Singaporeans are known for being kiasu, but are they kiasu enough when it comes to planning for retirement? We have some suggestions to aid you in your finances when it comes to retirement. Don’t fret, just plan and consider these tips and you’ll be on your way towards a comfortable retirement!
Put your mathematics into good use
Planning decades in advance may sound overwhelming. But financial experts say, simple math can help you out. Start by listing down ‘your numbers’. Think about your future expenses: What are your expenses likely to be when you retire? Will your housing be paid off? Will you have car payments? Then, compare the figures against your possible income sources: current savings, expected income from various sources, including CPF payouts, and possible part-time work. As long as you have these data, it will be easier to determine how much you need using a retirement calculator.
Prepare an emergency savings account
Emergency savings is your safety net from sudden financial shocks like illness, job loss, or major expenses. It also ensures a smooth transition to retirement. Make it a habit to save at least 10% from your income and keep it on a savings account or a money market account, whichever yields a higher interest rate. Aside from having emergency savings of at least 6 months of your income, it also pays to have retirement savings – an account which you can only touch as you reach retirement.
Put together an investment portfolio
An investment portfolio is your asset allocation plan for retirement. It is good to have one to beat inflation over the long run. You may consider unit trusts or mutual funds that invest in both shares and bonds. Or invest in Exchange Traded Funds (ETF) that diversify your risk and generate healthy returns. Those with conservative retirement needs could opt for the less riskier bank savings accounts that have higher interest rates.
Are you adequately insured?
Another way to combat inflation as you near retirement is through whole life insurance. It provides lifelong coverage plus guaranteed death and disability benefits, and your cash value can grow as much as 3.5% each year at a guaranteed rate. It may yield more depending on the non-guaranteed bonus sum of the policy. Some plans have reversionary bonuses – an accumulated profit on top of your investment income – which can be withdrawn as you desire.
Supplementary Retirement Scheme (SRS)
The Singapore government offers a voluntary retirement scheme for both Singaporeans and foreigners. Contributions to this scheme are tax-free before withdrawal. Moreover, only 50% of your withdrawal upon retirement is taxable. Contributions are given in cash at any amount (up to the allowed maximum yearly cap of S$15,300) and can be given any time, as often as you like. The best part is, it offers generous relief on your taxable income!
Manage your lifestyle
Economic reconstructions affect retirees, but the government ensures the public that ‘measures are in place’ to help ease financial burdens. This was outlined in the speech of Prime Minister Lee Hsien Loong during the National Day of Rally last August 19. In the same vein, Singaporeans are encouraged to become smart consumers and to practise financial prudence at all times. How we allocate our money today will impact our long-term financial condition, including our retirement.