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To get rich you have
to be making money
​while you're asleep.



The Harsh truths about Retirement in Singapore

6/9/2020

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No one really knows the answer. 

Until we get there ourselves, it will always be a mystery. 

I have been thinking more about retirement during the circuit breaker period. Perhaps, this CB has been a close simulation of what life will be like during our retirement days. Staring blankly at the walls doing nothing? Spending 2 hours for lunch? Zoom calls with friends and catching up on life?

So, when do we retire, really? At age 50? At age 55, when we say goodbye to our OA and SA, and welcome our RA? At age 65 when we can finally smell our CPF Life payout of approximately $1500 per month [assuming we leave $181K in our RA account]. Or never?

The average retirement Age in Singapore remained unchanged at 62 in 2019 from 62 in 2018.  This means I would probably work for another 19 years before I can officially enjoy my retirement. 
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How much do I really need by then? Assuming my average expenses are $1390 today, by retirement age at 65, it would have increased to $2,279. By 80 years, this amount would have snowballed to $3000.

If I need $2000 per month for a period of 18 years ( 80-62); the amount I’ll need will be $2000 x 12 x 18 years, which is approximately $432,000.

Wow, that’s really a huge sum of money. I didn’t really think about it. Looking at the diagram below, based on our earning capabilities, we only have approximately 35 years to accumulate our funds and earnings. Assuming I have another 19 years to accumulate my funds, I will probably need to save approximately $22,736 per year to get there.
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Of course, our CPF Life does help. Assuming we have $181K put into our RA account at the age of 55. By 65 years old, your monthly payout should be approximately $1500. This amount will still be insufficient when we match it against the amount $2,279. There’s still approximately a short fall of $700. 
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​This is not including any emergency expenses like medication, major home repairs, etc, and assuming all important insurance needs have been taken care of: Health, Life, Critical Illness and Personal Accident. 

The truth is, based on a survey done by NTUC Income on retirement, 6 out of 10 people started saving only at age 45, and starting late is the primary reason for the inability to retire comfortably. 
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But how can we blame them? Who is to teach us how to retire? Schools? Parents? Society? Friends? 

Retirement is really a far-fetched concept for everyone. 

We all have dreams to retire early. But in the harsh realities of life, we could possibly only scramble our way there.  Why is this so?

Perhaps it’s the inevitable social and political system Singaporeans have been caught into, making it difficult for us to fully lead a financial-free life. Why is this so?

Let me explain.

Most of us were taught to believe that having a degree is akin to having a guaranteed success in life. We spent our earlier years working hard in University, aiming for a high CGPA to get a second upper honour’s degree. If money is not a critical issue, most would have focused on studying and not taking any part-time job. We have lost an opportunity to earn some income here. By the time we graduate, most would be at the age of 24. 

What do we do now? Singaporeans take a gap year touring around the world with friends. If not, people with burning passion in life will take a while to decide what they really want. Most will not take on a full-time position, but buy time to slowly understand the harsh realities of ‘adulting’, the painful truth of growing up and taking personal responsibilities for themselves. 

Say we get ourselves a full-time job, Fresh grads took home a median gross monthly salary of $3,600 last year in 2019. After paying 20 percent to CPF, the take home is $2880.  We assume the expenses for a young adult are as follow:

1)    Payment to Education loan [$950] source for Valuechampion.sg
2)    Payment to insurance [$432] If I take 15 % for Insurance
3)    Payment to Grab, transportation $800 [ $20 x 2 x 20days] 

Just looking at the three above costs, an average young adult is probably left with $700 to save. $700!!! How to survive?!

We have not even included our daily expenses like food, shopping items, clothes, pocket money for parents. Let’s not even talk about traveling. 

No wonder it is ‘Money not enough’ for most Singaporeans. As one save up with more years of working, we then turned our attention to higher valued items like cars, gadgets and IT stuff. Most Singaporeans dream of owning a car for mobility. Or perhaps as a lifestyle statement. Little do we know that we are buying into a ‘want’ that is depreciating fast every year. The 10 year COE concept has made it exceptionally expensive for us to own a car.  For those who aspire to have one, the additional expenses include road tax, insurance, parking, petrol and occasional servicing and maintenance costs. 

