As life expectancy increases and the cost of living rises, the importance of early and strategic retirement planning cannot be overstated. That said, it’s never too late to start. 

Retirement planning may appear beyond reach. Especially when you are young, it might even feel like there’s no urgency to start, but starting early can allow your wealth to compound faster, so you have less to do later on.

In this article, we provide a checklist of retirement planning to-dos to help you ensure that your bases are well covered, no matter where you are on this journey.

Two retirement schemes in Singapore you should know about

In Singapore, the national pension scheme, the Central Provident Fund (CPF) is a key pillar to help Singaporeans and permanent residents build their retirement savings. 

Generally, employers and employees make monthly contributions to their CPF accounts and earn risk-free interests varying between about 2.5% and 4% (and extra interests up to 2%) per annum.

Your CPF savings can be used for housing, education, healthcare, and ultimately retirement. Your CPF retirement savings will determine your monthly payouts under the CPF LIFE scheme after turning 65.

On top of CPF, the Supplementary Retirement Scheme (SRS) was introduced as a complementary scheme to further encourage saving for retirement, which is rewarded with significant tax benefits.

Why you shouldn’t leave retirement planning for “tomorrow” 

Data shows that Singaporeans need around S$1.3 million for a comfortable retirement. Leveraging compound interest means that even small, regular contributions can grow significantly over time. By beginning early, you can:

• Take advantage of a longer investment horizon
• Build a more substantial retirement fund
• Have the flexibility to adjust your strategy as needed

Early planning allows you to maximise the benefits of tax-advantaged accounts like CPF and SRS. With rising inflation, it's essential to invest wisely to outpace rising costs. The chart below shows that returns compound exponentially faster when you start early – for instance, having a 20-year headstart for a $10,000 investment can potentially generate double the returns at the 40-year mark. 

Retirement plan checklist: Does yours check all the boxes?

A robust retirement plan should be holistic, ensuring that your bases are covered from now through retirement. 

This means balancing your retirement goals with other goals, including those that are short- to medium-term, such as a mortgage, an education fund for your children, or an allowance for your aged parents. Naturally, you would assess how much you need for each of these goals. Don’t forget to factor in healthcare and insurance costs, potential lifestyle changes at retirement, and the impact of inflation over time.

Next, you need to figure out how to reach these goals. There are usually three ways to get there:

1. Save: Maximise how much you can save by being disciplined about setting aside money from your income. Take full advantage of CPF interests, SRS and other tax relief schemes to generate more savings.
2. Increase your earning power: Whether it’s taking a side hustle or upskilling, give yourself more negotiation power to increase your income.
3. Invest: Rely on the expansionary nature of the markets to grow your wealth, taking measured risks that are commensurate with your desired returns.

A simple way to manage your finances is to allocate them for each goal and determine the time horizon you have to grow your monies for each goal, then work backwards to determine how much you need to save and invest.  

As you work towards your retirement goals, stay informed about changes in retirement schemes and incentives that may impact your retirement planning. Regularly reassess and adjust your plan as your circumstances change, seeking professional advice when needed to optimise your strategy.

What are your next steps in your retirement planning journey?

As with any journey, retirement planning consists of multiple checkpoints. We have put together common checkpoints in your retirement journey to assess where you are and the steps you may need to take to keep yourself on track to achieving your dream retirement and check off all the boxes on your retirement checklist.

“I haven’t started planning yet.”

The inertia to start your retirement planning can be strong, so start small and work your way up.

• Review your spending and decide where you can cut down to save more every month. 
• Start picturing your future – this may seem redundant as it’s difficult to predict the future, but having at least a goal or two can give you the purpose and drive to take steps towards it.
• Take the time to learn about how your CPF accounts work. By educating yourself on the differences between parking your savings in your various CPF accounts, you’ll find it easier to invest with your CPF funds as you move along in life.
• Start raising your levels of investment knowledge. Understanding the principles of investing and how various investment instruments work will help you better craft your portfolio in the future.

“I’ve started planning for my retirement.”

If you have an idea of how your retirement looks, and you have started to invest comfortably, now is the time to put your money to work. Maximising your CPF contributions and exploring investment options can provide you with more income streams as you get closer to retirement.

• Explore whether SRS contributions make sense, especially if you are in the higher income brackets. SRS contributions, earning only 0.05% interest per annum, should ideally be invested to minimally beat inflation. 
• Consider investing across your wealth sources, including cash and CPF. For example, if you are looking to reach S$100,000 in savings by the time you hit 50, design your portfolio to suit your risk tolerance, time horizon and goals.
• Start calculating your CPF LIFE payouts. CPF’s retirement payout planner can help you determine a rough gauge of what your payouts will look like when you turn 65.

