We are a fortunate bunch here in Singapore.
The country’s life expectancy is among one of the highest in the world, at 81.4 years for men and 85.7 years for women.
On this topic, I have both good and bad news.
The good news is obvious — living a longer life means having more time to spend with your loved ones and friends.
The bad news, however, is that living longer also means that you’ll need to sock away much more money to support yourself once you stop working.
On this note, the government recently raised the retirement and re-employment ages for Singapore workers to 65 and 70, respectively.
The move is to support older Singaporeans who still wish to continue working.
But the question here is — do you still want to keep working even if you can do so?
Or would you rather hang up your working attire and relax comfortably for the rest of your days?
Underestimating how much you need
OCBC Bank’s (SGX: O39) annual financial wellness index recently showed that most people are unable to properly estimate how much they need for retirement.
Around eight in 10 underestimated the amount they needed for their retirement by 31%.
The good news is that around two-thirds of Singaporeans have made retirement plans this year, with the bulk of those being in their 20s and 30s.
On the flip side, less than 50% of this group are on track to meet their goals.
These results show that it’s not easy to project how much you’ll require as you age as your circumstances may change.
Another factor is that as we progress in life and become more successful at our careers, our needs and desires may also increase, bumping up the amount we think we require.
Having a choice
A recent study found that a family of four (i.e. parents of a teenager and a pre-teen) requires at least S$6,426 per month for a basic standard of living.
The thing is, this amount may keep increasing as inflation rears its ugly head next year and beyond.
In a decade, the amount required should easily exceed S$6,426 per month.
And with the government’s policy of slowly raising Singapore’s retirement age, those in their 40s or 50s may feel squeezed as they have kids to feed and seniors to support.
What you want to have is a choice — to stop work if you have sufficient savings, or to carry on working if you feel that it engages your mind and body.
By investing, you can give yourself the power to choose whether you’d like to retire happily or to continue contributing to the economy.
Building a robust portfolio
You can consider buying growth stocks to slowly build up the value of your investment portfolio.
Over time, as these businesses become more valuable, their share prices should also increase in tandem.
Blue-chip companies such as DBS Group (SGX: D05), Apple (NASDAQ: APPL) or Amazon (NASDAQ: AMZN) can raise their revenue and profits more than inflation.
By parking your money in such companies, you can enjoy long-term capital appreciation and steadily grow your retirement pot of gold.
During your golden years, you can start drawing down on these funds to support your lifestyle.
Generating a stream of passive income
Let’s not forget that cash flow is equally important when you retire.
Dividend investing can help you to generate a steady flow of passive income that carries on for years and decades.
You can allocate some money to REITs with strong sponsors such as Mapletree Logistics Trust (SGX: M44U), CapitaLand Integrated Commercial Trust (SGX: C38U), or Keppel DC REIT (SGX: AJBU).
Or perhaps you can also select stocks that have displayed a great track record of paying dividends, such as VICOM Limited (SGX: WJP) or Singapore Exchange Limited (SGX: S68).
By filling up your portfolio with a collection of dividend-paying companies, you can ensure that you can continue to enjoy cash inflows even after you stop work.
Get Smart: Start as early as you can
The process of building up your portfolio’s value and a stream of income should start as soon as possible.
By starting early, you can hasten the process of compounding which will work wonders to grow your pot of funds.
It’s possible to retire comfortably in Singapore.
What you do need, though, is to be consistent and prudent in investing your money.
If you do so, the future will be a bright one and you have nothing to worry about when you finally throw in the towel.
If you’re nervous, confused, or worried about buying your first stock, then our latest beginner’s guide to investing can help. It’s easy to read yet packed with valuable insights. Download it for free today, and buy your first stock in the next few hours. Click here to get started.
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Disclaimer: Royston Yang owns shares of DBS Group, Apple, Keppel DC REIT, VICOM and Singapore Exchange Limited.
