The short answer to this question is: “It depends”.
Fortunately, there’s a longer answer that can help us determine what we need to have a comfortable retirement.
While we are in our 20s, many of us dismiss retirement planning as something that is not as urgent as other financial goals in our lives. We may be planning for our wedding and honeymoon, to buy a home, or get a car for our growing family.
The problem with this mindset is that there will always be more immediate financial goals in front of us, to prioritise regardless of the stage of life we’re at or how old we are. While it may be decades away, planning for our retirement should start the moment we start working to give us the best chance of a comfortable retirement.
How Much Do You Need In Retirement?
No two individuals will need the same amount in retirement. This is because different people will lead different lifestyles and have different expectations in retirement.
Starting at this point, we can use our current monthly expenditure to determine how much we will likely need in our retirement. List down everything you spend on in the month. Make sure you include annual expenses, such as insurance premiums, subscription services, and even property tax or road tax. Determine how much of it you can cut out by the time you retire, such as housing loans and car loans, children allowances and school fees, gym memberships, and investing for our retirement (since we will already be in retirement!).
Many of you will also be able to cut down other expense areas such as shopping for work clothes, some transportation costs of getting to work, eating lunches out, and even downsizing your lifestyle if you have a helper or car.
Of course, many expenses will continue during your retirement, including utility bills, telecommunications bills, TV subscription bills, grocery shopping, transport expenses, entertainment expenses and many others. In some instances, we could even see greater expenditure in areas such as healthcare or leisure. If you or your spouse have poor health, you may also need to employ a helper to upkeep your home.
Based on your current monthly expenditure, and cutting out what you’re unlikely to spend on in retirement, you will arrive at an estimate for how much you may need in retirement.
Read Also: How Much Would $1 Million Dollars Really Buy You During Your Retirement?
So How Much Do We Really Need In Retirement?
As mentioned, this isn’t an easy question to answer, nor will it be an exact figure for everyone. For a good estimate, we can use some insights from the Singapore Department of Statistics (SingStat) to determine what we may need to spend on in our retirement.
Based on a SingStat survey in 2023, the average monthly household expenditure per household member in the 41st to 60th quintile, in retiree households, was $1,017. This is a mouthful, but it simply means that each retired person in the middle 20% of households, spent $1,017 per month.
This is an increase of 4.5% p.a. from the prior Household Expenditure Survey conducted in 2017/18. Extrapolating this, here is the approximate amount you will need in retirement. This assumes you will spend close to 20 years in retirement, from around 65 to 85 years old.
| Age Today | Number Of Years To Retirement | Amount You Will Spend In Retirement |
| 65 | 0 | $412,000 |
| 60 | 5 | $514,000 |
| 55 | 10 | $640,000 |
| 50 | 15 | $798,000 |
| 45 | 20 | $994,000 |
| 40 | 25 | $1.2 million |
| 35 | 30 | $1.5 million |
| 30 | 35 | $1.9 million |
| 25 | 40 | $2.4 million |
Read Also: Here’s What Your CPF Full Retirement Sum Might Look Like When You’re 55
Sounds Like A Lot Of Money – Here’s Why You Don’t Need To Worry (That Much)
Firstly, you don’t need this amount in your bank account the day you retire. You need to understand that you’ll likely spend this amount during the the entire duration of your retirement, which is close to 20 years. This means that part of your money can still be invested, and earn interests and/or returns, while you are 65 to pay for expenses years down the road.
Another consideration is that you won’t need all of this money in cash. You can rely on your CPF savings, in particular, your monthly CPF LIFE payouts to cover your expenses in retirement. One problem you may face is that while your CPF Special Account (SA) savings compound at 4.0% per annum, it looks like the increase in spending in retirement is higher at 4.5% per annum.
Also Read: Retirement Planning Beyond CPF LIFE: Here Are 3 Other Ways To Supplement Your Monthly Income
This figure should already account for inflation, barring unforeseen circumstances. The current figures you see in your take-home pay, investment portfolio and CPF balances do not. Hopefully, between now and when you retire, you will be able to see your savings and CPF balances rise in tandem.
Of course, we’re also taking the middle 20% of the population into consideration. Depending on your ability to spend when you retire, you could fall in the top 20% of retiree households or even bottom 20% of retiree households – and you will still be able to have a retirement.
Lastly, while 65 is the retirement age today. There’s no guarantee that we can’t work beyond that age. Already, the government has committed to raising the re-employment age to 70 by about 2030, and this may follow more adjustments by the time we are near 70.
Finally, even if we aren’t able to keep up with expenses, we can always try to take on some work or even choose to monetise our property by right-sizing or renting out a spare room to keep up with expenses, especially if our savings and CPF balances aren’t able to afford that for us.
Read Also: Retirement In Singapore: Calculating How Much Do You Really Need
