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Retirement Planning In Singapore: 5 Reasons Why You Should Start The Moment You Start Work

Planning for retirement is simpler and less painful the earlier you do it.

For many young adults in the 20s, fresh out of university and just starting their career, retirement planning seems like a distant goal that hardly seems real. But many do not know that this is also the best time to plan for retirement.

In fact, many Singaporeans have expressed uncertainty about their own financial stability in their twilight years, despite it being an oft-overlooked and forgotten topic.

This is why planning for your own retirement early enables you to have a peace of mind, knowing that you will be able maintain a comfortable standard of living as you grow older.

If you are not convinced, here are the five reasons why there is no better time than now to plan for your retirement, especially when you are in your 20s.

Read Also: Investing In Yourself: Here’s What Every Student Needs To Know Before Entering The Working World

#1 You Have Lesser Financial Obligation When You Are Young

Starting your retirement planning early has its advantages. For instance, when you are young and starting out your career, you are most likely to have a lower demand when it comes to an ideal standard of living.

You are also likely to be single, and do not have other major financial obligations at any given time near future, perhaps with the exception of servicing a student loan.

Nevertheless, the situation makes it easy for you to plan for a budget that caters to saving ahead. You can contribute a small sum each month – which can be as little as $100 – towards your retirement needs, and still have plenty of money to pay off your student loan debt.

For someone in the 40s however, despite commanding a higher salary, the person is likely to have a higher demand in terms of living standards, which translates to a higher cost of living.

In addition, they are also likely to commit to a heavier financial obligation, such as servicing a housing loan while raising a child at the same time.

Read Also: Should I Repay My Student Loan As Quickly As Possible?

#2 You Have More Time To Plan And Save 

You may not earn a lot of money as you start your career in your 20s, but there is something you have more of than the richer, older folks: time.

We will illustrate this concept by making a comparison between Mr A, who is 25-years-old, and Mr B, who is 40-years-old.

Mr A Mr B
Age 25 years old 40 years old
Years until 65 years old 40 years 25 years


Presuming both would like to retire at the age of 65, it leaves the younger Mr A with a whopping 40 years to save up and invest for retirement.

For the 40-year-old Mr B however, he has only 25 years to save and invest.

You may begin to ask why time is important? With time on your side, planning for retirement becomes a walk in the park, and this is just only the beginning.

Read Also: Here’s How You Can Start Retirement Planning At Every Stage Of Your Life

#3 When You Start Saving Early, You Can Afford To Put Aside Less, Instead Of Needing To Save A Lot Later

With more time on your hands to plan for retirement, you can make smaller contributions over a longer period of time.

In this case, you are certainly going to end up in a better financial position than those who are starting out their retirement planning later.

Let us illustrate this concept with another comparison between Mr A and Mr B.

Mr A Mr B
Age 25 years old 40 years old
Years until 65 years old 40 years 25 years
Amount set aside each month $200/month $320/month
Total deposit $96,000 $96,000


Presuming Mr A sets aside $200 each month over a span of 40 years, he would have saved $96,000 when he turns 65.

For Mr B however, he will have to put aside $320 each month, or $120 more than Mr A, over a period of 25 years in order to save the same amount of money as Mr A. This doesn’t take into account interest, which leads us to the next point.

Read Also: Why Are Many Singaporeans Still Poor – Despite Working Hard And Saving Diligently?

#4 You Can Effectively Leverage On The Power Of Compound Interest

Albert Einstein once said, “Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”

For the uninitiated, “making money on your money” is the concept behind compound interest. Compounding occurs when the money you earn from your capital is added to your capital, which allows you to earn even more, thus allowing you to see an exponential growth in your money over time.

This is why if you were to start your retirement planning early, you will stand a better chance to make better use of the power of compound interest.

Let us examine the concept of compound interest by making another comparison between Mr A and Mr B.

Mr A Mr B
Age 25 years old 40 years old
Years until 65 years old 40 years 25 years
Amount set aside each month $200/month $320/month
Returns per annum 5% 5%
Total deposit $96,000 $96,000
Interest earned $201,771.44 $92,235.68
Total value $297,771.44 $188,235.68


Presuming Mr A invests his monthly savings of $200 into an investment with a return of 5% per annum, he should see a total value of over $200,000, including interest, after 40 years.

For Mr B however, despite putting aside an additional $120 each month, and having the same deposit amount of $96,000 as Mr A, his total value with returns is lesser than Mr A’s by more than $100,000.

The shortfall is caused by a shorter duration of 25 years on the effect of compound interest on his investment, as compared to Mr A, who has 40 years to leverage on the effect to see a higher return.

The concept of compound interest should make a strong justification as to why you should start planning for your retirement now. By starting early, you can leverage effectively on compound interest and retire with more money in your pocket.

Read Also: 3 Occasions When Compound Interest Can Work Against You

#5 You Can Afford To Make More Aggressive Investment Choices

In investments, we must accept that risk and returns go hand-in-hand, where the potential return is proportionate to the potential loss.

However, we also need to bear in mind that the market is cyclical. Correction will occur, so does recovery. But it takes time for the market to recover from a correction.

With more time to see through the correction and the recovery that will follow, you should have no problem seeing higher returns on your investment.

And this is why by planning your retirement early, you can exercise the option to invest in products that carry a higher risk but may yield a higher return over time, simply by leveraging on the cyclical nature of the market.

On the other hand, by starting your planning at a later stage, you risk shortening the available timeframe for your investments to see any returns. This would mean limiting your investment choices further with only conservative options, which will see your growth diminishing.

Also, if you are pulling out your investments when prices are low, you are most likely to lose a portion of the money you have initially invested.

Read Also: Why Risk-Adjusted Returns Matter For Your Investment Portfolio

The Best Time To Start Retirement Preparations Is Yesterday, And The Second Best Time Is Today

The bottom line is the sooner you start planning for your retirement, the better. When you start early, you can afford to put away less money a month since compound interest is on your side.

With more time to ride out volatility, you are also able to make calculated investment choices that are likely to give higher returns over the longer-term.

Read Also: Why Retirement Planning Is For The Young, And How Singaporeans Can Start Planning For It Today

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