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Ask-Me-Anything!
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How do you plan for retirement?
1. Build a retirement plan. Ask yourself when you intend to retire and how much you would need.
The CPF Retirement Estimator is a tool that can help compute the lump sum savings you may need for your retirement: https://www.cpf.gov.sg/eSvc/Web/Schemes/RetirementEstimator/RetirementEstimatorLanding
You can use the CPF Retirement Calculator to help determine if your retirement goal is achievable: https://www.cpf.gov.sg/eSvc/Web/Schemes/RetirementCalculator/CoverPage
2. Assess your current situation. Estimate the savings, CPF and investments you will have upon retirement. If you are buying a home, choose an affordable one that will leave you with more savings for your future needs. Review your insurance policies to ensure you are sufficiently covered.
3. Reduce the shortfall between what you would need for retirement and what you would have upon retirement by considering your options, such as investing in suitable products to close the gap.
4. Plan your legacy. Consider making ...
- LPA (Lasting Power of Attorney)
- AMD (Advance Medical Directive)
- ACP (Advance Care Planning)
- A Will
- CPF nomination.
More information is available at “My Legacy” website: https://mylegacy.life.gov.sg/
1. Build a retirement plan. Ask yourself when you intend to retire and how much you would need.
The CPF Retirement Estimator is a tool that can help compute the lump sum savings you may need for your retirement: https://www.cpf.gov.sg/eSvc/Web/Schemes/RetirementEstimator/RetirementEstimatorLanding
You can use the CPF Retirement Calculator to help determine if your retirement goal is achievable: https://www.cpf.gov.sg/eSvc/Web/Schemes/RetirementCalculator/CoverPage
2. Assess your current situation. Estimate the savings, CPF and investments you will have upon retirement. If you are buying a home, choose an affordable one that will leave you with more savings for your future needs. Review your insurance policies to ensure you are sufficiently covered.
3. Reduce the shortfall between what you would need for retirement and what you would have upon retirement by considering your options, such as investing in suitable products to close the gap.
4. Plan your legacy. Consider making ...
- LPA (Lasting Power of Attorney)
- AMD (Advance Medical Directive)
- ACP (Advance Care Planning)
- A Will
- CPF nomination.
More information is available at “My Legacy” website: https://mylegacy.life.gov.sg/
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The Supplementary Retirement Scheme (SRS) is a voluntary scheme to encourage individuals to save for retirement, over and above their CPF savings. Here are some of its features.
- It offers tax benefits as contributions to the SRS account are eligible for tax reliefs the following year.
- The contribution cap is at $15,300 yearly for locals and PRs, $35,700 yearly for foreigners.
- Early withdrawal of funds before the statutory retirement age* would be subject to a 5% penalty and 100% of the amount withdrawn is subject to tax.
- If you withdraw during or after the retirement age, there would not be penalties and 50% of the withdrawal amount will be subject to tax.
- For more information, visit https://www.mof.gov.sg/schemes/individuals/supplementary-retirement-scheme
* The statutory retirement age (63 effective from 1 Jul 2022) that was prevailing at the time of your first SRS contribution (i.e., prescribed retirement age). If you have already opened an SRS account and made your first contribution, any subsequent change in the statutory retirement age (e.g., up to age 65) will not affect you.
- It offers tax benefits as contributions to the SRS account are eligible for tax reliefs the following year.
- The contribution cap is at $15,300 yearly for locals and PRs, $35,700 yearly for foreigners.
- Early withdrawal of funds before the statutory retirement age* would be subject to a 5% penalty and 100% of the amount withdrawn is subject to tax.
- If you withdraw during or after the retirement age, there would not be penalties and 50% of the withdrawal amount will be subject to tax.
- For more information, visit https://www.mof.gov.sg/schemes/individuals/supplementary-retirement-scheme
* The statutory retirement age (63 effective from 1 Jul 2022) that was prevailing at the time of your first SRS contribution (i.e., prescribed retirement age). If you have already opened an SRS account and made your first contribution, any subsequent change in the statutory retirement age (e.g., up to age 65) will not affect you.
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How much do you think is needed to retire in Singapore? $500,000? $1 million? Regardless of the amount, it is important to start saving early to enjoy retirement. Here are some ways to build your retirement income.
1. Annuities
- Comprises of principal, interest and survivor benefits
- A lump sum payment is made in return for promised future monthly payouts
CPF Lifelong Income For the Elderly (CPF LIFE) is a national longevity insurance annuity scheme that provides you with monthly payouts no matter how long you live, so you never have to worry. You can visit CPF website for more information: https://www.cpf.gov.sg/member/retirement-income/monthly-payouts/cpf-life
2. Insurance
- You can receive a lump sum payout when the endowment policy has reached maturity. There are also policies where payouts can be withdrawn at certain intervals.
