According to a recent survey, 80% of Singaporeans want to retire at age 60. Do they have suffiicient funds to retire? How much money do they need to retire?
I carried out a survey with the participants in a class on financial planning. Most of them come from the lower income group. The results surprised me.
To cover food, utilities and other essentials, a couple needs about $1,000 a month. This assumes that they have a home that is fully paid for. It may be possible to get by with $800 a month, but this does not leave any margin for unexpected expenses.
To provide a monthly sum of $1000, with adjustment for inflation, a person retiring at age 65 needs accumulated savings of $200,000 to last an average remaining lifespan of 20 years. If the person wishes to retire at 60, he will need $230,000.
If you wish to have a more comfortable lifestyle, you will need $2,000 a month. Your accumulated savings has to be $400,000 when you retire at 65, or $460,000 when you retire at 60.
If you do not have this sum of accumulated savings (that is needed for the bare minimum or a comfortable lifestyle), you have the following options:
a) Extend your retirement age to 65 to 70 years.
b) Retire from full time work at 60 to 65, and continue to work part time to earn a supplementary income.
To ensure that you have sufficient savings to last a lifetime, in case you live a very long life, you need to buy a life annuity (which provides pooling of longevity risk).
When you are working, it is important for you to make adequate savings for retirement. You must save 10% to 15% of your earnings, and invest in a low cost investment fund that can earn you a good rate of return.
Do not spend too much money on unnecessary insurance that depletes your savings for retirement. Do not buy financial products that give a poor return, due to high expenses.
Read this FAQ:
http://www.tankinlian.com/faq/fptips.html
http://www.tankinlian.com/faq/life.html
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