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Retirement planning in Singapore
Find out how to retire and live comfortably in this expensive country
Based on the Worldwide Cost of Living survey conducted by the Economist Intelligence Unit (EIU), it was found that for the third consecutive year, Singapore still remains as the world’s most expensive country to live in.
Apart from saving money for daily expenditure or a holiday trip, you might want to consider planning for your retirement for peace of mind. As living expenses in Singapore climbs higher, the amount of money that you need to save increases as well.
Preparing for the future can be intimidating but knowing that you are financially stable for the next 20 years after retirement, is definitely a motivation to start. Not only will you be able to provide for yourself, you also do not need to worry about working for extra income. This gives you more time to spend with your family or knock some items off your bucket list.
Here are some pointers to start planning your retirement and put your mind at ease about the future.
Insurance
Besides placing your money in savings accounts, look for alternatives to grow your savings. Instead of relying on banks’ interest rates, you can choose to make investment in insurance products.
Approach your financial adviser and arrange a consultation session for them to analyse your financial priorities. Insurance companies include Prudential, Great Eastern Life and Tokio Marine. All financial institutes require a license from the Monetary Authority of Singapore in order to operate in Singapore. Do not rush into buying insurance plans as the market offers a wide variety. Understand your financial needs and find the most suitable plan that caters to your objectives.
Market Shares
You can also get a boost in your income through purchasing market shares. These are categorised into safe and risky assets. Safe assets refer to your CPF and bonds that have annual guaranteed returns. However, their yields are considered to be low at 2.5% for your ordinary account and 4% for the special account. Risky assets are stocks where returns are non-guaranteed but come with higher interest rates.
It’ll be optimal to diversify and invest portions of your funds in both safe and risky assets. You also might want to diversify your stock portfolio so that possible losses can be kept at a minimum level. Speak to a fund manager if you need more insights or advice on investment.
Start Young
You may not have difficulty in maintaining your present lifestyle but what happens when you lose your source of income upon retirement? If you’re in below 40 years old, now is as good a time as any to start saving. The cost of living in Singapore will only continue to go up. Due to technology and medical progress, you will most likely live healthier for a longer period of time. This means that you will require more money to sustain your current lifestyle.
Take internal factors into consideration such as wedding or anniversary and household expenses, and hospital bills. 35 percent of Singaporeans were not confident about their financial stability after retirement or even to support their children’s education.
To meet your financial goals, you should start cultivating saving habits now. If you’re unsure of how to allocate your savings, you can consider these rules of thumb from DBS Bank Ltd:
- If you need money now or next year, keep it in cash
- If you need money in the next 3-5 years, keep it in safer assets like bonds or bond funds
- Untouched money for at least 5-7 years can go into the stock markets
- Always keep a portion in stocks so that it will still generate money during your retirement.
