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Are you retirement ready?
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You are now reading:
Are you retirement ready?
Many of us dream of living a comfortable life in retirement. Some may have plans to retire by the beach in another country, while others could be happy simply being debt-free after years of hard work. However you would like to spend your golden years, retirement could be a lot closer than you think, and you would need some careful planning to achieve your financial goals so you can enjoy your desired lifestyle in those years.
Some people think retirement simply means you stop working and live off your CPF money. Firstly, you need to be aware that you can only start to receive your CPF LIFE monthly payouts from the age of 65.
Furthermore, the monthly payouts for those with the Full Retirement Sum of S$176,000 at age 55 currently ranges from S$1,350 to S$1,450. To support the lifestyle you have been dreaming about, you may need additional funds to supplement your CPF LIFE payouts.
If you are no longer working, you will not have a monthly salary to draw on but will still have all your daily expenses to pay for.
As you can see, it requires a certain level of planning and action to ensure you are well prepared for your retirement years.
The longer you wait to plan for retirement, the less time you have for your money to grow and the harder it will be for you to reach your retirement goals.
A good starting point for planning for your retirement is determining how much retirement funds you should accumulate. The ideal retirement allows you to satisfy your wants while ensuring your basic needs are met. How do you know how much you need, and how can you be financially prepared for your wants?
One way to calculate how much you need is to look at 70% to 90% of your annual pre-retirement income. For example, if you are earning S$63,000 per year before retirement, you would probably need S$44,000 to S$57,000 per year in retirement. Additionally, other factors you would need to consider while calculating your basic needs include:
To help you understand your wants during retirement, here are a few questions you can ask yourself:
As you answer each question, note down an amount that you think you may need to achieve all these items.
Alternatively, check out the UOB Retirement Calculator to discover how much you may need for retirement.
Living the retirement you have dreamed of might cost more than your savings. As you work hard to put aside some cash for your later years, let your money work harder for you too and optimise your retirement funds with these ideas.
For Singaporeans, having more in your CPF account means having more income when you retire. Build up these savings by topping up your Special Account (SA) or Retirement Account (RA) under the Retirement Sum Topping-Up Scheme (RSTS). Whether it is via a CPF transfer or a cash top-up, the RSTS helps you build up your retirement savings to receive higher monthly payouts. Additional benefits include tax savings and earning higher interest when you transfer funds from your Ordinary Account (OA) to your SA.
Beyond your cash savings or the CPF LIFE scheme, the Supplementary Retirement Scheme (SRS) is another option that can help you save for your retirement. Unlike the CPF scheme which is mandatory and only applicable to Singaporeans and Permanent Residents, SRS is also available to all foreigners who are working in Singapore. SRS account holders enjoy benefits such as:
To enjoy these benefits, apply for an SRS account with UOB in 3 easy steps via MyInfo.
Understanding Your Time Horizon
Investing is a good way to help grow your retirement nest egg. If you are at a mid-career stage and have the risk appetite to do so, consider investing in products that offer potentially higher returns in order to boost your savings, as you likely have a longer time horizon until your retirement. However, always bear in mind the risks that are involved and see if the potential investments suit your risk appetite.
On the other hand, you would want to protect your savings as you move closer to retirement by rebalancing your portfolio to more conservative investments. For instance, a shorter time horizon to your retirement means you should:
If you already have an SRS account, you can make your SRS savings work harder for you. When left uninvested, your SRS savings will earn you an interest of only 0.05% per annum. To beat inflation, you can consider putting your SRS funds to work in a range of investments, such as unit trusts or insurance savings plans.
Speak to a UOB banker to learn more about your investment options.
Whether you seek a lavish lifestyle or a simpler one in retirement, it will take disciplined planning, saving and even investing for you to get there. So do not procrastinate – start taking simple steps today to work towards your goal.
“The question isn't at what age I want to retire, but at what income.“
- George Foreman | former heavyweight boxing champion
Whether you are in your 20s, 30s or beyond, use this simple chart to see how much you need to save each year to have S$1 million at your desired age.
Assuming you are starting with zero savings at your current age and earning a 5% annual savings rate of return, here is a chart on what you need to save each year to reach S$1 million.
A) If You're Currently: | 20 years old | 30 years old | 40 years old | 50 years old | 60 years old | |
C) To Be A Millionaire At This Age: |
||||||
B) You Need To Save This Much Each Year: |
S$25,000 |
Age 42 |
Age 52 |
Age 62 |
Age 72 |
Age 82 |
S$20,000 |
Age 45 |
Age 55 |
Age 65 |
Age 75 |
Age 85 |
|
S$15,000 |
Age 50 |
Age 60 |
Age 70 |
Age 80 |
Age 90 |
|
S$10,000 |
Age 56 |
Age 66 |
Age 76 |
Age 86 |
Age 96 |
|
S$5,000 |
Age 69 |
Age 79 |
Age 89 |
Age 99 |
Age 109 |
The information herein is given on a general basis without obligation and is strictly for informational purposes only. It is not intended as an offer, recommendation, solicitation, or advice to purchase or sell any investment product, securities or instruments. Nothing herein shall be construed as accounting, legal, regulatory, tax, financial or other advice. You should consult your own professional advisors about issues mentioned herein that may be of interest to you as the information contained herein does not have regard to any specific investment objectives, financial situation and/or particular needs of any specific person. The information contained in this publication, including any data, projections and underlying assumptions, are based on certain assumptions, management forecasts and analysis of known information and reflects prevailing conditions as of the date of the article, all of which are subject to change at any time without notice. United Overseas Bank Limited, its subsidiaries, affiliates, directors, officers and employees make no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accepts no responsibility or liability relating to any losses or damages howsoever suffered by any person arising from any reliance on the views expressed or information in this publication. This publication shall not be reproduced, re-distributed, duplicated, copied, or incorporated into derivative works, in whole or in part, by any person for whatever purpose without the prior written consent of United Overseas Bank Limited. Any unauthorised use is strictly prohibited.
Understanding Your Time Horizon
A time horizon refers to the period of time you expect to hold an investment until you need the money back.
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