How to Retire Comfortably in Singapore

Retire comfortably in Singapore by leveraging CPF, investments, and savings to ensure a financially secure and stable retirement for your golden years.

Embarking on the journey towards a secure and fulfilling retirement demands thoughtful consideration and strategic planning. Whether you find yourself in the initial stages of financial independence or are nearing retirement, this comprehensive guide on “how to retire in Singapore” aims to shed light on the intricacies of retirement preparation in Singapore.

From understanding the nuances of the Central Provident Fund (CPF) system to exploring diverse investment opportunities and navigating insurance plans tailored for retirement, this article will delve into the key factors that contribute to a successful retirement for a stable and worry-free future.

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Why retirement planning is important

The core of retirement planning lies in deciding your retirement age. A few factors influence your decision-making:

Having a place to stay, e.g. a fully-paid home
Being debt-free
Having adequate health insurance to offset your medical expenses
Having sufficient savings or passive income to support your retirement lifestyle

You’re ready for retirement if you’ve checked all four boxes above. If it’s the opposite, you may still have some preparation or work to do, but it’s never too early to start saving and investing. Doing so gives you a better chance of achieving your desired retirement goals.

While there are many ways to retire, it’s best to pick the one that suits your circumstances as you plan how to retire. This can hinge on factors like your lifestyle, inflation rates, and how long you expect to live while in retirement.

The CPF retirement income planner can help you gauge the sum you need to retire. Key in your age, desired retirement age, salary and investments into the calculator, and it will calculate your expected retirement savings accordingly.

Retirement in Singapore

As of 1 July 2022, the official retirement age in Singapore is 63 years old, and it is set to incrementally rise to 65 years old by 2030. This adjustment aims to safeguard older employees from premature job termination due to age-related reasons. In case of an age-related dismissal, the affected employee has the option to submit an appeal to the Ministry of Manpower.

Reaching the age of 63 doesn’t mean you have to stop working. A ‘re-employment age’ contract allows you to be offered continued employment until the age of 68, or you can choose to extend for another five years. These contracts, lasting approximately a year, are extended based on satisfactory job performance and medical fitness. The maximum eligible age for re-employment contracts is also set to rise to 70 years old by 2030.

How to qualify for reemployment

In order to qualify for reemployment, you need to meet four requirements:

Be a Singapore citizen or Singapore permanent resident
Have satisfactory work performance based on your employer’s assessments
Serve your current employer for a minimum of 2 years before turning 63 (employees hired at 55 years and above)
Be medically fit to continue working

What happens if you’re eligible but there’s no position available in your company?

In the event that you are eligible for reemployment but your employer cannot give you a position, your employer has to:

Transfer your reemployment obligation to another employer (with your agreement), or
Offer you a one-time Employment Assistant Payment (EAP).

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How CPF works as your retirement income source

Your CPF account holds your primary retirement income source, and it does not restrict you from withdrawals before you retire. Withdrawals from the Retirement Account can only begin at the age of 55, though full fund access is not available.

What happens to your CPF funds when you turn 55 years old?

When you turn 55, the savings from your Special Account (SA), followed by the Ordinary Account (OA), will be transferred to a newly opened Retirement Account (RA).

The amount to be transferred is capped at the Full Retirement Sum (FRS), the ideal point of reference for how much you might need for retirement. The amount of CPF savings in your RA will ultimately determine your future monthly payouts.

If you would like higher payouts, consider making cash top-ups to your Retirement Account up to your prevailing Enhanced Retirement Sum (ERS). This strategy optimises your RA and secures higher payouts when you become eligible for them.

What are the three retirement sum levels and how do they work?

The Retirement Sum (RS) serves as a benchmark on the amount you should save to achieve your targeted monthly payouts. It comprises three levels, as shown in the table below.

Retirement Sum Type	What It Does
Basic Retirement Sum (BRS)	Offers monthly payouts during retirement to address essential living expenses, excluding rental costs.
Full Retirement Sum (FRS)	Ideal reference point on how much a person needs for retirement
Enhanced Retirement Sum (ERS)	Gives a higher monthly payout, ideal for those requiring more retirement income

Source: CPF Board

Each year, the BRS and FRS undergo adjustments to account for long-term inflation, increased life expectancy, and enhancements in the standard of living. The retirement sum you must allocate is determined based on when you turn 55 and remains fixed throughout your lifetime.

