Retirement planning: from investing to enjoying the payout

Hearing the term “Retirement”, what’s the first thought that comes to your mind?

Going on a cruise, travelling around the world, socialising with old friends, and watching your favourite shows all day, right? But retirement in Singapore isn't that easy if you don’t plan ahead.

For some, bearing the cost of their post-retirement lifestyle is a major concern. Hence, it is important to start planning early for your retirement.

Fortunately, you don't always need to set aside all your savings for your retirement planning. You can likewise decide to place your cash in insurance plans, retirement plans and investments which at any rate, can grow your funds. 

What is Retirement Planning? 

Retirement planning consists of distinguishing sources of revenue, evaluating costs, carrying out a savings programme, overseeing resources and mitigating risks.

Planning for retirement can be mind-boggling as you explore different retirement factors. There are things that you've no control over, for instance, the market returns and future tax policy, and things that you have some command over, like how long you intend to work and the money which you can set aside every month.

Beyond financial planning for retirement, there are other decisions like pursuing new hobbies after retirement, where to live, when to totally stop working, and so forth.

How has the COVID-19 pandemic affected retirement planning?

The COVID-19 pandemic has a significant impact on household incomes where many people have lost their jobs or taken a pay cut. The lower-income groups are fighting to make ends meet while for the more privileged ones, their financial goals may have also taken a hit due to a drop of value in their financial assets.

The global economy is getting affected and the low interest rate environment is likely to stay for the next few years. All of these factors might impact our retirement goals.

The COVID-19 pandemic has set off Singaporeans to reexamine their attitude towards retirement. Singaporeans are understanding the significance of being financially ready for this new phase of life.

Here are some solutions to help you make better decisions till the situation is sorted.

1. Nobody knows when the situation will completely end, therefore having the option to extend your "Emergency Funds'' is important. For most individuals, your primary cash inflow is the salary from your work. This means to continue working at any cost, and even tolerate a temporary salary cut to make sure you don't lose your whole paycheck.
2. Another related topic is to have control over your lifestyle. If you can control your expenses and keep track of everything, that’ll be great as it will permit you to direct more cash into your emergency fund.
3. Making a month-to-month income and expense report will assist you with evaluating your present financial well-being, shortcomings, and where you and your family stand in the coming months. With this information, you can all the more effectively direct the measure of cash that comes into and leaves your accounts.
4. In the event that you are in the lucky circumstance of having extra money, then investing during a pandemic may give a critical potential gain in the long term.
5. Having adequate life and health protection is especially important during these times. This will ensure that you and your loved ones are protected should something unfortunate happen.

How much do I need to retire in Singapore?

Before starting to plan, one should know the official retirement age in Singapore. As per the Ministry of Manpower, the statutory retirement age is presently 62 years, although it's scheduled to go up to age 65 by 2030*.

​​As most would know, the standard of living in Singapore is ranked as one of the highest in the world. Therefore, when one plans for retirement, they must consider costs like basic living expenses, medical expenses, and leisure.

Research amongst 304 retirees in Singapore was conducted in May 2021. From this study, there were some key insights that were uncovered:

●       61% wished they had done better in their retirement planning when they were younger.

●       Across all respondents, starting retirement planning late was the #1 regret.

●       The average person started planning for retirement in their 40’s.

●       Those who did not plan for their retirement, have to contend with an average monthly income of S$1,700.

●       Those who had planned for their retirement with the help of a professional, are able to enjoy an average monthly income of S$3,200 and are able to enjoy retirement incomes closer to their expectations.

In the same research, we found that the average retiree currently spends S$1,450 per month (S$48/day) but would like to have 60% more to spend (S$2,300 per month) in order to be highly satisfied.

Also, the main sources of income for these retired seniors are:

● Savings
● Investments
● CPF
● Insurance
● Allowances from children

What are government support schemes regarding retirement planning?

Every Singaporean is probably acquainted with the Central Provident Fund (CPF). This helps working people save their money for retirement. It incorporates Special Account (SA), Ordinary Account (OA) and Medisave Account (MA) devoted to your retirement needs.

Another better option is to go for SRS. According to IRAS (Inland Revenue Authority of Singapore): “The Supplementary Retirement Scheme (SRS) is a voluntary scheme to encourage individuals to save for retirement, over and above their CPF savings. Contributions to SRS are eligible for tax relief. Investment returns are tax-free before withdrawal and only 50% of the withdrawals from SRS are taxable at retirement.”

So, how to plan your retirement in Singapore?

You can't depend completely on the CPF Retirement Scheme for your retirement plan. Our survey¹ shows that people lay higher-level of trust in the government and measures taken by them, like - CPF & discount for pioneers which they later regret, as almost half (47%) of the respondents who didn’t plan properly faced monetary issues after retirement.

