Do you even know how much money you need to

retire in Singapore, other than, you know, a lot? Ok, let’s do a simple exercise to find out. Let’s say you are 30 years old now, and you spend

$3,000 a month. You are planning to work till 60 years old, and you think you’ll live till 80.

(it’s been 84 years meme). Whatever you want to do during retirement is totally up to you, you want

to stay at home take care of grandkids, can can. You want to go skydiving everyday, can

also. Whatever it is, you’ll have 20 years of retirement, which means, in total, you

need $720,000 for retirement right? Wrong. If this is your calculation, gg lor,

you will never be able to retire lo. Why? Because of inflation. You think your 1 meat 2 veggie cai fan will forever stay

at $3 ah? You wait long long ah. Ok, let’s ignore Singapore’s inflation

rate for the past few months, because it’s a little crazy,

cos you know, (money printing).

Let’s just use 2.5% annual inflation instead.

So with that, you’ll need $6,292 every month for retirement. Which means in total,

you’ll need to save up $1.5M just to be able to retire. Right? Wrong again. Because

inflation still exists even when we are retired. So if we take that into account, we would need

$1.93M. Wah, ho seh boh. No need to retire lo. But don’t scared don’t scared.

Thankfully, as Singaporeans, we have something magical called

CPF, where starting at 65 years old, CPF will give us a fixed payout every

month for as long as we live. Huat ah. But with many of us using our CPF money

to pay for our houses, chances are, CPF payouts may not be enough for our retirement.

That’s why we also need to save

and invest in order to make sure we have enough money to retire. But how

much is enough? Is it $500,000? Is it $1,000,000? What if inflation is a

lot higher? Or what if we plan to retire early in our 40s and travel around

the world? How much would we need then? That’s why I have created this spreadsheet

to let you easily calculate whether you are on track to retirement or not. It

takes into account your age, savings, investment returns, CPF payout, and

of course, not forgetting our best friend inflation. And yes, it’s totally

free to use, download link down below. Quick pause, here’s a super good news. Webull’s

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features with Webull. Such as their $0 commission trades, auto investment which lets you easily

dollar cost average into your favorite stocks. So if you have not signed up to Webull yet, you can sign up using my link down below. With

that being said, let’s get back to the video. Alright, let’s go through this

calculator together. For this demo, let me introduce John. John is a

programmer who has a pay of S$4,000 John is now 28 years old, has a beautiful wife, 2

cute children and a cute little puppy. John plans to work until he retires at 60, and expects to

live up to 85 years old. (it’s been 84 years) That means that John will be working

for another 32 years till he reaches retirement. After which, he’ll have

25 years to enjoy his retirement. Every month, John spends $150 on transport,

$1000 on food, because remember, he has a wife, 2 kids and a cute puppy ya.

He spends $500

on leisure, and $1,000 on other stuff, which includes school fees, utilities,

insurance payments, parents allowance and so on. So, in total, John spends

$2,650 per month. But maybe, after retirement John’s kids have all

grown up, and John no longer needs to spend as much. So maybe he will only

be spending 80% of his current amount. Next, we also need to factor in inflation to find out what the total monthly expenses

will be at the point of retirement.

CPF assumes our annual inflation to be 2.5%, but

let’s assume a higher number, just in case. Let’s say from now on, the annual

inflation will be 3%. This means, when he retires at 60 years old, his

monthly expenses would reach $5,459. Let’s continue on. At 28 years old, John has

saved up $10,000 which is not too bad. As for his investments, as he has watched

Kelvin Learns Investing since young, he knows the importance of investing,

so he has invested a total of $20,000. Every month, after contributing to CPF and

paying for expenses, he has $550 leftover money, which he then puts $100 into savings,

and the remaining $450 into investments. Because John is a smart guy, he’s parking his

savings in a high yield savings account that gives an average 1% interest. Ok I know high

yield savings accounts are easily giving more than 3.5% now, but we are talking about long

term here ya. So, 1% is a reasonable number.

Next, John doesn’t anyhow YOLO his money

into random meme stocks and crypto, but instead invests in good stocks and ETFs, so

he’s getting an annualized 8% return every year. But after retirement, John doesn’t want

to invest into stocks that give a high return anymore, as he can’t handle

the volatility. Later he sees his investments drop 20% and gets

a heart attack, so that’s bad. So, he switches to invest into safer investments, like Singapore banks and REITs, which give

a steady bom pi pi 3% dividend every year. Next, let’s include all the passive income

too. For CPF Life, let’s say John achieved the Full Retirement Sum which means he will get

a monthly payout of $1,550 after he retires. Pro tip, if you don’t know how much payout

you’ll receive, CPF website has a calculator which lets you estimate how much payouts

you’ll get based on your CPF balance. John has no rental income. But

because he takes care of his kids well. His kids will be giving

him $100 in allowance every month. Besides that, he also has a side business that’s

paying him another $100 in income every month.

So, in total, he would be earning a total of $1,750

passive income per month during retirement. And tada, John finds that he has a shortfall

of $387,000 during retirement. Uh oh. According to this chart, he’ll run out of

money at 82 years old. So how? Luckily, there are a few things John can do. He can try reducing his expenses by $300,

and he would no longer run out of money during retirement. But maybe, those are

his necessary expenses like school fees, and insurance payments, so he can’t

really cut his expenses that much. In that case, he could try finding a better

paying job so that he will have more money to contribute towards investments.

So

let’s say, if he just increases his monthly investment contributions to $1000,

he’ll now have enough money for retirement. But maybe, John doesn’t want to work till 60

years old. Maybe he wants to retire by 45 and travel around the world. With his current income

and expenses, he’ll run out of money in his 50s. So, what can he do to fix this? First, he can

try cutting down his expenses ($2300). And because he’s retiring at such an early age,

he can continue investing in stocks and ETFs that could give a slightly

higher return (6%) during retirement. If that’s still not enough. He will

need to find a better paying job, so that he can increase his investments even more. Or consider migrating to somewhere

that has a much lower cost of living, so that his post retirement expenses

will be a lot lower. Like that Jean girl who moved to Bali and

was able to retire by 38 years old So, that was a quick demo on how

to find out whether you are on track to having enough for your retirement or not.

All in all, retirement can

be a scary thing especially when there’s high inflation and we

are living in an expensive city. That’s why it’s important to find out how much

we need for retirement. Because by doing so, we will then be able to start

planning for it early in our life, to make sure that we have to live comfortably..