At least for me,  I had my first car when I was 26. I bought a Hyundai Getz and I was extremely satisfied. Little did I know that the reliance on cars have stucked with me till now. I have changed my car later to a Subaru Forester, a 2.0 Litre that comes with higher road tax and insurance premiums, and then a second-hand beetle, all eating into my additional funds and savings, without me knowing. I am now smarter. Recently I bought a 20 year old Suzuki Jimny car at $25K ( After minusing my Beetle trade in), and I just need to service a $25K loan for 7 years. I still can drive it for another 9 years! That, to me, is more financially savvy.
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My point is, most Singaporeans do not really know how to plan their finances. Or perhaps the lack of awareness of it has made it hard for us to plan. Most aspire to own a house by 30. If you get married, then owning a HDB house with a value of $300K at age 30 might be easy. If you are single, you need to wait till 35. It should be relatively hard to buy a private property worth $800K at age 35 if you are just an average earner. 

I was slightly lucky. I  bought my property at the age of 34. I was scouting around for a private property and got my first property at $683K at Flora drive area. It was a dream come true as I always wanted a house of my own. Buying a property was partly due to the limited financial knowledge I have (before being a financial Planner), that property should appreciate over time and that it might prepare me well for old age. Of course, it’s not that simple. 

Ok, I think I have been digressing a bit. I guess my point is that no one is born to plan for retirement.  Or perhaps it is just a far-fetched notion that we simply choose to ignore? Do we even want to imagine ourselves growing old? Most of us choose to live in the present and adopt the ‘come what may’ attitude. 

How many of us have the foresight to look beyond the present and predict what is to come? How many of us actually want to know what is to come?

Hence, preparing for retirement can actually be painful. We don’t want to see our future. We don’t want to even grow old. We don’t want to get there. We just want to be young forever. 

Is this possible? We ask ourselves. 

But the financial hard truths about retirement remain the same. We can choose to ignore them. If we don’t start planning for our retirement, we might see ourselves facing the same situation met by our older generation. Talk to most pioneer and Merdeka generation folks; a large number of them will tell you that they have failed to plan for their retirement. Some are even unaware of the importance of insurance. 

One such person is my dad. When he passed on at the age of 56, he did not insure himself against his life and property. My mum and family were left with nothing and had to strive hard for ourselves. I don’t blame him. He did his best to provide for my family. 

What’s your retirement like? Have you started thinking about your retirement? If you have not, you should start thinking about it. Think about what you might do after retirement. Think about the age you want to retire and whether you have the financial capabilities to sustain your daily living. 

If you have a sum of SGD181K by age 55 in your RA account, Congrats, you are somewhat covered and safe as you will get payouts from age 65 to 80. If you have not, you need to start thinking of ways to earn that money whether it’s through your property or investments or passive income. 

To be honest, if you have been reading and following my train of thoughts, what I am really hoping is to get you to save up for your retirement.  One effective and cool way is really to invest in an endowment saving retirement plan. You force yourself to save by locking your monthly saving into a retirement plan. 

Retirement Saving Plan

You can enjoy the freedom to spend your retirement the way you want with a guaranteed stream of income over your choice of 15 or 20 years. Plus, every dollar that you contributed is guaranteed at your selected retirement age, so rest easy and look forward to the best years of your life!

Take charge of your retirement insurance plan by choosing how much monthly income you want to receive, as well as the age to begin receiving it – either 50, 55, 60, 65 or 70.
 
This plan cushions your retirement dreams against the impact of inflation and enhances your retirement income through potential monthly dividends that will increase by about 5% every year, starting from your selected retirement age. To celebrate a life well lived, a potential one-off dividend may be added as an extra bonus to your retirement funds or a token for your loved ones.

You can pay a single premium if you have a lump sum to set aside; or you can spread your premiums over a longer period (5, 10, 15 or 20 years, or pay to retirement age) for regular, more affordable payments.

To illustrate, if you are 35 years old, if you invest $6490 per year for 10 years, by the age of 65, you will get a monthly payout of $500 plus monthly dividend. The cumulative amount received by the end of the term could be close to $236,140 vs the amount $64,900 you invested. 

It is a good way to prepare yourself for retirement against the CPF Life which you have been painstakingly accumulating. 

Alright, I think I will end here. If you want to know more about the Retirement Saving Plan, do WHATSAPP me via this link             WHATSAPP ME 
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    About Dennis Toh

    YOU CAN FIND OUT MORE ABOUT ME AT WWW.IAMDENNISTOH.COM

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