With proper financial planning, it is possible to retire at 55 and have enough funds to last into your 80s

Prime Minister Lee Hsien Loong announced at the 2019 National Day Rally that Singapore is going to increase its retirement age to 65 in 2030. This is part of a global trend, as countries around the world increase retirement ages in the face of demographic pressure and slowing economies.

This trend has increased the need for financial planning globally as people seek to take greater personal responsibility for their retirement funding. According to OCBC bank, 73% of Singapore residents are not on track with their retirement plans.

We have produced cash-flow modelling to show how someone can retire at 55 and ensure their funds last well into their eighties.

The following models* chart the average financial life of a Singapore resident and consider life events such as a $10,000 wedding at age 31, a $80,000 new car at age 41 and paying off the $300,000 remainder of their mortgage at 50.

Despite a monthly salary of $10,000 by age 40 cashflow model 1 shows that without additional planning on top of the CPF, someone would exhaust their funds by age 74. This could leave someone with another nine years left to live as the average life expectancy in Singapore is now 83.2**. For those earning a significantly higher salary than illustrated here, you may find that your expenses are much higher too. Therefore, this issue does not go away unless you put a financial plan in place.

If we account for medical bills at old age, funds will be exhausted quicker than illustrated. In an extreme scenario, a lack of retirement planning could create a financial burden for our children as they will need to support us financially for both living and medical expenses.

Using the same case study but with additional planning, our model shows that retirement at age 55 is very achievable.

By starting to save from a young age and gradually increasing personal savings and investments over the course of this case study’s life, we show that it is possible for someone to be able to retire by 55 and still have sufficient funds to last until their 80s, in-keeping with the average life expectancy for Singapore residents. It is still achievable if you are already in your 30s or 40s but proper financial planning will become absolutely critical.

If you look at the global retirement landscape there are two striking trends; firstly, the age at which you can retire has steadily increased; secondly there has been a shift from someone’s retirement provision being the responsibility of the government and employers to the individual.

Singapore is not immune to these changes and while the CPF continues to be a fantastic retirement tool, the increased costs of living coupled with rising life expectancies mean it can no longer be relied on as someone’s sole retirement provision.

Our models illustrate that even with relatively high wages and regular contributions to the CPF, unless you make additional retirement provision, it’s likely that Singapore residents will be running out of money late in life when they have no means of making more. It’s therefore critical that more people seek advice on exactly how much they need to put away each month to reach their retirement aspirations.

You are not planning for retirement just for yourself; you are also ensuring that you are not a financial burden to your children.

In an increasingly complex and competitive world, expert retirement planning advice is key to securing your future. So contact us today for a free financial planning consultation and get all your financial affairs in order.

*Assumptions for the financial plan:

Monthly expenditure (all in today’s money with inflation assumed at 2.5% per annum)

1. 1. $2,000 per month from 25 -30
   2. $3,000 per month from 31 to 35
   3. $4,000 per month from 35 to 40
   4. $6,000 per month from 41 till retirement at 55
   5. $5,000 per month in retirement from 55

Regular savings

1. 1. $400 per month from 25 to 30
   2. $750 per month from 31 to 34
   3. $1,500 per month from 35 to 40
   4. $3,000 per month from 41 to 55

 

** Source: Department of Statistics Singapore 2018.  https://www.singstat.gov.sg/find-data/search-by-theme/population/death-and-life-expectancy/latest-data

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