The 101’s Of a Retiring In Singapore

Everyone must retire someday. It is essential that you start preparing for your golden years as soon as possible. The question amongst most people especially the older generation is how long their retirement funds will last. To enjoy and relax in your retirement days, you must start saving from much earlier. The cost of maintaining your lifestyle into your retirement may differ from home to home. To be in comfort during your golden years, you will need an income that is equal to 70 to 80% of what you made while you were employed. Apart from the inclusion of food and necessities, your retirement pension will have to cover various other expenses that will include your transport, medical bills and entertainment. Quite often, people may have to still pay off the mortgage on home loans well into their retirement years.

When thinking about retirement, insufficient healthcare funds, real estate inflation, not enough job opportunities and unpaid debts and loans are the top things that Singaporeans fear about. Working-class Singaporeans find it difficult to start saving early on in life due to the large amounts of money that is spent towards personal loans and housing loans that are licensed from money lenders in Singapore; these loans often last for decades. This is why Singapore citizens find it difficult to save for their retirement.

In Singapore, the retirement age begins from 62 and an average Singaporean must start saving for his golden years from the age of 38. Those Singaporean citizens who are employed or are permanent residents, essentially should put a part of their salary into the compulsory Central Provident-Fund (CPF). This is one of the oldest pension schemes offered by the government and is common throughout Asia.

This retirement scheme takes care of your medical care as well as savings and retirement funding. This retirement account has the highest rate of fixed interest which is 4%. You can contribute anywhere between range of 5 to 20% of your salary. Recently, the government has added a few more improvements in the Central Provident-Fund system. Now citizens can choose from three retirement sums basic, full, enhanced retirement sum, rather than the previous mandatory “minimum sum”. This is an added advantage for Singaporean citizens and permanent residents, since they now have more flexibility in retirement planning.

Many governments operate pension schemes worldwide, the Singaporean government also does so. The government promotes its citizens to think about saving for the retirement age. It encourages its residents to save by offering a separate voluntary scheme which comes with attractive tax benefits. One such scheme is called the Supplementary Retirement-Scheme (SRS), this is run by the Ministry of Manpower.

The Supplementary Retirement-Scheme works alongside the Central Provident-fund. It allows Singaporean citizens to pay a variable amount that is subject to a cap along with certain terms and condition. The amount that you contribute to the scheme can be used to invest in various financial products. The contributions that are made to the scheme are qualified for taxbreak, but the accumulated investment returns tax-free. Withdrawal amounts of up to 50% is taxed at the time of retirement, this is referred to 50% tax concession. It is always advisable to save as much as possible using tax-efficient schemes. The Supplementary Retirement-Scheme falls under such a bracket.

Let’s presume that your contributions to your CPF has been diligent. Not only have you tried to maximise the amount that you have put in to your Central Provident-Fund, but you have also completely utilised your scheme cap. You are now looking for another additional saving scheme for your retirement. You could think about foraying into the stock market and look at low-cost options and purchase STI’s, which is an exchange traded-fund abbreviated as ETF. This type of fund works best for someone who does not want to be hassled by the nitty-gritties of the stock market. It offers a long-term saving scheme. This monthly saving scheme gives you additional benefits such as a dollar cost average.

Over the recent, past majority of financial consultants have encouraged their clients to switch to a complete stock exposure plan upon reaching the retirement age. Nowadays, however the Singaporean population is ageing, and this means that keeping savings in stocks for a large period of time is quite practical! Even though permanent residents make up 1/3 of Singapore’s population, they are not allowed to participate in the Central Provident-Fund which is offered by the government. In scenarios like these, citizens can look into purchasing and Exchange Traded-Funds. ETFs can be purchased by anyone residing in Singapore.

Oftentimes, people will prefer looking at employing a money manager to take care of their retirement portfolio for them. In such a scenario, purchasing an insurance product could be an alternate route. The benefit of having an insurance product is that someone else will take care of managing your portfolio thereby you will save time. On the flip side however, you will have to pay the necessary fees to your money manager. This will require that your projected returns have to be higher. Insurance products can be taken out by Singaporean citizens as well as permanent resident of Singapore.

One-way Singaporeans can reduce their loans prior to retirement is by opting for a debt consolidation plan from a licensed moneylender. Debt consolidation plans let you pay your debt at comfortable pace and also reduces the amount of interest that you have to pay back to the bank. These plans have a revolving credit facility that is equal to your monthly salary. The plans also let you choose how you would like to repay the loan back, you can set a period of time that ranges anywhere between 3 to 7 years.

No retirement product returns can guarantee that it will keep up to the cost of inflation, let alone surpass it. But exchange traded funds which have a variety of assets are more likely to achieve the minimum returns and keep up with inflation. So, let’s stop pondering and now start thinking and calculating what amount you would need to retire. Start taking baby steps towards saving towards your golden years. Get advice from now. And don’t forget that it’s your money that can help you generate more money!


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