Saving for an imminent future can be daunting especially when you do not know what is to come. At some point, everyone will have to retire from their jobs, and having a sum of money set aside is crucial. Especially in an expensive country like Singapore, planning ahead to ensure that your retirement years are comfortable can get complicated. There are various financial responsibilities you have to think about when you plan your retirements such as existing cash loans, your desired lifestyle, and possible health issues. You may be thinking, “So, how much do I need to retire in Singapore?” Unfortunately, there is no universal amount that can be stated for every individual as it varies for everyone. Here is a quick guide to planning your retirement fund to guarantee a protected future.
Overview: Calculating Your Retirement Value
When calculating your retirement plan, some factors you have to consider are your monthly expenses, your desired lifestyle after retirement as well as any outstanding loans. Your monthly expenses generally decrease after retirement with a study showing that elderly people in Singapore need an average of $1379 per month for their basic needs. A rough gauge to calculate your monthly expenses after retirement would be 80% of your current monthly income. However, that only covers your basic needs. If you wish to live an opulent lifestyle and travel around the world, you will need to factor in that cost. Moreover, if you did apply for a loan to pay off your bills, you will need to calculate the interest charges for it, especially for unsecured loans that have a higher interest rate.
Insurance: Contingency Plan for Medical Issues
Getting older definitely comes with more health issues and medical and hospital bills can really break one’s bank. To avoid such cases and ensure a smooth retirement despite medical surprises, it’s always important to invest in a good insurance plan. Instead of taking out from your retirement savings, insurance will be able to cover these exorbitant costs, leaving you with a healthy sum for personal use. Your basic health insurance plans like Medishield and Careshield only cover a small cost for disability and hospital bills. For better coverage, you should consider enhancing these plans for larger coverage from private insurance companies.
Insurance: Retirement Plan
Besides getting an insurance plan for your hospital and medical bills, a retirement plan can act as an added security blanket for extra cash in your golden years. A retirement plan that is sold by private insurance companies usually works by putting in a lump sum of cash that increases in bonuses on an annual basis. After a couple of years, you will be able to withdraw your cash on a monthly basis, which will cover you for life. A lot of the time, clients prefer to apply for a loan when purchasing this retirement plan. This type of cash loan is called premium financing and is an affordable way of paying off premiums. It is not considered an unsecured loan even though there is no need to give up any personal assets. Instead, the insurance plan itself is taken as collateral for the bank. These retirement plans can help to fund any extra costs that you need for travel or entertainment purposes.
CPF Life
Of course, every Singaporean is entitled to a CPF Life plan, which is helpful if you have collected a significant sum throughout your working life. CPF Life is a scheme that provides lifelong monthly payouts once you turn 65. There are three schemes under the CPF Life plan, which differ in payout amounts. The Basic Retirement Sum will pay out a total of $90,500, the Full Retirement Sum provides a payout of $181,000 while the Enhanced Retirement Sum will offer a payout of $271,500. You can choose which plan most suits your needs once you turn 65 and this will be able to help you plan and compartmentalise your different streams of payouts when you decide to retire.
Personal Savings
Despite the various schemes and insurance plans that can be used to sustain your retirement days, your personal savings are always extremely important. It is always advised to distribute your monthly income to different needs such as monthly expenses, investments, and savings. A part of your monthly savings should also be put aside for your retirement. A good gauge is 10-15% of your monthly salary.
To sum it up, every individual will have to prepare their retirement plan based on their needs and future lifestyle. It is not wise to rely on just one stream of income payout but you should have several streams to sustain your future.
