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A 5-Step Plan to Investing for Retirement in Singapore

We all strive to stay two steps ahead. Most Singaporeans will have their five-year plan laid out ahead of them, while others might even be thinking ten years ahead.

But how many young Singaporeans in their twenties are already making plans for their golden years? It may seem premature to start thinking about retirement before you’ve started family planning, but it certainly pays to start early—yes, even if that means 40 years early.

The funds in your retirement nest egg not only go to your retirement lifestyle, but also to your dependents. As your priorities shift to your family and personal wellbeing, you might even want to dive into a new hobby or business endeavour during your retirement.

A 2020 survey by wealth management firm St. James’s Place found that 48% of Singaporean respondents believe they won’t have enough savings for their retirement.

In this guide, we show you how to beat those odds as we guide you through an introduction to investing for your retirement in Singapore.

Life stages: From Accumulation to Decumulation

For the majority of our time in the workforce, we are operating in the accumulation stage. The accumulation stage is where our efforts are focused on accumulating our wealth—generating more income, saving every penny, and investing wisely to watch our money grow. You know the drill.

It’s no wonder then, that this becomes second nature. Come time to step down, it’s often more complicated to figure out how to draw down your assets instead of building them up, known as decumulation.

After an entire lifetime of earning, we may be prone to loss aversion which makes us afraid of spending, which may then lead to underspending (believe it or not!).

A decumulation strategy helps you spend down all the money you’ve worked so hard to earn throughout your adult life, making sure you actually get to enjoy the fruits of your labour while spending wisely in accordance with your retirement goals.

Our 5-Step Plan to Investing for Retirement in Singapore

There are a million and one different approaches to retirement planning. Below is our five-step plan to retirement planning in Singapore.

  • Define your retirement goals
  • Anticipate your retirement spending needs 
  • Start saving smart and investing early 
  • Diversify your investment portfolio
  • Consider your decumulation strategy 

1. Define your retirement goals

“Retirement” in itself is not a proper goal. Accurate retirement planning starts with setting actual goals.

When drafting your list of retirement goals, make sure not to neglect essential items such as:

  • Family and inheritance
  • Paying off your house mortgage
  • Financing your ideal retirement lifestyle
  • Having an emergency reserve

From there, you can branch out into the exciting stuff. Common discretionary retirement goals include:

  • Travel
  • Charitable giving
  • Hobbies such as landscaping
  • Realising a new business
  • Pursuing a different career path

Shortlisting your retirement goals will no doubt require a sit down with yourself to ask some tough questions. Realistically, what will your future look like? How would you want to be spending the remainder of your years?

2. Anticipate your retirement spending needs

Think of your retirement goals as your dream house, and your retirement spending needs as the house’s price tag. How would you know how much to save if you don’t know the house’s purchase price?

A 2020 JP Morgan survey showed that 59% of retirees are spending more than they did when they were working full-time. The safe approach then, is to assume that your retirement expenses will surpass your living expenses before retirement. That means your living expenses with car, mortgage, children and parents included.

Knowing your retirement age and goals, you can then do some guesswork to quantify the required savings involved. Since we’re thinking decades ahead, you will also need to adjust for inflation. Luckily, our handy retirement calculator already accounts for inflation.

3. Start saving smart and investing early

From here on, it’s a matter of aligning your financial resources with your retirement goals and spending needs. Some questions to ask yourself include:

  • How will you save and invest to build up your retirement nest egg?
  • How will you manage your debt to afford retirement?
  • What does your current financial situation look like?
  • Where will your retirement income be coming from?
  • How much will your savings grow for you?

Below are the most common ways to structure and invest your savings for retirement in Singapore.

Retirement schemes in Singapore Benefit Minimum withdrawal age
Central Provident Fund (CPF) 4 – 6% interest p.a. 55
Supplementary Retirement Scheme (SRS) Tax relief for the following year only 62
Insurance policies and private annuities Avg. 1 – 3% interest p.a. Avg. 50 – 70

The above are your typical, conservative retirement schemes. That said, building up your investments for retirement can look different for everyone – whether that be in the form of Fixed Deposits or other investments such as ETFs and Unit Trusts.

Regardless, the most important thing is to start saving and investing NOW. As you’ve no doubt heard many times before, the best time to plant a tree is 20 years ago, the second best time is now. 

4. Diversify your retirement portfolio

Under the umbrella topic of investment, diversifying is the golden rule of investing that many are already familiar with.

Diversifying is spreading your investments across various asset classes to reduce the overall risk.

Over the course of planning for retirement, you may hear advice from many parties touting so-and-so as the best asset class for your retirement portfolio. Whether it be investing for retirement or any other goal however, it’s wise to recall the golden rule.

Your retirement portfolio in particular, needs to be sufficiently diversified as you approach the decumulation stage of life, and protecting your savings takes priority.

5. Consider your decumulation strategy

After all that effort investing for your retirement, you won’t want to neglect the decumulation stage.

Good news though, if you’re a Singaporean born after 1958 with at least $60,000 in your CPF before age 65, you’ll automatically be enrolled in CPF Life.

CPF Life is a national annuity scheme that provides you with monthly payout for as long as you live, starting from age 65. The monthly payouts are withdrawn from your CPF RA (Retirement Account) balance, while the exact amount depends on which plan you choose – Basic, Standard, or Escalating.

(Read more: Click here to read our comprehensive guide to CPF Life.)

CPF Life alone however, often isn’t enough for most Singaporeans’ retirement lifestyles. You can however, also opt for private annuity plans to help bolster your retirement income. Find out all the questions people ask us about annuity insurance plans in Singapore here.

When have you ever regretted starting something early? With the right planning, retirement doesn’t have to be as daunting as it seems. Use our Retirement Calculator to easily help you sort out all the details!

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