Retirement is what many people look forward to after years of slogging away at work.
But there are a few key things to consider before you get there.
On top of lifestyle changes, retirees need to adjust to a life without a wage.
With people living longer nowadays, it is all the more important that retirees have enough financial strength to see them through their lives.
To ensure that you are prepared for the financial challenges of retirement, it is vital that you equip yourself with as much information about retirement as possible.
I have listed five money facts about retirement that are important for retiring in Singapore.
Fact 1: Singaporeans can make use of the CPF LIFE scheme
With the life expectancy of Singaporeans having increased over the years, many retirees are today expected to live for more than 20 years after their retirement.
The CPF LIFE Scheme, which stands for CPF Lifelong Income for the Elderly, provides monthly payouts for as long as a scheme-participant lives.
The scheme provides a minimum payout of $540 a month to participants; the payout comes from the participants’ CPF retirement savings.
You can find out more about CPF LIFE scheme from the CPF website.
Fact 2: Cost of healthcare is on the rise
The Straits Times reported back in 2016 that by 2030, each senior in Singapore would need to spend S$51,000 a year on average on healthcare.
This rise is not surprising as medical advancements have made healthcare more costly as time goes by.
Rising operating costs also contribute to this rise, with Senior Minister for State Koh Poh Koon stating back in 2019 that manpower costs make up 60% of total healthcare costs.
With such a drastic increase in health care costs, retirees need to be prepared financially to ensure they have enough cash to pay for these additional expenses.
Fact 3: An increase in life expectancy
As mentioned earlier, a higher life expectancy makes it even more important for you to plan for your retirement.
Living longer is of course a good thing but it also means we have many more years of expenses to plan for after we retire from active work.
Singapore’s average life expectancy at birth is 83.6 years as of 2019. It is 81.4 years for males and 85.7 years for females.
Singapore is ranked fifth in the world, together with Switzerland and Italy, for life expectancy, which is an amazing achievement for our young nation.
To put this in perspective, a lady with a life expectancy of 85.7 years in Singapore who is retiring at the age of 60 years old will need to prepare enough money to tide her through upwards of 25 years.
Fact 4: There is the option of delaying retirement
As life expectancy increases, more people are opting to delay retirement.
There are benefits that come with delaying retirement for a few years.
These benefits include saving more through additional earned income, and letting your retirement fund accrue more interest as you delay dipping into it.
The delay is also a good option for people who wish to keep physically and mentally active.
Fact 5: Retirement and your health
Retirement can have a negative effect on your health.
There are reports that retirees are more susceptible to loneliness, which leads to depression and other mental health problems.
Retirees are also prone to less physical activity, which in turn is a risk factor for other medical conditions. These can all lead to expensive medical bills.
It is important that as we prepare ourselves for retirement, we take necessary measures to prevent these negative health effects by keeping active or joining a community club to meet people and keep our minds active.
Get Smart: Start investing early to prepare for retirement
Singaporeans work tirelessly in the office, in the hopes of enjoying their golden years when they retire.
However, retirement can also be a period of great stress as we acclimatize to lifestyle and financial challenges.
A good way to prepare for retirement financially is to start investing at a younger age.
Investments in stocks, for example, can provide retirees with income through dividends.
Investing at a younger age also allows your investments a longer period of time for compounding to work its magic.
By investing early on, you will have a better chance of being able to enjoy a much greater return on your investments, thereby preparing you for a stress-free retirement.
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Disclaimer: Royston Yang does not own any of the companies mentioned.