Singapore Retirement 101
Singapore is truly one of the best places to retire, considering the great quality of life, warm climate, and safe and secure environment. This nation is also filled with many attractions and entertainment, including world-class museums, shopping, and nightlife.
But before retiring here, you need to save up for your nest egg accordingly. One of the most common questions people have in their mind now is this: how much do you need to retire in Singapore?
We’re going to be completely honest with you – the answer is different for everyone. After all, people have different standards of living.
In this article, we’ll look at how much you need per month, and how you can accelerate your finances to achieve your retirement fund goals.
Here at OMY, you will discover the following:
Retirement Planning In Singapore
According to a 2018 report, 1 in 2 Singaporeans aged 65 is expected to live over the age of 85. Currently, the retirement age is 62 so with proper planning, you need to plan your finances for your golden years as early as now.
To start this guide, we’ll take a look at how you can take advantage of CPF Life and CPF Retirement Sum below.
More from OMY: A Comprehensive Guide to CPF in Singapore
What Is CPF Life?
Singaporeans and PRs are extremely lucky in Singapore, especially because the government does wonders in helping them plan for retirement. For instance, the CPF Life is a national longevity insurance annuity that gives people monthly lifelong payouts when they reach 65 years old.
People can choose among three plans namely the Basic Plan, Standard Plan, and Escalating Plan, according to the retirement lifestyle they want to have.
Check out this helpful CPF Life estimator to help you plan for your CPF Life payouts accordingly.
What Is CPF Retirement Sum?
Aside from CPF life, everyone in Singapore should also be familiar with CPF retirement sum. This is especially true not only for older Singaporeans, but also for young ones who still have enough time to grow their retirement savings.
More from OMY: 5 Best Savings Accounts In Singapore With Highest Interest Rate
The Basic Retirement Sum gives CPF members monthly payouts to pay for their basic living expenses when they retire. This amount is adjusted regularly to ensure it covers all the things needed for a person’s basic living expenses.
Keep in mind that the cost of living in Singapore (and around the world) changes each year due to inflation so the Basic Retirement Sum should also be in sync with it.
During your 55th birthday, your CPF Retirement Account will automatically be created. Your savings from your Special Account, then your Ordinary Account, will be transferred to this account. This sum will be used to cover CPF Life as well.
Based on the amount you’ve saved as your retirement sum, you can get monthly payouts under your CPF life for as long as you live, even if you go beyond 85 years old. The key thing to remember is the more money you set for your RA, the higher your payout will be.
There are three types of retirement sum namely the Basic Retirement Sum, Full Retirement Sum x 2 of BRS), and Enhanced Retirement Sum (x 3 of BRS).
Take a look at the table below to see the retirement sum applicable to you.
|Year of 55th Birthday
|Basic Retirement Sum (BRS)
|Full Retirement Sum (FRS) 2 x BRS
|Enhanced Retirement Sum (ERS) 3 x BRS
In the past, the annual increase was roughly 3% per year. But from 2023 to 2027, the Retirement Sums will increase by 3.5% per year to make up for the rising cost of retirement in Singapore.
CPF Life Vs. CPF Retirement Sum
Singaporeans born in 1958 or later will automatically be placed under the CPF Life scheme, although they must have at least S$60,000 in their CPF RA. During this point, the CPF will replace the CPF Retirement Sum Programme, which pegs monthly payouts to the retirement sum in your CPF account. Considering this, your monthly payouts will also end if you turn 90 (like term life), or when your CPF RA runs out of money.
With CPF Life, your monthly payouts are guaranteed for as long as you live.
So if you’re still in your 20s, 30s, or 40s, and you’re confirmed to be enrolled in CPF life, do you still need to think about your CPF BRS, FRS, and ERS?
Absolutely. When you turn 55 years old, your CPF Retirement Sum will affect how much you can withdraw from your CPF account in that year.
How Much Do You Need To Retire In Singapore: Example 1
To help paint a better picture of how much is required to retire in Singapore, let’s examine some cases.
