5 Common Misconceptions That Singaporeans Have About Retiring

When it comes to retiring, many of us tend to leave it for later, thinking that there’s still time. Retirement can be the best years of our lives – if we set a vision for the future and start planning for it early.

In this article, we discuss some of the misconceptions that Singaporeans have about retiring and explain why these common “reasons” cited should not be grounds for us to defer retirement planning.

1: I Am Still Young And Can Afford To Think About Retirement Later

Like many other things in life, it’s never too early to start planning for retirement. Many Singaporeans only turn their attention to retirement when age starts catching up with them — usually at middle age.

Due to compound interest — interest earned on your interest — you have the opportunity to grow your wealth when you are young, no matter how much you are earning. For example, if you invest S$25,000 at the age of 25 with a five percent rate of return, you will have more than S$1.8 million by the time you are 65 years old. However, if you wait until you are 30 years old to invest the same amount, even with the same rate of return, at age 65 you will have less than S$1.4 million¹.

While it’s always better to start saving for retirement than not do so at all, compound interest is most effective if you start your retirement investment programme early in your career — the longer your interest earns interest, the more your account snowballs, and the better the quality of your retirement.

2: My CPF Is Sufficient For My Retirement

Most Singaporeans believe they can rely on their Central Provident Fund (CPF) savings to cover their retirement costs comfortably. While definitely helpful, it is important to bear in mind that CPF Life only provides a basic standard of living for retirees². Depending on how much you have in your CPF when you retire, it is currently estimated that you will get between S$730 to S$2,000 per month³, starting from age 65. Since your CPF payout is fixed and may most likely be eroded by inflation, it is crucial that you don’t depend solely on your CPF for retirement. Instead, to maintain a standard of living that you are comfortable with, do consider other streams of income as well such as dividends from stocks, endowment insurance or rental income.

3:I Will Not Have As Many Expenses After I Retire

While it is true that you may be spared certain expenses when you retire, such as the cost of your daily commute to and from work, the truth is, costs tend to increase in post-work life. For instance, monthly expenses such as electricity and mobile phone bills are likely to rise due to inflation. Also, even if your daily living expenses remain the same or dip slightly due to, for example, downsizing your home, other costs such as healthcare and leisure may increase upon retirement. By 2030 the over-65s are expected to make up 27 percent of the population, putting stress on the country’s healthcare resources⁴.

With more free time, you are likely to want to spend it travelling the world or taking up different leisure activities, like meeting friends for lunch or attending plays and musicals with your family. It is best when planning your retirement to assume that your living costs won’t change much — and prepare accordingly. Your retirement finances should be flexible enough to support your changing lifestyle.

4:My Savings Will Be Enough For My Retirement

Using your savings for daily transactions is practical, but your savings should not be the only thing you fall back on when you retire. Remember, not only are you chipping away at this reserve for daily living, inflation will have an impact as well. Investment is one of the key things to consider in countering inflation. Rather than putting all your eggs in one basket, diversify your investment portfolio. Consider lower-risk government bonds that promise a steady income or invest in a retirement insurance savings plan from a financial institution.

It may also be helpful to speak to a UOB banker to find out about options that can help you grow your savings further.

5:I Don’t Plan To Retire So Soon

While the minimum retirement age in Singapore today is 62 years⁵ and the re-employment age has been raised from 65 to 67⁶, life can be unpredictable. Many of us may plan to work as long as we can, but sometimes may be unable to do so due to health considerations, family obligations, employment changes and so on. Do note that CPF contribution rates decrease⁷ for workers aged 55 and older, too. Speak to a UOB banker to start planning for your retirement today.