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How To Retire Earlier Than An Average Singaporean Even With An Average Income

To be able to retire earlier, we need to embrace the fact that we have to forgo things that we can actually afford now.

All of us know that Singapore is one of the most expensive countries to live and retire in. Given the absence of any unemployment welfare scheme in our country, one would expect that most Singaporeans would pay more attention to their retirement planning in order to have enough during their old age.

However, a survey conducted by DBS Bank and Manulife found that only 36% of Singaporeans age between 40 to 60 is confident of retiring comfortably with their current savings and investments. Another 30% expects to downgrade their lifestyle after they have retired.

If retirement planning is such a challenging task in Singapore, are we all in trouble? Is that anything we can do today to help us to have a peace of mind for our retirement planning tomorrow?

How Much Are We Spending?


In this article on how much Singapore households are spending, we mentioned that the average household in Singapore (40th to 60th percentile) spends about $4,699 per month. At the same time, the average household (40th to 60th percentile) earns about $8,378 per month.

It implies that the same group of households should be able to save and invest about $3,679 per month.

Did that catch you by surprise?

Let’s Go Into The Details…

Based on the income and expenditure numbers given above, we decided to go a little more into the details.

According to Singstats, where we found the original figures from, the figures given for the income is inclusive of employer CPF contributions. So here is a more detailed breakdown of the household income.

Total Income

(Inclusive of employer’s CPF contribution)

Gross Salary $7,160
Take Home Salary

(After 20% employees CPF contribution)

Total CPF Contributions $2,650


With total CPF contributions of $2,650 per month, monthly contributions would be made to the various CPF accounts in the following proportion.

CPF Account Contribution Allocation Amount
CPF Ordinary Account 23% $1,647
CPF Special Account 6% $430
Medisave Account 8% $573


The assumption we made here is that the couple, age 30, will use about $1,100 each month from their CPF Ordinary Account to pay for their home mortgage and transfer the remaining amount ($547) to their CPF Special Account to earn higher interest rates of 4% per annum. With a monthly contribution of $977 per month, the couple would be able to accumulate a total of around $502,000 at age 55.

At age 55, they can buy both buy into the CPF Enhanced Retirement Sum (ERS), which would cost $241,500 per person. Upon reaching the age of 65, they will obtain a monthly payout of between $1,770 to $1,920 per person. The combined total of about $3,800 per month should be sufficient for the couple, especially if they are no longer supporting their children.

Retirement At Age 55 Instead?


The above illustration appears reasonable for a couple intending to retire at age 65. But what if they would like to retire earlier?

When we revisit our “average” couple, we find that their monthly take-home salary of $5,728 is largely used to fund their “average” expenditure of $4,699 per month. This gives them a saving of about $1,029 per month. What can they use this for?

If we assume they spend the first two years (from age 30 onwards) building up an emergency fund of about $24,000, and then start investing at a 4% per annum return over the next 23 years, their portfolio at age 55 would be $452,158. This will give them a monthly income of $3,768 per month from age 55 till 65, where their CPF Life payouts start kicking in.

If you are a middle-income household in Singapore, retiring at age 55, or even before that, is not impossible. Living within your means and making smart financial decisions is generally the key to success. However, retiring early requires us to forgo things that we can afford today. For example, you might be able to afford a car based on your income. Yet, you have to choose to say no to that so that you can afford to save and invest more.

The lowest income households in Singapore would need support from society to be able to cope with the cost of living in Singapore. We don’t deny that. But for a large majority of us in Singapore, working towards our own retirement is something that is attainable and within our means.

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