You can visit CompareFirst, an informational portal that can help you find information on life insurance products that are offered by all life insurers catering to the retail market in Singapore. The information from the portal allows you to compare Direct Insurance products (DPIs), term life insurance, whole life insurance and endowment policies. You can also obtain general product information on investment-linked policies. https://www.comparefirst.sg/wap/homeEvent.action
3. Right-sizing to a smaller home
- Cash proceeds can be used for expenses or investments
4. Cash top up to Special Account or Retirement Account
- Benefits include good interest which is guaranteed and tax reliefs
More information is available at following CPF website: https://www.cpf.gov.sg/member/growing-your-savings/saving-more-with-cpf/top-up-to-enjoy-higher-retirement-payouts
5. Supplementary Retirement Scheme
− A voluntary scheme to supplement retirement income by saving cash into an SRS account that is opened with one of the three local banks.
− Benefits include tax relief
More information is available at the following website:
https://www.iras.gov.sg/taxes/individual-income-tax/basics-of-individual-income-tax/special-tax-schemes/srs-contributions
https://www.cpf.gov.sg/member/faq/general-information---useful-tips/general-information-on-other-government-agencies/what-is-supplementary-retirement-scheme-
6. Shares, Bonds, Unit Trusts and Others
- Rebalance your portfolio when you are nearing retirement by investing in lower risk products.
1. Annuities
- Comprises of principal, interest and survivor benefits
- A lump sum payment is made in return for promised future monthly payouts
CPF Lifelong Income For the Elderly (CPF LIFE) is a national longevity insurance annuity scheme that provides you with monthly payouts no matter how long you live, so you never have to worry. You can visit CPF website for more information: https://www.cpf.gov.sg/member/retirement-income/monthly-payouts/cpf-life
2. Insurance
- You can receive a lump sum payout when the endowment policy has reached maturity. There are also policies where payouts can be withdrawn at certain intervals.
You can visit CompareFirst, an informational portal that can help you find information on life insurance products that are offered by all life insurers catering to the retail market in Singapore. The information from the portal allows you to compare Direct Insurance products (DPIs), term life insurance, whole life insurance and endowment policies. You can also obtain general product information on investment-linked policies. https://www.comparefirst.sg/wap/homeEvent.action
3. Right-sizing to a smaller home
- Cash proceeds can be used for expenses or investments
4. Cash top up to Special Account or Retirement Account
- Benefits include good interest which is guaranteed and tax reliefs
More information is available at following CPF website: https://www.cpf.gov.sg/member/growing-your-savings/saving-more-with-cpf/top-up-to-enjoy-higher-retirement-payouts
5. Supplementary Retirement Scheme
− A voluntary scheme to supplement retirement income by saving cash into an SRS account that is opened with one of the three local banks.
− Benefits include tax relief
More information is available at the following website:
https://www.iras.gov.sg/taxes/individual-income-tax/basics-of-individual-income-tax/special-tax-schemes/srs-contributions
https://www.cpf.gov.sg/member/faq/general-information---useful-tips/general-information-on-other-government-agencies/what-is-supplementary-retirement-scheme-
6. Shares, Bonds, Unit Trusts and Others
- Rebalance your portfolio when you are nearing retirement by investing in lower risk products.
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Investment risk can refer to:
• Lower than expected returns, e.g., due to share price volatility or the underperformance of funds; or
• The possibility of losing money invested, e.g., when a bond issuer defaults on interest or principal payments. In some cases, you may lose all of the money you invested.
All investments come with the risk of losing money, whether it’s the amount you invested or a loss in earnings.
When deciding on the appropriate level of risk for you, consider the following:
1) What is your investment horizon? Simply remember this: Do not take the risk if you do not have the time to recover from your losses.
2) What is your risk tolerance? How much can I afford to lose?
Risk tolerance differs from person to person. You are the best person to gauge how comfortable you are with different level of risk. Your need to take risk largely depends on the returns you want. But your ability to take risk depends on factors such as the commitments you have currently, your investment horizon, future commitments, number of dependents and how much capital you have and can afford to lose. Your willingness to take risk may be curtailed if your need and ability to take risk are low. Some questions you should ask yourself include:
• Some investment products may involve losses which are permanent. Can you afford the losses in some of your invested assets should the whole economy and market head south?
• Do you have a fall-back plan should things turn very wrong with the investments you have made?
• How far can you extend yourself?
In terms of appetite for risk, it refers to how much can a person afford to lose without overly impacting his/her financial situation and financial plans. Do not put your money into investment products that you do not understand. Allocate your funds according to your investment objectives and risk profile.
It is also important to know your investment horizon, which is the amount of time you have to invest so as to achieve your financial goals. Generally, the shorter the investment horizon you have means that you will need your money in a short time and you cannot take chances with your capital. You should invest in assets that do not put your capital at risk during the period.
A longer investment horizon allows you more time to ride out short-term price fluctuations on your investments. Furthermore, the longer the investment horizon you have, the more time you also have to grow your savings through compounding. Compounding is about earning interest upon interest, i.e. returns on previous returns. This means that earnings that you earn are reinvested and thereby increase the amount upon which more earnings are generated. If you start early, your investments will be able to compound over a longer time period. The earliest returns are reinvested for the longest time and therefore generate greater returns.
Your risk- return profile and investment horizon depend on the life stage you are in – Accumulation, Savings, Pre-Retirement, and Retirement Phases.
