Singapore ranks third in global life expectancy rankings. With longer live expectancies, are we living better than before? With the increasing costs of living in Singapore, how can we prepare for our retirement?
“Couples should determine their financial priorities and adjust accordingly. What people fail to realize is that their retirement funds will not be as sustainable as they hoped,” shared Madam Melly, a mother of three and financial advisor with over 20 years of experience.
Although it is never too early to start planning for your retirement, it is perhaps more relevant for couples whose children are older.
Re-examine Your Living Expenses
Re-examine your living expenses and have a clear idea of what retirement looks like to you. How you intend to spend your years would mean a shift in your living expenses and you may want to re-prioritise certain items.
Based on your lifestyle, you can better estimate how much savings you will need:
1. Living expenses - transportation, insurance, recurring health care expenses, food, housing, mortgage
2. Contingency reserve - home repairs, car repairs, unanticipated health care expenses
3. Discretionary spending - vacations, eating out, entertainment
4. Legacy - transferrable wealth
“Inflation will be a liability. So always know your limits and think long-term. Double, or triple your intended saving amount whenever possible,” advised Madam Melly.
Start Living Within Your Financial Limits Now
Couples should list out their financial limits to avoid over-spending and getting into debt. If your partner tends to be a compulsive shopper, make your expectations clear and agree on setting some limits.
Always communicate openly and reach a consensus. Support each other to focus on better long-term money management, and agree to discuss significant financial pay-outs together (i.e. starting a business, lending money to friends and family) before making such a decision.
Couples can also tap on resources such as CPF Savings Calculator to estimate how much savings they need to put aside no matter which stage of life they are in.
As people are generally living longer due to advances in technology and healthcare, many of us face uncertainty if our savings can last us through retirement. To have peace of mind, you can explore CPF Lifelong Income For The Elderly (CPF LIFE) Scheme, which provides Singapore Citizens and Permanent Residents with a regular stream of income for as long as you live.
Identify Your Health Risks and Take Action
Statistics show that 66% of parents were most worried about being unable to afford healthcare. Health risks inevitably increase as you and your spouse get older. People need to be conscious of risks such as high blood pressure, immobility, and hospitalisation. It can take only one major illness to wipe out your life savings. Chronic conditions will require long term care and medication and can be costly over the years.
It helps to stay healthy to prevent illnesses but also helps you to enjoy your golden years. Nonetheless, it is wise to save for future healthcare expenses.
Though it is compulsory for Singaporeans to set aside their income for MediSave and MediShield Life, this coverage may not be comprehensive enough in the face of rising healthcare costs. CPF members can thus consider to use their MediSave savings to buy additional integrated Shield Plans for themselves and their dependents.
You could always protect yourself further by considering private healthcare insurance plans, where many cover the costs of regular health screenings as well.
“Always aim for comprehensive and broad-based insurance coverage. Be mindful of all risk factors. For example, a term insurance might cover total permanent disability and death, but might not have adequate coverage for critical illnesses or hospitalisation,” advised Mr. V. Maheantharan, Director of Institute for Financial Literacy (IFL), MoneySENSE-Singapore Polytechnic.
Always take stock and ensure that you and your partner will be able to afford long term insurance premium. Do not let upfront benefits (free gift, short-term discount on premiums) distract you in deciding which insurance to buy. Make informed decisions through thorough research and comparison on all product features before you purchase anything.
Determine How Much Housing Space You Require
Ask yourself, how much housing space do you really need?
When your children move out of the family nest, you may want to consider moving into a right-sized home for just you and your spouse. There are many benefits with this move.
For starters, moving into a smaller property makes it easier to maintain. Instead of requiring a live-in helper, you can save money by opting for a part-time cleaner. If you remain in good health, you could even finish the chores yourself.
“When you make the practical decision to right-size your home, you unlock value from the appreciation of your property. The net sale profit can be used to fund your retirement,” explained Mr. V Maheantharan.
To have a clearer idea on your needs, you may want to seek professional advice to help you plan a more detailed retirement plan.
This article was written in collaboration with Institute for Financial Literacy, MoneySENSE-Singapore Polytechnic, who is committed to helping Singaporeans develop core financial capabilities through its free and unbiased financial education programmes.