Will I be able to save enough for retirement?


Have you ever wondered what retirement life would be like for you? Some people aspire to live huge mansions, feast extravagantly or tour the world. Maybe this is not how you imagine your life to be; you are contended with a simple life. Your plan is to take your morning exercise at the park down the road, have your meals at the regular coffee shop and splurge on a fine dinner on special occasions. Travelling only once a year, catching the blockbuster with your family every now and then and your financial duties are limited to telco bills, daily expenses, maintenance fees and utilities. $3,000 a month seems more than enough to cover for all of the above.


On a monthly basis, $3,000 might not seem like an astronomical figure but cumulatively for 25 years from retirement age, you would require $720k in order to sustain your lifestyle until 85.


Perhaps now you start to think that you won’t need $3,000 per month for retirement. $2,000 will be enough to do that job. After all, you are not asking for an extravagant retirement life. Post-retirement income is just to pay for the daily bills and simple fares.


However, you should account for inflation. Even if inflation is maintained at 2% per annum, $2,000 today might shrink significantly 25 years later. On top of that, take the lifestyle you lead before retirement into consideration. If you belong to the top-tiered income holders where you are used to fancy lifestyle, would you be able to adapt to the simple lifestyle post retirement? For most people, they find it difficult to adjust their lifestyle habits therefore they will have to plan ahead and set aside a bigger pool of retirement funds.


Having said that, are you fretting over how to build your retirement funds? Retirement fund does not necessarily come from a single avenue. It is usually made up of multiple sources. Here are some of the usual sources that contribute to our retirement fund.


1. CPF – Singapore Citizens and Permanent Residents (PRs) are required to contribute to their CPF during their working years. Under the CPF Lifelong Income Scheme, Citizens and PRs will receive monthly payouts from 65 years old based on the Retirement Sum set at age 55. The monthly payout varies based on the type of plans you choose. For example, with $85,500 in my Retirement Account Savings at 55, I will receive up to $770 under the Standard Plan but only up to $610 if I opt for the escalating plan where payouts increase by 2% every year.


2. Insurance – Endowment plans and Investment-linked insurance policies are alternative income sources that contribute to your golden nest egg too! These policies will help to diversify your portfolio and grow your funds. However, some people have the misconception that they can skimp on their life insurance coverage as these are insurance products. With rising medical bills, you should not neglect your life insurances despite the coverage these policies offer. This is because the coverage for these products is usually minimal and the main purpose of these products is to help you expand your post-retirement income source.


3. Savings - Most experts believe that one needs to have an emergency fund. The amount required is usually between 3 and 6 months worth of living expenses. The money that you keep in the bank account might not be able to counter inflation, however accessible cash on hand allows you to be more prepared for rainy days. On top of that, never under estimate the power of compounding interest. It pays to start saving young. For instance, saving $10k per annum with compounding interest of 3% will grow your funds by 50% after 25 years! The process of planning and building up your golden nest egg might seem tedious and intimidating. However, starting early with the right tools will definitely make it easier. Unsure of where to start? Try out the Finance Roadmap today!


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