Imagine Person A turns 55 years old in 2020, and he managed to save up to S$120,000 for his RA. This is above the Basic Retirement Sum of S$90,500, but below the Full Retirement Sum of S$181,000. Person A co-owns an HDB flat he bought in his youth, and he doesn’t want to sell it.
Because he still has a property that will last him up until he’s 90+ years old, he can withdraw the amount above his BRS, which is S$29,500. He may also choose not to withdraw this amount and set it aside for a higher retirement sum so he can receive more payouts by the time he turns 65 years old.
With S$120,000 as his retirement sum, Person A is set to receive S$1,030 monthly until his last days. This is S$220 more than if he only saved up enough money for the BRS, which is S$810.
How Much Do You Need To Retire In Singapore: Example 2
Person A turns 55 years old in 2022 and has managed to save up to S$300,000 in his OA and SA. This is higher than the ERS for 2020, which is S$271,000.
Because the ERS is the maximum amount he can have in his RA in 2022 and he has chosen to set aside this amount for CPF life, he is set to receive a S$2,180 monthly payout when he turns 65 years old, until the end of his life.
How Much Do You Really Need For Retirement?
According to a 2019 study conducted by the Lee Kuan Yew School of Public Policy (LKYSPP) to know the Minimum Income Standard or MIS elderly people need, it was found that an elderly person living alone would need S$1,379 per month, and elderly couples need S$2,351 per month for their retirement fund in Singapore.
Considering the rapid rate of inflation today, how much do I need to retire might be more than that, especially if your standard of living is high.
Is S$2,000 Per Month Enough?
For many people today, S$2,000 per month is the perfect amount for their monthly retirement fund in Singapore.
Some people may think that S$2,000 is not enough, especially because you may have tons of financial commitments such as paying off your car or home loans, or your children’s expenses.
However, keep in mind that when you retire, you’ll probably have lesser expenses. During that time, you may have already paid off your home mortgage, or your children’s education. Even your insurance investments have already been reduced when you retire.
Is S$600,000 Enough To Retire In Singapore?
The key to knowing how much do I need to retire in Singapore is to be honest with yourself and know how much you can spend.
Let’s backtrack some key points.
To determine how much money to retire in Singapore based on your desired standard of living, you need to know how much you can spend monthly. This will be your major basis. Then, you can choose to add more or less depending on your personal preference.
What if you need S$2,500 per month from the time you’re 65 years old to 85 years old? Will S$600,000 be enough? Let’s take a look:
240 (number of months) x S$2,500 = S$600,000
Considering this, the answer is YES. However, this cost of retirement in Singapore still doesn’t account for added expenses such as travel and medical bills, among others.
How Much Do You Need To Retire In Singapore: Other Factors You Need To Keep In Mind
Make sure to factor these things if you want to calculate your cost of retirement in Singapore.
Assess what retirement lifestyle you want to have
Before planning your retirement fund, assess what kind of lifestyle you want to live if you’ll retire in Singapore.
If you love to travel, take many vacations, or attend social events, you know that you would need to have a bigger nest egg. If you’d rather stay home and spend time with your loved ones, you can probably have a smaller nest egg.
Work out how much payouts you will receive per month
If you’re short on CPF savings to pay for the premiums you need for your CPF Life Plan, you can increase your savings through cash top-ups and CPF transfers to your RA
Delay your payouts
If you’ve started receiving payouts but you don’t need them yet, you can choose to delay it until you reach 70 years old. For each year you want to delay your payouts, it will increase by 7%. So if you defer until you reach 70 years old, your payouts will increase by a staggering 35%.
A Word From OMY
When it comes to how much do you need for retirement in Singapore, keep in mind that your money will cost less in the future due to inflation. Assuming you pay S$1,000 for your groceries
today, you may need S$1,500 to cover for this expense 20 years from now, assuming you buy the same items.
Calculating how much do I need to retire in Singapore is no easy feat. It requires careful and continuous planning. The key is to start as early as you can.
More from OMY: A Beginner’s Guide to CPF Shielding