How many of us think about planning for our retirement when we are still young?
In our 20s, when the memory of earning our first paycheck is still fresh, the day when we stop working seems distant. Besides, there are many more attractive ways to spend our paycheck other than stashing it away into a retirement account (Bubble tea, anyone?) But the consequences of running out of funds, just when we want to enjoy retirement, are unpleasant.
On 2 Oct, YWLC members woke up bright and early to hear Ms Amanda Ong, Country Manager for Singapore, Stashaway, share strategies - all the ins and outs - for retirement planning in Singapore. Read on for actionable tips you can start to adopt in your life!
Some of the YWLC members who attended the event
How much money do you need in retirement?
Rule of thumb for the amount needed in retirement: (Current Annual Expenses x 70%) x Inflation Rate x (Life Expectancy - Retirement Age + Buffer). If one expects to have a similar lifestyle in retirement as compared to pre-retirement, then feel free to adjust the 70% rule of thumb higher.
Where will the money come from?
CPF is one source of retirement funds. Besides that, one can make use of other investment options like the voluntary Supplementary Retirement Scheme (SRS), which complements the CPF scheme. Funds in the SRS enjoy tax break advantages as long as they are withdrawn after the statutory retirement age of 62. This is because funds contributed to SRS will be considered tax relief when you file income taxes, lowering your tax bill. And it is recommended to invest the SRS funds instead of leaving it as cash, since the SRS interest rate is only 0.05% hence the cash value will decrease over time due to inflation.
Maximising returns from CPF
Funds in the CPF Ordinary Account (OA) and Special Account (SA) have guaranteed interest rates of 2.5% and 4% respectively, so make use of these Accounts to earn interest on your money. In addition, if one does not intend to use OA funds for a home down payment, consider moving funds from the OA to SA to take advantage of higher interest.
Alternatively, OA funds can be invested in certain approved products, however, evaluate the potential risk and returns carefully - it only makes sense if one is confident it will beat the 2.5% guaranteed interest rate.
Robo-advisors for investment - how to choose between them?
Consider various factors such as whether they are licensed by MAS (Robo-advisors licensed by MAS are subjected to a higher level of scrutiny), their investment framework and investment fees, track record, platform user experience, and lastly, the financial backers behind the company or platform.
As the saying goes: “it’s never too early - or late - to plan for your retirement years”. Rather than having regrets in hindsight, think about the kind of lifestyle you would want when you enter your golden years. Act on these useful tips to strategise for retirement and build your own peace of mind, one step at a time.
Click here to subscribe to YWLC's monthly newsletter and be the first to get our latest updates in your inbox.
Organising Committee: Member Engagement Organising Team: Rachel Kuo Partner: Stashaway
Author: Tay Mingfang Artwork: Chua Khai Shing Editor: Joey Ong