So you want to retire in Singapore?

As I was going through my daily activities recently, the thought of retirement came through my mind. Do not get me wrong. I am not thinking of retiring anytime soon. Even if I do reach financial freedom before age 65, I will still find work to do, meaningful work especially. This is because I believe one should contribute his time to meaningful activities (providing a product or service) to help others since he is financially free with available time. Even if such work does not receive remuneration, as long as it is serving a meaningful purpose, I will still work for a meaningful cause.

Financial freedom is a blessing received and not to be taken for granted. I believe one who is in this special status of life should start living for others to commit his freed up time (since he is no longer financially burdened and need to restrict his time to working for a paid salary) to help others in need (in whichever meaningful ways).

Leaving financial freedom aside (which not many people eventually reach due to one reason or another), the more important issue of concern is retirement planning. Most people will live long enough to reach their retirement age. For Singaporeans, our retirement age is seen to be age 65 (at least by our government since the official age to receive our Central Provident Fund, CPF monies is at age 65). Assuming as a benchmark many people do work until age 65 and thereafter retire from work, how much does it cost to retire in Singapore?

I did an estimation of the cost of retirement in Singapore. I was shocked by my finding. This made me realise that it is difficult for many people to retire in Singapore, not to mention retire comfortably.

I provide a few case scenarios as follows:-

For a Singaporean aged 20 currently

Depending on individual's needs, let's assume an average comfortable living expense for an individual is around $2000 per month currently. When the individual reaches age 65, he will need around $7563.19 per month in year 2056 upon his retirement to continue living at his same living standards as of today. This is assuming an annual inflation rate of 3% over a period of 45 years until his retirement.

He will continue to live another 20 years of retirement (assuming the average lifespan is around 85 years). Assuming the same annual inflation rate of 3% over his retirement period, his total retirement funds needed is approximately $2,438,708.88. A $2.4 million sum need for retirement! What a staggering amount!

For a Singaporean aged 30 currently

Assuming the same comfortable living expense of $2000 per month currently, the individual will need around $5627.72 per month upon his retirement at age 65 (assuming an annual inflation rate of 3% over 35 years until retirement) for living expense to maintain similar living standards.

Over his retirement period of 20 years, his total retirement funds needed is approximately $1,814,627.21 (assuming an annual inflation rate of 3% over his retirement period). Ok. This is slightly better compared to the younger folk mentioned earlier who needs more in total retirement funds. However, a $1.8 million sum is not a small sum either.

For a Singaporean aged 40 currently

Assuming the same comfortable living expense of $2000 per month currently, the individual will need around $4187.55 per month upon his retirement at age 65 (assuming an annual inflation rate of 3% over 25 years until retirement) for living expense to maintain similar living standards.

Over his retirement period of 20 years, his total retirement funds needed is approximately $1,350,252.36 (assuming an annual inflation rate of 3% over his retirement period). This $1.3 million sum is not a small sum also for a slightly older folk currently to retire at.

Conclusion

As we can see, the older the Singaporean is currently, the lesser the total amount of retirement funds needed for his retirement. However, even at age 40 currently, the total retirement funds (approximately $1.3 million) needed to set aside is by no means a small sum to be overlooked.

I leave the reader to draw your own conclusion whether it is an easy feat to retire in Singapore or not. Are we prepared for the better or worst to come upon our retirement days? It is no wonder why our government keep increasing the retirement age (now already standing at age 65) and encourage Singaporeans to continue working as long as they are able to till they die. This leaves one thinking whether this is just a passing statement for the government to say encouraging older workers to stay active in their golden years by working, or that the harsh realities of retirement living dictates one's neccesity to keep on working until one drops dead.

Downgrade one's living standards during retirement days with whatever limited savings left? "Continue working" during "retirement days" to maintain current living standards or just to meet basic living needs? Be not financially burdened during retirement days by saving up and investing early during younger days? One needs to consider carefully his choice now as the consequence of his choice will unfold definitely in time to come.

Assumptions in my estimation

Please note the following assumptions in my estimation of the total retirement funds needed.

1. An average annual inflation rate of 3% at least over the next 65 years.

2. An average monthly living expense of $2000 currently for decent living standards.
3. Retirement age of Singaporeans at 65 years.
4. Average lifespan of Singaporeans at 85 years.