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4 Retirement Myths That Singaporeans Believe In


It is hard to retire in Singapore. Things are expensive and the population is ever increasing. There are tons of luxury items that many of us want, but are unable to afford. Price of HDB flats are similar to that of landed properties in other developed nations. Prices of cars are exorbitant. The cost of daily necessities such as food and transport are always creeping upwards. Just look at the latest public transport review.

If retirement is important, then planning for it is absolutely essential. However, people often spend far more time planning for their annual end-of-year holidays than their retirement. If only we spend as much time reading up on financial planning as we spend to reviewing holiday destinations on Tripadvisor.

Here are 4 myths about retiring in Singapore that people always fall victim to.


1. CPF is sufficient for me.

If you were to be given $1200 a month for retirement, would that be enough? Probably not. That is what CPF Life will give you provided that you could  meet the minimum sum, which most Singaporeans can’t.

Here is a story of a 77-year old man from the US who is still working flipping burgers. He is paid about $8 an hour for his job. He does however have a social security payout of $1200 and a $600 payout from his corporate pension plan. However, $1800 a month was not sufficient for him to be able to maintain even a much reduced lifestyle compared to what he used to have. Hence he continues working.

Singapore is equally (if not more) expensive. Thinking we can get by on a $1200 monthly CPF payout is unlikely to be feasible for most of us who are used to a higher standard of living. CPF payout is structured to provide just enough money for you to stay off the streets and not be a social problem to the country.

To maintain even a fraction of your lifestyle, you need a lot more.


2. Planning for retirement starts after 50

Assuming you need about $25,000 a year to retire, a comfortable ball park figure of how much money you will need at retirement would be $375,000 (15 years of annual expenses).

The CPF minimum sum (again assuming you achieve it) would give you about $155,000, leaving you with another $220,000 to fill in.

If you are only going to start thinking about accumulating that $220,000 on your 50th birthday, it is going to be an uphill task. Assuming retirement at age 65, you will need to save about $15,000 a year, (or about $1250 a month).

If you start this on your 30th birthday, you will only need to save about $6000 a year (or $500) a month, which in our opinion, is a far more attainable goal.

And we are assuming here that you will not invest with the money you  have saved.


3.Drawing a monthly income from a savings account is a good strategy.

Putting your entire savings into a savings account and drawing it down on a monthly basis is probably the most inefficient way for you to be maximizing your money. This sum of money in the bank should be earning interest even as you are slowly depleting the principal.

An example is CPF Life. A member who meets the minimum sum required of $155,000 will be able to draw about $14,400 a year that will last the person 10.7 years. However, CPF Life is able to pay beyond that time span till death of the member due to the fact that the principal amount continues to earn interest even during the time of payout.

The point here is regardless of whether you used CPF Life, or any other investment instruments; you need to be generating returns on the principal that was set aside.


4. My investment will continue to do well till retirement

Asset allocation is an investment strategy that is extremely important when one is planning for retirement. Here is why.

Most investment plans are successful in the long run due to the effect of compound interest. It is easy for any financial planners to excite potential customer on how much he can have if he starts investing today for the next 30 years and generate a 5% annual return.

For example, an annual investment of $5000 (about $400 monthly) into investment plan generating a 5% return would provide about $175,000 after 20 years. Give this 10 more years and the amount would double to about $350,000. Exciting stuff isn’t it?

What many people don’t realize is that compound interest gives a higher weight to returns in the tail end of an investment plan. That basically means that the returns generated in the last 5 years of your investment plan is far more important than the returns you get in the first 5 years. For example, if the first 5 years of your investment provides a negative return, it is okay and you can recover from it. If it happens in the last 5 years, your retirement plan is basically screwed; it is as simple as that.

Asset allocation is the solution to mitigate this risk. It basically says that as you grow older, you should be taking less risks, not more. Sadly, some Singaporeans do the exact opposite.

Do any of these myths resonate within you as well? Do you know someone who is making mistakes mentioned above? Share it with us on Facebook today. aims to provide interesting, bite-sized and relevant financial articles.

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