Preparing for Retirement I Are You Saving Enough

The official retirement age in Singapore is 65 years old, and that’s also the average age of retirement. However one can continue working within his/her company up to the age of 67- re-employment age. With the average life expectancy of Singaporeans being 82.9 years old, one must plan for life after retirement. So have you been saving enough for retirement?

Of course, the answer to this question is never straightforward or easy. But there are a number of theories or rules-of-thumb that can help you get an idea on whether you’ve been saving enough for retirement or not. In this page, we discuss 3 of the most popular ones. Read the full article to help you find out if you are on-track or not, when it comes to saving for retirement.

1. Percentage of Your Income that Goes to Retirement Savings

Let’s remind you that this subheading reads “retirement savings” and not just any other savings. This means that if you’re halfway through saving for your European holiday fund or if you have savings set aside for your kid’s education, that doesn’t count. So, have you been saving at least 15- percent of your monthly paychecks in retirement accounts such as CPF Special Account (SA) or Retirement Account (RA). If your answer is “Yes” then you’re probably saving enough.

It’s recommended that you set aside a good percentage of your monthly income for retirement. Note that the employer matches also qualify towards this amount. For example, if your employer matches the first 6-percent of your contribution, then you need to save 9-percent of your income, so as to achieve the 15-percentage total savings.

2. Replace 70- 85-Percent of Your Income

Our second rule-of-thumb states that one should replace 70- 85 percent of his/her current income in retirement. So if you & your partner earn around S$100,000 combined in a year, you should be generating approximately $70,000- $85,000 annually, in retirement.
Note: It can be tricky to implement this tip since it relies on an assumption that your total expenses are correlated to your income, which in most cases isn’t always true. We understand that you spend the most of what you earn. Therefore, we recommend that you modify this thumb-of-rule by scrutinizing your expenses, which leads us to the next tactic.

3. Estimate Your “Retirement Money” via Your Current Expenses

Try to estimate the amount of money you’ll need to sustain you in retirement. You can start by estimating your current expenses, (you shouldn’t be spending more than you earn). This will give you a close approximation of the money you’ll need to spend in retirement.
Of course, you have some expenses that you won’t have when you retire. These include student & personal loans, education & pocket money for your kids, certain insurance plans and your mortgage loan. But you shouldn’t bank on your expenses to vastly decrease since there are also retirement costs that you don’t carry today.

When you retire, you’ll enjoy more hobbies, travel more and indulge a bit, all at a cost. Other expenses in retirement include end-of-life care costs and certain out-of-pocket costs. Moreover, Singaporeans have their good health until the age of 73- on average. So your health expenses are likely to rise during retirement.

While estimating your expenses, you’ll be able to know some of the unnecessary expenses you incur on a monthly basis. Also, you’ll be forced to question yourself of the expenses you would like to take on in your retirement years. But what’s important is that you’ll be able to budget for retirement assuming that you’ll be spending roughly the same amount of money you spend now.

For those who are unwilling to do the math or if you are extremely unsure of your expenses, one lazy method for estimating the number is by using about 70-percent of your current total income. Most experts tend to use this method, but you should try to avoid it since it may be too generic or overly simplistic.

Let’s illustrate this technique with an example.

i. Assume that you and your partner currently spend $90,000 per year, and you would like to live on the same budget ($90,000 per year) in retirement.

ii. Take a look at your expected social security payouts. You can obtain these from the official Central Provident Fund’s (CPF) website. This agency should be to show you the amount of money you’re on-track to receive when you retire. If you can’t access your personal account, you are free to use the estimator tool, also available on their website.

iii. Assuming that you’re primed to get $30, 000 per year from CPF once you hit 65, you need a retirement portfolio that will create the other $60,000 annually so as to reach the $90,000 total. In order to generate $60,000 per year, you need at least $1.5 million in your portfolio. This will enable you to withdraw the portfolio at a rate of 4-percent annually, which is considered to be a safe withdrawal rate.

iv. Now that you know your target goal, get online, look for an online retirement calculator, and use it to determine if your current contributions will let you build a $1.5 million portfolio. If that isn’t the case, then you should start investing more in your retirement accounts.


In consideration of everything we have discussed in this article, would you say that you’ve been saving enough for retirement? If you have been setting a side 15 percent of your income then you’re probably on the right track. But the best way to get a comprehensive idea on whether you’ve been saving enough or not involves;

i. Estimating your costs during retirement
ii. Determining how much of those expenses need to be generated from your investment portfolio
iii. Looking at whether your contributions are putting you on-track to generate the target money in your portfolio.

If you are worried that you aren’t saving enough, then you should start boosting your retirement contributions. The extra savings will always give you an added peace-of-mind.

Note: Studies have shown that most Singaporeans start planning for retirement at the age of 38 years old, but we recommend that you start saving now. The longer you wait, the more the amount you’ll have to save every month to achieve your portfolio target. To find out more Visit us at Credit Hub Capital – Rated #1 among top moneylenders in Singapore

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