almost certainly not be like SGD1,000 twenty years from now. From there, you can begin working out how much monthly CPF income you will need to be saving now and until retirement to reach those goals.

Do: Saving and Investing

The earlier you save and invest for your retirement, the better off you will be. The longer you wait, the more you will have to save and invest later in life to catch up. There are two types of passive income you can save and invest your money in. They are: guaranteed and non-guaranteed income.

For those who are risk intolerant, opt to save in guaranteed income assets. Some are, amongst others:

• Fixed deposits
• Central Provident Fund (CPF) pay-outs and withdrawals.
• SRS savings, cash, and near-cash assets like Singapore Savings Bonds.
• Short-term endowment products like China Taiping’s i-Save or NTUC Income’s Gro Capital Ease

These savings alternatives will give you a low level of interest and preserve your capital, but they may or may not give you a return over and above inflation.

For longer-term savings and investment, you could consider lifelong annuity plans like China Taiping’s Infinite Harvest II. This annuity plan gives you not only lifelong income, but you can also apply for premium financing and benefit from Singapore’s low-interest-rate environment to boost the monthly cash dividends, payable after year 5, up to 8% p.a.

Don’t: Just Rely Only on CPF

If you allocate your capital to CPF as the only source of retirement savings, then inflation can reduce your asset growth. Also, there is a cap on the amount you can contribute to your CPF account, so the contributions may not be enough to fund your desired lifestyle after you retire.

Diversify your assets to investments like annuity or retirement income insurance that will allow you to grow wealth more effectively.

Don’t: Wait to Start Planning

Retirement may seem eons away, but time has a way of sneaking up on us. Rather than waiting until retirement is just a few years off, it is prudent to do retirement planning now.

Whether you are in your 20s just launching your career or in your 30s, 40s, or 50s nearing retirement, equip yourself with a detailed plan for a successful retirement. With a plan in place, you can customize, kick-start, and fine-tune it as and when needed.

Wrapping it up

We cannot ignore the importance of retirement planning. There are two things you need to consider when planning for your retirement finances. First, think about your retirement goals and action plans. Second, think about the amount of risk you are willing to tolerate in achieving those goals.

InsureDIY has financial advisers to help you make the correct choice and answer your questions. Email us at [email protected] at your convenience!

Posted in Life & Health