How to Retire in Singapore?

How much do you need to retire in Singapore? For context, you might wish to read more about FIRE Singapore, if you have not done so.

Studies have been done, and the magic figure as of 2018 is around S$1,400. If this seems low, it’s because it’s meant to only cover basic standards of living. You should plan for the lifestyle you want, rather than the minimum.

Reading this beyond 2018? Factoring inflation, these are the figures in subsequent decades:

YearAmount per month to retire
2030S$1,881
2040S$2,528
2050S$3,398
2060S$4,566
Doesn’t look pretty.

The figures are appalling. Furthermore, bear in mind that the figures are for getting by in a humane manner. Say you are 30 years old in 2020, and you want to retire at 50. You will need S$2,528 per month in 2040 for just basic living expenses. This increases to $4,566 when you are 70 (in 2060).

Are you in a State of ‘Financial Limbo’?

Other than confusion with these dazzling thoughts, here’s a quick litmus test:

  1. Do you know your net worth? Surprisingly, a lot of people can’t even answer this offhand!
  2. Any idea how much you need to retire, with the same quality of life you are having right now?
  3. Is your target retirement age based on what people sadly accept to be the norm (i.e. when you are old)?
  4. Do you have a clear plan to build up enough money to retire at this retirement age?

If the answer is ‘no’ to these, I would define you as being in a state of ‘financial limbo’. You will likely repeat a rat race till your 60s – 70s (wasting your life away), when you could be taking action to retire early right now.

Typical Mentality on how to Retire in Singapore

Most people screw up their retirement plans due to ignorance; they simply refuse to confront the issue. Also, making an attempt to retire early is usually never a consideration, because ‘how the heck does one retire early unless you have a sudden windfall’?

This is the typical Singaporean mindset – get a job, get paid monthly, start a family. Save money, stop working at 62. Hope you have enough money by then to use till you die. Hope your kids are filial and give you pocket money (if you messed up your retirement pot).

During their working years, they will try to save money in the bank, perhaps meddle with stocks, buy a property to rent for ‘passive income’ or join some kind of ‘business opportunity’ that they might not understand. Despite doing all these, they have no proper target of how much they need to retire in Singapore, aside from generally trying to amass as much cash as possible.

Most then have a ‘financial adviser’, from whom they hope they have bought enough ‘retirement savings plans’ from.

Typical Interaction with a Financial Adviser

how much to retire in Singapore
‘Bro I have a good plan for you’.

Where building up this ‘retirement pot’ is concerned, financial advisers typically simplify it as: retirement pot needed = money needed per year multiplied by years you think you will live after retirement. Let me know if your first meeting with a financial adviser (FA) sounds something like this:

Preparing Client for the Slaughter

FA: *Takes out a notepad* ‘Tom, so at what age do you want to retire?’

Tom: ‘Haha errr of cause as soon as possible lah. Got people don’t want to retire ASAP one meh? But normally people retire around 60+ right? I just earn a normal salary. How to retire in Singapore sia?’

FA: *Draws a line showing your current age leading up to 62* ‘Let’s say age 62 lor. This is a very normal age to retire. You need to invest your money to make sure you have enough by then. How much do you think you need a month in retirement?’

Tom: ‘Err I don’t know. Maybe 2.5 or 3k?’

Creating a Self-Fulfilling Prophecy

FA: ‘OK bro, that is before inflation. With inflation let’s say 3.5k to be safe. Men usually die around 85. Means you have 23 years of retirement. So you need 23 x 12 x $3,500 = around 1 million dollars. This will last you until age 85.’

Tom: ‘What if 3.5k not enough? Or what if 85 I’m not dead yet ah?’

FA: ‘Men usually die around that age. But it’s always better to over plan than under plan bro. I always tell my clients to plan for around 1.5 million to be safe. If you want better quality of life, it is even better to aim for more..’

Tom: ‘Wow.. hmm OK..’

A ‘Good Plan’ to the Rescue

FA: ‘I have a good policy that gives you insurance coverage, and at the same time helps you invest for retirement. Therefore, it is the best of both worlds. This will help you to retire in Singapore *Takes out confusing table with figures* This plan costs $400 a month. It gives you life insurance coverage, and helps you save also. At age 62, you will have $290,000 after investing for 30 years.’

Tom: ‘Wah that’s like almost 5k of premiums a year. But you said I need 1.5m right? Like that only got 290k at 62. Then how?’

FA: ‘Don’t worry, we start small first. We will meet regularly to review your financial goals.’ Note: what the adviser means is ‘when you earn more money, I will recommend to add more investment plans so I can earn more commissions’

The Horrors of Financial Advisers and Investment Linked Policies (ILPs)

ILPs, a sure-fire way to.. burn away your money.

There are many fundamental issues with this interaction, and the false notions fed to the client.

1. The Idea of Withdrawing Down to Zero

Firstly, think about what the adviser has just suggested. Trying to retire by building up a fixed sum of money, and then withdrawing it down to zero? How do you think you would feel when you approach 85 (the supposed ’85 most people die already’ age), and see that your retirement pot has mostly been depleted? This ‘deflationary’ strategy of ‘drawing down to zero’ is both ineffective and depressing!

2. Giving the Insurance Company your Hard-Earned Returns

Secondly, the adviser said you would get $290,000 after 30 years. This is a mere 4% growth rate, which is mostly not guaranteed. Wanna know what makes things worse? To pay you this amount, the insurance agency projects a growth of around 8% (again, not guaranteed), so they can keep almost half your portfolio amount as profits and other admin charges.

If things ‘go well’, you get $290,000. Otherwise, we’re talking about getting back something in the range of $150,000 (around the same amount of total premiums you have put in over 30 years). However, if you had invested $5,000/year yourself at 8% growth for 30 years, you would have ended up with $600,000 (twice what the agent touted as something good for you). Talk about a rip off!

3. Hello? Are We Forgetting CPF LIFE? In Singapore, This Helps You Retire Too

Thirdly, most advisers will never speak a word about the CPF LIFE scheme. Why? Because it is a national annuity scheme that insurance companies are mostly unable to beat (or virtually impossible to). CPF LIFE pays you a monthly amount from age 65 until you pass away, and should be part of your retirement plan. Financial advisers do not want to talk about this, so they can give an impression that you need a larger retirement pot (without factoring in CPF LIFE).

How to retire in Singapore, if you depend on a financial adviser whose interests conflict with yours?

Disclaimer: I have nothing against financial advisers making a living. In fact, I have good friends who are FAs (who are excellent and very kind people). Financial advisers do play an important role in educating people who are not in tune with coverage for accidents, hospitalisation and illnesses. ILPs might have some form of value for those who do not mind policies with nominal returns paired with insurance coverage.

Getting out of Financial Limbo to Retire in Singapore in the Shortest Time

I think we have more or less established that it is generally not a good idea to invest your money with financial agents. Therefore, what you should do is buy term insurance coverage, and invest the rest yourself (with a Bogleheads portfolio) to build your retirement pot of gold.

With all that said, it is not too late to take rapid action. If you’re reading this in your 20s – 30s, you’ll at a good start. If you’re in your 40s and beyond, it’s better late than never. First and foremost, I will share with you what a Bogleheads portfolio is, how to find your net worth, how to invest with a Bogleheads portfolio, and also how to fight psychological demons that try to disrupt your FIRE journey.

So, how to retire in Singapore? Read on below to find out more:

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