If you want to secure greater payouts for your preferred retirement lifestyle, you can increase the amount set aside via a top-up to the ERS level.

Retirement sums that apply to you

The table below indicates the retirement sums for CPF members turning 55 years from 2023 to 2027. The Singapore government announces retirement sums so that CPF members nearing 55 years can prepare themselves for retirement ahead of time.

Year of 55th Birthday	Basic Retirement Sum (BRS)	Full Retirement Sum (FRS)
2023	S$99,400	S$198,800
2024	S$102,900	S$205,800
2025	S$106,500	S$213,000
2026	S$110,200	S$220,400
2027	S$114,100	S$228,200

Source: CPF Board

Even if you haven’t reached your FRS or BRS by the age of 55, you can still start receiving payouts at 65. However, it’s crucial to recognise that these payouts might be less than you expect or need. This highlights the importance of being mindful of your retirement goals and planning accordingly.

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How to build your retirement plan

While it’s commendable that the government manages CPF funds to ensure your well-being, solely relying on your CPF Retirement Account may not be sufficient for a comfortable retirement. It’s crucial to consider the longevity of your CPF funds and whether they align with your retirement needs as you plan how to retire.

For instance, if your monthly payout is S$1,500, less than the S$3000 required for your commitments and lifestyle, you will need to cut down on your expenses by half to ensure you have sufficient funds to last for your retirement. Careful planning and additional efforts to build your retirement funds become imperative.

It’s essential to go beyond that and proactively plan for your retirement. Here’s the strategic approach you can adopt.

Build up your savings

One option on how to retire securely is by growing your savings. The Singapore Savings Bonds (SSB) is a safe investment option that helps your retirement savings grow. SSB offers the advantage of easy access to your money when you need it.

There are also savings plans from financial institutions with tenures from three to five years but with less liquidity compared to SSB. If you’re interested in investing, consider Regular Shares Savings (RSS). With just S$100 a month, you can invest in shares, REITs, or ETFs.

You can use the 25x rule to figure out how much money you need for retirement. Estimate your yearly retirement expenses and multiply that by 25 for the total amount you should aim to save. For example, if your annual expenses are around S$50,000, follow the 25x rule to save S$1.25 million SGD for a worry-free retirement.

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Get sufficient insurance coverage

There are four types of insurance plans to use and enhance your retirement income.

Traditional annuity plan

This insurance type provides monthly or yearly payouts throughout your life. This works by paying a one-time premium or a series of payments to the insurer, resulting in regular lifelong payouts.

Retirement income insurance

This insurance complements growing your retirement income. It helps cover you for life and provides a wider range of components like payout periods and additional cover for long-term care.

Whole life insurance

This insurance type incorporates a savings element and can be withdrawn when you surrender the policy.

Endowment plans

This insurance type combines protection, savings, and investment into a single plan. However, these policies have shorter, defined coverage periods. Benefits are paid in situations such as death, total permanent disability, or when the policy reaches maturity.

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How to retire using investments

When you’re young, your financial focus tends to lean towards capital gains from investments, making a profit by buying low and selling high. However, as you age, the perspective often shifts towards seeing investments as a source of passive income. This shift is crucial, especially considering that investments can become a primary source of passive income during retirement.

Certain investments can provide a reliable stream of passive income to enhance your financial situation in retirement. For instance, if you own property, renting it out can be a valuable investment. Alternatively, if you have spare rooms, renting them out can also generate a consistent passive income over time. Another option is collecting dividends from stocks that pay dividends.

Determining how much investment is needed to achieve your desired savings and income for retirement is essential. High-yielding investments like Real Estate Investment Trusts (REITs) typically offer annual dividends ranging from 5% to 8%. For instance, with an annual yield of 5%, you’d need to invest S$240,000 to generate S$1,000 a month in dividends.

In conclusion, navigating the path to retirement involves a thoughtful blend of financial planning, investment strategy, and a clear understanding of the available options. From maximising CPF contributions to exploring diverse investment avenues and insurance plans, the journey toward a comfortable retirement demands proactive decision-making.

As you plan how to retire, it’s crucial to regularly reassess and adapt your retirement plan as circumstances change. By staying informed, making informed choices, and taking steps to secure both your short-term and long-term financial well-being, you can embark on the retirement phase with confidence, ensuring a fulfilling and financially sound future.