Endowment Insurance

What Is Retirement Like for You in Singapore?

The key to maximizing the amount of time you spend on leisure activities while minimizing financial worries during retirement is through a stable and sizeable passive income stream. Here’s what you need to do.

Would you be financially ready to retire? Unfortunately, if you're anything like most Singaporeans here, the answer is likely "no". According to a June 2020 survey conducted by OCBC, around two-thirds of working Singaporeans and permanent residents indicated that they did not even have enough savings to last them beyond 6 months – highlighting the urgent need for you to start beefing up your nest egg as soon as possible. And the key to that? It's in ensuring a steady stream of passive income that adequately covers your lifestyle preferences, needs, and any unexpected expenses; here are 4 strategies you can leverage to achieve that.

Maximise Your Monthly Payout from CPF Life

Retirement Account Savings At 55 (S$)Standard Plan (S$)Escalating Plan; Increases by 2% every year for life (S$)Basic Plan; Progressively Lowers When CPF Balances Falls Below S$60,000 (S$)
Basic Retirement Sum (BRS): 93,000770600730
Full Retirement Sum (FRS): 186,0001,4201,1001,350
Enhanced Retirement Sum (ERS): 279,0002,0801,6001,960
Table showing how payouts vary according to the amount of RA savings at 55 and type of CPF Life Plan selected. Calculations are based on an individual turning 55 in 2021.

One of the keystones that’ll make up your monthly passive ‘retirement income’ is CPF Life: a government-mandated life annuity for all Singaporeans that provides a monthly payout (after the age of 65) for their lifetime. Note that your monthly payouts hinges upon how much you have in your Retirement Account – in general, the more you have, the higher your ‘monthly income’ will be. That said, how much you receive per month also depends on other factors, like the CPF Life plan you select (i.e., ‘Standard Plan’, ‘Basic Plan’, and ‘Escalating Plan’).

Regardless of which plan you eventually go with, one thing you should strive for is having the Enhanced Retirement Sum (ERS) in your retirement account savings at age 55, with monthly payouts starting from S$1,560, this offers you the best chances of having enough for your retirement needs. For reference: the "What's Enough" study found that a single person aged 55-64 retiring in 2021 will need at least S$1,721 per month to meet basic standards of living.

Top Up Your CPF Retirement Account by Monetising Your Flat

Scenario AScenario BScenario C
Selling Price Of Existing Property (S$)470,000336,000247,000
Outstanding Loan On Existing Property (S$)100,000076,000
Purchase Price Of Next Flat (S$)141,000301,000141,000
Resale Levy (S$)45,000030,000
Proceeds (S$)184,00035,0000
Top-Up To RA Required (S$)60,00035,0000
Cash Bonus (S$)30,00017,500Not eligible
Maximum Top-Up To RA (S$)90,00052,5000
Table showing how the Silver Housing Bonus works. Information adapted from HDB.

Run through the necessary calculations – and find meeting the ERS an awful stretch? Then, something you could consider doing is monetising your flat for retirement. One of the options available is something called ‘Right-Sizing with Silver Housing Bonus’. Under this scheme, senior households that downsize their existing property to a lower value 3-room or smaller HDB flat can receive up to S$30,000 cash bonus when they top up their proceeds (capped at S$60,000) into their CPF Retirement Account.

So, assuming that you choose to top up all of your cash bonus into your RA, you’d end up with an additional S$90,000. For individuals turning age 55 in 2021, this provides a significant boost up from just above the FRS (S$186,000) to the ERS (S$279,000).

Build a Strong Dividend Portfolio

More financially savvy? You can also consider investing in stocks that pay a good dividend yield. Depending on your investment size and strategy, monthly dividend payouts could make up a sizeable part of your monthly passive ‘retirement income’. Aside from blue-chip companies (e.g., local banks) that have a strong and stable cash flow and Singapore REITs, you can also screen for listed stocks that pay out high dividends when adding to your investment portfolio.

That said, you might not want to place all your eggs in this form of 'retirement income'. Companies can cut dividend payouts depending on their performance and economic variables. For instance: due to structural challenges, intense competition, and the pandemic, Singtel’s dividend for FY2021 comes up to 7.5 Singapore cents per share – down from the previous year’s dividend of 12.25 cents. Assuming you hold 100,000 Singtel shares, you’d only receive S$7,500 in FY2021, compared to $12,500 in FY2020.

Supplement Monthly Payouts with Retirement Income Insurance Plans

Depending on dividend payouts to sustain you through retirement is risky. You're at the mercy of uncertain economic variables. What about CPF Life payouts, then? The government guarantees it – so you don't have to worry, right? While there's little to no risk, the primary issue with CPF Life is that your monthly payouts only kick in at age 65.

That’s where a retirement annuity plan, like the Great Eastern Prestige Life Rewards 5 (SGD), comes in. Under this plan, you'll receive guaranteed monthly income (plus a non-guaranteed cash bonus) for life starting from the 2nd policy anniversary – regardless of how the market performs. As a result, you get income stability and the flexibility of choosing when you'd like to retire: a win-win situation in every sense.

Drop your contact details in this simple form and a Great Eastern representative will get in touch with you to share more about their Prestige Life Rewards 5 (SGD) plan – no obligations!

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