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This Is How Much You Need To Retire In Singapore

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 
fund any amount promotion is back! By just   funding any amount and keeping it there for 
30 days, you’ll get a total of 8 free stocks,   all without having to do any trades.

they’re essentially giving away free money. Each stock is anywhere from 
USD3 all the way to USD100.   Which means you’ll get to earn up 
to USD800 worth of free shares. Besides that, you’ll also get to enjoy awesome 
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.

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..

As found on YouTube


Posted in Planning your Retirement, Retire Wealthy & Wise, Retiree Tips and TricksTagged

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