Below are a few questions you can ask yourself first before deciding whether you need to diversify your money or approach a professional for financial advice.

● Do you have sufficient cash in your CPF and investment funds to get the retirement income that you need?
● Can the CPF Retirement Scheme or CPF Life beat inflation?
● Should you put resources into different investments?
● What will be the risk associated with your health-related expenses? Do you have enough money for your nursing needs?

Before you settle on any monetary choices for yourself, it's best to converse with a professional financial planner. They will appropriately assess your present financial standing and protect you from uncertainties while you focus on living life to the fullest.

How can you plan better for your retirement?

Based on the survey, those who planned their retirement with professional advice from a financial planner had a higher average monthly income. Great Eastern Life has been assisting a huge number of clients in their financial well-being. The idea is to provide services that help retirees live their life with joy and fulfilment. Our main priority is the financial security of our policyholders and their families.

In any case, there is more you can do to guarantee a secure retirement. You need to diversify your portfolio and look beyond CPF for your retirement plans. You can start by opting for our two main products, i.e.,

●       GREAT Lifetime Payout 2 Special

Maximise your savings the smarter way, with the assurance of a lifetime of monthly cash payouts of up to 3.28% per annum² after holding your plan for just 3.5 years. Your capital is 100% guaranteed from the end of the 6th policy year³. You also have the flexibility to manage your payouts and policy value as your needs evolve. Your loved one will receive a lump-sum benefit of 105% of the total annual premiums paid plus any bonuses in the event of your passing or terminal illness.

It's easy to begin, with a short premium commitment of just three years, beginning from S$10,000 per year. The best part is that no medical assessment is required. Grow your wealth and secure your lifetime income towards financial freedom today.

●       GREAT Retire Income

Making smart money decisions when you are young lets you retire early and well with a steady stream of monthly income whenever you decide to stop working. This plan gives you a cash payout plus a potential cash bonus every month. You can choose your premium term, retirement age, and how long you want to receive payouts for. Your capital is guaranteed at your selected retirement age⁴, plus you get coverage against Loss of Independence (LOI)⁵ during the income period for additional peace of mind.

With premiums starting from S$150 a month⁶ and with no medical assessment needed, you are also protected against Death, Total & Permanent Disability⁷ and Terminal Illness. It is an affordable way to start building your financial freedom, one dollar at a time.

It's a simple and easy process.

Sources:

 ^* Retirement, Ministry of Manpower, April 11, 2019, https://www.mom.gov.sg/employment-practices/retirement

Footnotes:

¹ Great Eastern’s survey was conducted in May 2021 with 304 respondents above age 63 in Singapore through an independent research consultancy. Online and qualitative interviews were conducted to better understand the current state of retirement in Singapore.

² For a Standard Annual Premium of S$30,000 and above: The guaranteed payout of 3.28% p.a. is only applicable from the 43rd to 48th policy month. From the 49th policy month onwards, based on an IIRR of the participating fund at 4.25% p.a., the guaranteed payout is 0.85% p.a. and the non-guaranteed payout is up to 2.43% p.a.. At an IIRR of 3.00% p.a., the non-guaranteed payout is up to 1.34% p.a. of the total annual premiums paid.

For a Standard Annual Premium below S$30,000: The guaranteed payout of 3.15% p.a. is only applicable from the 43rd to 48th policy month. From the 49th policy month onwards, based on an IIRR of the participating fund at 4.25% p.a., the guaranteed payout is 0.80% p.a. and the non-guaranteed payout is up to 2.35% p.a.. At an IIRR of 3.00% p.a., the non-guaranteed payout is up to 1.24% p.a. of the total annual premiums paid. The actual benefits payable may vary according to the future experience of the participating fund.

³ Capital guarantee is on the condition that premiums are paid by annual mode and no policy alterations are made.

⁴ Capital guarantee is on the condition that no policy alterations are made.

⁵ Loss of Independence (LOI) income benefit is payable if the Life Assured, as certified by a medical practitioner, is unable without the continual physical assistance of another person to perform 2 or more Activities of Daily Living (ADLs). ADLs include washing, dressing, feeding, walking or moving around and transferring.

⁶ Based on a 20-year premium term, premium illustrated is rounded down to the nearest S$10. Please refer to the policy illustration for the actual premium amount. 

⁷ Protection against total and permanent disability is from the start of the policy till before the policy anniversary on which the Life Assured reaches the selected retirement age. 

Disclaimer:

This advertisement has not been reviewed by the Monetary Authority of Singapore.

As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid.

Protected up to specified limits by SDIC.