“I’m about to retire!”

By now, you may have accumulated a considerable amount of savings to use in your golden years. Securing a stable income stream and liquidity in your retirement years will be more important than ever. Re-evaluate your CPF LIFE options to ensure lifelong monthly payouts that match your desired lifestyle. By now, you should have a relative idea of how much you would need in your monthly payouts and can upgrade or downgrade your plan accordingly.

• In addition to CPF LIFE, supplementing your monthly payouts with investment solutions is a good way to counter inflation. You can consider using your savings to invest in low-risk investment vehicles that allow you to stay liquid as you move into your retirement years.
• Setting up passive income streams through investing can also provide you with a “set and forget” means of generating income as you move through life, though it is important to periodically reassess whether your passive income streams outpace inflation over the long term.
• Healthcare planning becomes paramount; bolster your MediSave Account to cover potential medical expenses. Shifting towards a more conservative allocation whilst maintaining some growth assets could be enough for your retirement needs when combined with your CPF LIFE payouts.

“I need to start considering legacy planning for my loved ones.”

With numerous passive income streams and your CPF LIFE bolstering your monthly income, you’re in a good spot. However, ensuring that your descendants and loved ones are safeguarded if anything unexpected happens will take a load off your chest and allow you to fully focus on enjoying your retirement.

• Start the process of your CPF nominations, ensuring your hard-earned CPF savings help your loved ones going forward. If circumstances change, your nominations can be tweaked accordingly.
• Plan out your will early to ensure that you’re comfortable with the distribution of your assets amongst your family and loved ones, as well as to avoid any unpleasant circumstances from occurring, should the unexpected happen.
• Create a Lasting Power of Attorney (LPA) that allows you to appoint an individual or multiple individuals to make decisions on your behalf should you be unable to do so.

Common mistakes to avoid when planning your retirement

While we’ve covered what to do for your retirement as you move through life, there are still several mistakes that you could make as you plan for your retirement. 

• Chasing instant gratification: While it may seem tempting to jump on the latest investing trend or follow through with instruments that earn you “quick money”, prioritising your retirement goals and following through with the plan you’ve ideated will pay off in the long run. Timing the market or using your savings to invest in unnecessary assets detracts from ensuring that you and your family are well cared for in your golden years.
• Withdrawing your CPF without a plan in mind: Understandably, you may want to protect your CPF savings to ensure a higher CPF LIFE payout in your retirement. Another consideration lies in wanting to withdraw your CPF savings at 55. Leaving your CPF savings in their respective accounts allows you to enjoy risk-free wealth accumulation over time. Withdrawing your CPF savings should be carefully considered, based on your risk tolerance levels and understanding of how you would devise a portfolio for said savings.
• Fearing the markets: That being said, being overly afraid of investing your CPF savings may cause you to lose out to inflation in the long run. Pick and choose the right investments that work to your future benefit while considering your risk tolerance. Diversification is key, and overconcentrating your investments in a specific asset class can prove a setback to a fuss-free retirement. Allowing your investments to grow over a longer period is a time-tested, scientifically proven method of wealth accumulation.
• Not reviewing your plan: Life is unpredictable and, as such, requires constant reviewing to ensure that your investments are balanced in liquidity and in achieving your retirement goals. Cover all your angles by diversifying your portfolio to account for liquidity needs and wealth preservation. The 'bucketing strategy' can help manage retirement income by dividing your portfolio into different time horizons, balancing the need for stable income and capital growth or preservation.
• Allowing emotions to derail your retirement investments: Economic volatility can significantly impact your retirement savings. Short-term economic downturns can be painful to look at, but if you base your portfolios on a long-term view, your funds are likely to grow over time. Globally diversifying your portfolio can ensure a level of protection from geopolitical happenings and provide you with a steady stream of income over time. 

How we can help you with your retirement plan 

Planning for retirement can be complex, especially when considering factors like inflation, healthcare costs, and investment strategies. Seeking guidance from a professional financial advisor can provide reassurance and help you make informed decisions for your financial future.

A qualified advisor can assist in:

• Assessing your current financial situation
• Setting realistic retirement goals
• Developing a comprehensive investment strategy
• Maximising CPF and SRS benefits
• Evaluating insurance needs

With their expertise, you can navigate the intricacies of retirement planning more confidently and with a stronger intent on your future priorities. Schedule a call with our MAS-licensed financial advisors to help you with your retirement plan today. To learn more about retirement planning and how to get started, explore our curated section on retirement.