Karen Tang, CFP®: Certified Financial Planner in Singapore
Retirement Age in Singapore to Go Up
The 18 August 2019 Straits Times article headline “National Day Rally 2019: Retirement age to go up to 65, older workers’ CPF rates to be raised” came as no surprise to me.
The statutory retirement age will be raised from 62 to 63 in 2022 and to 65 by 2030. Re-employment age will also go up from age 67 now to 68 in 2022, and eventually to 70 by 2030. With rising longevity, this is in inevitable decision by the government.
The numbers are meant to regulate the employers, not workers. This is to protect workers against unfair dismissal. And if you are lucky enough to be with a good employer who recognises the value you bring to the organisation, then you can continue to work all the way till 70.
What does this mean for you in your retirement planning?
Longevity is a double edged sword – while we stay healthy for a longer time, outliving one’s resources can be a very real challenge if we are unprepared for it. As long as health permits, we want to stay engaged, active and lead a purposeful life during retirement.
Currently, CPF LIFE payouts start at age 65. It is obvious that the new retirement age is gradually aligning itself to this by 2030.
When planning for retirement, be realistic about your needs and also remember to give yourself a buffer. Do not be mistaken that your expenses will reduce significantly after retirement, even after paying off mortgage and car loan. This is because getting old usually means more medical bills and free time costs money to fill up!
What is the cost of living in Singapore like?
How do we estimate what we need in retirement? Let’s split this ‘magic number’ into 3 categories:
Core expenses:
This is your baseline i.e. the absolute essential amount of money you need to sustain your day-to-day living expenses. This would include utilities, transport, food and the recreational activities you regard as essential to your quality of life.
Old age/elderly contingency costs:
We could be less healthy as we age and it is highly advisable that we have some form of health insurance and elderly care protection in place. In my opinion, these needs are best met by a comprehensive hospitalisation and surgical plan like the Integrated Shield Plan, and a long term care plan like Aviva MyCare that takes care of old age disability. You can also take up NTUC Income’s MerdekaCare insurance (personal accident) to enhance your overall protection.
Emergency buffer:
Emergencies of any kind can happen. You suffered a bad fall. Your home got partly destroyed as a result of a fire next door. Family drama. How much do you have in your ‘rainy day’ pot? It is always recommended to have a bit of extra money as buffer.
How’s that ‘magic number’ looking?
Much higher than you thought? A recent survey commissioned by NTUC Income put the average desired retirement income of a Singaporean at $3,314 per month. So, how do you fare against this figure?
Don’t forget about inflation…
It is worth noting that this number is subject to inflation as well. Inflation is typically around 3% a year. But if you have a comfortable or lavish lifestyle, do budget for a higher inflation rate i.e. 4% to 5% a year as luxury goods do appreciate faster.
If you need guidance in your retirement planning, feel free to call me for a chat over coffee today!