• Lower than expected returns, e.g., due to share price volatility or the underperformance of funds; or
• The possibility of losing money invested, e.g., when a bond issuer defaults on interest or principal payments. In some cases, you may lose all of the money you invested.
All investments come with the risk of losing money, whether it’s the amount you invested or a loss in earnings.
When deciding on the appropriate level of risk for you, consider the following:
1) What is your investment horizon? Simply remember this: Do not take the risk if you do not have the time to recover from your losses.
2) What is your risk tolerance? How much can I afford to lose?
Risk tolerance differs from person to person. You are the best person to gauge how comfortable you are with different level of risk. Your need to take risk largely depends on the returns you want. But your ability to take risk depends on factors such as the commitments you have currently, your investment horizon, future commitments, number of dependents and how much capital you have and can afford to lose. Your willingness to take risk may be curtailed if your need and ability to take risk are low. Some questions you should ask yourself include:
• Some investment products may involve losses which are permanent. Can you afford the losses in some of your invested assets should the whole economy and market head south?
• Do you have a fall-back plan should things turn very wrong with the investments you have made?
• How far can you extend yourself?
In terms of appetite for risk, it refers to how much can a person afford to lose without overly impacting his/her financial situation and financial plans. Do not put your money into investment products that you do not understand. Allocate your funds according to your investment objectives and risk profile.
It is also important to know your investment horizon, which is the amount of time you have to invest so as to achieve your financial goals. Generally, the shorter the investment horizon you have means that you will need your money in a short time and you cannot take chances with your capital. You should invest in assets that do not put your capital at risk during the period.
A longer investment horizon allows you more time to ride out short-term price fluctuations on your investments. Furthermore, the longer the investment horizon you have, the more time you also have to grow your savings through compounding. Compounding is about earning interest upon interest, i.e. returns on previous returns. This means that earnings that you earn are reinvested and thereby increase the amount upon which more earnings are generated. If you start early, your investments will be able to compound over a longer time period. The earliest returns are reinvested for the longest time and therefore generate greater returns.
Your risk- return profile and investment horizon depend on the life stage you are in – Accumulation, Savings, Pre-Retirement, and Retirement Phases.
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Ask-Me-Anything!Podcast (30 March 2022): Planning Your Retirement (continuation from 19 Feb 2022 AMA Session):
https://www.youtube.com/watch?v=DZ3g7-jnvX8
https://www.youtube.com/watch?v=DZ3g7-jnvX8
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How are families changing?
The Census of Population 2020 has shown the following trends.
1) People are having smaller families- average household size has decreased from 3.5 to 3.2 from 2010 to 2020.
2) Proportion of resident households with at least 1 member aged 65 years and over has increased from 24.1% in 2010 to 34.5% in 2020.
3) Life Expectancy at Birth has increased from 81.7 years in 2010 to 83.9 years in 2020.
4) More Stretched Resources- Resident old-age dependency ratio* increased from 13.5 in 2010 to 23.4 in 2020.
*Residents aged 65years and over per 100 residents aged 20-64 years.
5) More Singles, Less Married Individuals- The percentage of people between 20 and 49 years old who stay single increased among all age groups. The proportion of married individuals dropped to 58.8% in 2020 from 59.4% in 2010.
Source: https://www.singstat.gov.sg/find-data/search-by-theme/households/households/visualising-data
The Census of Population 2020 has shown the following trends.
1) People are having smaller families- average household size has decreased from 3.5 to 3.2 from 2010 to 2020.
2) Proportion of resident households with at least 1 member aged 65 years and over has increased from 24.1% in 2010 to 34.5% in 2020.
3) Life Expectancy at Birth has increased from 81.7 years in 2010 to 83.9 years in 2020.
4) More Stretched Resources- Resident old-age dependency ratio* increased from 13.5 in 2010 to 23.4 in 2020.
*Residents aged 65years and over per 100 residents aged 20-64 years.
5) More Singles, Less Married Individuals- The percentage of people between 20 and 49 years old who stay single increased among all age groups. The proportion of married individuals dropped to 58.8% in 2020 from 59.4% in 2010.
Source: https://www.singstat.gov.sg/find-data/search-by-theme/households/households/visualising-data
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What are some things you should do to prepare yourself when starting a family?
- Have enough insurance. Buy maternity health insurance to protect yourself from unexpected complications during pregnancy. Speak to your financial advisor.
- Set up an emergency fund, which should be at least about 6 times of your monthly expenses.
- Plan ahead for future costs. If you decide that one of you will stay home to take care of the child, you may be dependent on a single income. Prepare for this and ensure that you are able to save at least 20% of your income. Reduce your unnecessary expenses.
- Have enough insurance. Buy maternity health insurance to protect yourself from unexpected complications during pregnancy. Speak to your financial advisor.
- Set up an emergency fund, which should be at least about 6 times of your monthly expenses.
- Plan ahead for future costs. If you decide that one of you will stay home to take care of the child, you may be dependent on a single income. Prepare for this and ensure that you are able to save at least 20% of your income. Reduce your unnecessary expenses.