Going through your retirement check list:
Holiday destinations bucket list – checked
Signed up activities club – checked
Achieve CPF Full Retirement Sum – checked
Wrote your will – checked
Advance Medical Directive – checked
Living Power of Attorney – checked
Integrated Private Medishield Plan – checked……………………….
Lifestyle expectation?
Why do we need to do a lifestyle check? For health reasons? No, it is not. It is more of managing your cost of living. Most of us, especially those born during the 1960s and 1970s may not have huge investment to extract passive income during retirement to sustain our preferred or planned lifestyle. That is where a reality check is necessary.
According to a a SingStat Newsletter published in September 2016, a household which is led by someone who is 60 years and over, spend an average of $3,586 per month or $43,032 per year. We must remember this is 2016 cost of living.
Say you and your spouse are born in 1961 and are planning to retire at 65 in 2026 (where you will draw down your CPF LIFE), and assuming annual inflation is 3%, you will be looking at an annual expense of $57,831. Simplistically, you got to have a monthly retirement income of $4,819.
Foo Wan Ting and Hong Renting “Households’ Spending by Age Group” Statistics Singapore Newsletter September 2016
Again, assume you and your spouse both have $200,000 in your respective Retirement account, CPF LIFE pay out for male is $1,330 per month and $1,240 per month for female under the standard pay out plan. These pay outs were derived from CPF LIFE Estimator. https://www.cpf.gov.sg/eSvc/Web/Schemes/LifeEstimator/LifeEstimator Your total income from CPF LIFE would be $2,570 per month when you retire in 5 years’ time.
Ask yourself realistically, can you and your retired spouse are able to garner enough retirement income of $4,819 a month or $57,831 a year in living expenses (assuming there is no other source of income i.e., contributions from your children).
This article does not seek to give you a solution to meet your monthly expenses as the author believes context is more important than a solution. For example, factors that can affect your retirement expenses level:
Own health care needs/expenses;
- Retirement lifestyle;
- Financial obligations such as outstanding loans that still need to be paid off;
- Need to support physically challenged or sick sibling and/or aged parents (yes, I have come across people who still need to support their very aged parents while they are in the late 60s); and
- You intend to work part-time during retirement until you are no longer able to do so.
The above are some more common factors.
Lifestyle is the most controllable factor that impact your retirement adequacy. Review what you have, and your current commitment then ask yourself: What kind of lifestyle you want in retirement? You should be able to come out with a budget easily after all these years and work the numbers to give you a sense of proportion.
For the younger ones, plan your budgets carefully. You have more time, so plan for the imponderables. Before planning, ask yourself the kind of lifestyle you want to lead in retirement. Try to put a number to it so it can give you what magnitude you are looking at.
You may wish to contact me via WhatsApp 8750 8966 if you are interested to know more.
Written by Ray Ng, 8 November 2021
Disclaimer: All information are for informational purposes only and should not be relied upon as financial advice.