Retirement planning for millennials and Gen Zs in Singapore
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Retirement planning for millennials and Gen Zs in Singapore

Feb 2023
Feb 2022
millennials and Gen Zs planning for retirement, life-stage investing

Retirement might seem like a distant dream for many younger adults. Most would balk at the thought of planning for the next 50 to 70 years of their lives. And today, sky-high inflation and interest rates, market uncertainty, and a less-than-rosy economic outlook are making it seem even more daunting to achieve their financial goals.

Gen Zs and younger millennials in Singapore — those in their 20s and 30s now — are especially concerned about building up their nest eggs. Roughly 6 in 10 Singaporeans that are in their 20s are worried that they will not have enough financial resources for retirement, compared to less than half of those aged 40 and above who said they had the same concern, according to the OCBC Financial Index 2022.

Fret not, however. It literally does pay to start planning for retirement sooner, and many of us still have decades ahead to let our money work harder, which means a longer runway for our wealth to grow before we reach our golden years.

The earlier you start, the more you can comfortably line your nest egg, and the less it will cost.

What challenges do millennials and Gen Zs face in retirement planning?

Sandwich generation

Many millennials are part of the sandwich generation, having to raise children while supporting elderly parents at the same time, and facing rising costs on both sides. And as Gen Zs age, in several years' time they are also likely to face the same situation.

The mountain of financial responsibilities faced by the sandwich generation is getting dragged on for longer, in part because more millennials are choosing to start families at a later stage in life compared to previous generations. In addition, medical advances will continue to prolong the lives of the elderly parents.

The twin pressures of supporting both the young and the old may lead to some millennials neglecting or shelving their own retirement planning.

Read more: Financial planning strategies for new parents in Singapore

Limited time and resources

Being a part of the sandwich generation drains us of not only our finances, but also our time. Between slogging it out at work, caring for our aged parents, and running after our children, it is a wonder if we have the chance to take a breather, much less take on what may seem like a daunting task of planning for retirement.

Need for flexibility

Millennials and Gen Zs still have a ways to go till we reach retirement age (Singapore's minimum retirement age is 63 years old, as of 1 July 2022).

Keeping in mind this long runway ahead of us, our retirement plans need to be as flexible as possible to account for any major life changes down the road. This could pose a challenge because many retirement products currently on the market do not offer the level of flexibility that younger adults require.

Why is it important to start planning for retirement?

Having adequate retirement funds

The most crucial part of retirement is making sure you have sufficient money to live on, without an active income stream. This is all the more important given that record-high inflation is fast eroding the purchasing power of our money.

More Singaporeans today are concerned about retirement adequacy, as compared to a year ago, according to the findings in the Endowus Retirement Report 2022. About 4 in 10 respondents said they were not confident that they would have enough money for retirement, up from 37% in the 2021 survey. In particular, individuals from middle-income households are signalling the biggest loss of confidence than other income brackets.

Chart: % not confident about retirement adequacy in Singapore, by household income
Source: Endowus Retirement Report 2022

This concern is exacerbated by the surging costs of living and longer life expectancies in Singapore, because that means more money will be required to maintain your current standard of living after you retire.

Even if you are a retirement supersaver, inflation will eat at your savings if you do not invest — thus eroding the value of your retirement funds. In order to not outlive your savings and get peace of mind in your golden years, proper retirement planning is crucial.

Millennials and Gen Zs need to take extra care to plan and budget for their retirement, especially if you already have several dependants or are intending to start a family in the future.

Starting young

Anyone nearing retirement age will tell you the years fly by, and building a sizeable nest egg becomes more difficult the later you start. With time on your side as a millennial or Gen Z, planning for retirement can be a much more pleasant and relaxed experience. 

Starting early enables you to plan ahead sufficiently. When you account for any foreseeable big-ticket expenses, that also means you are better able to budget for these expenses accordingly.

In coming up with your retirement plan, you should think about these questions:

Define your retirement goals

  • When do you want to retire? 
  • What kind of lifestyle do you want in retirement?
  • How much money do you want to retire with?

Assess your current financial situation

  • Do you have any outstanding debts or liabilities?
  • Do you have any upcoming major expenses?
  • How much can you set aside for retirement each month?

Determine how will you fund your retirement

  • How would you use your CPF and SRS to bolster your retirement fund?
  • How should you best grow your wealth for the next few decades?

It will also be important to adjust these steps accordingly if and when you're facing any major life changes.

Starting young gives you a longer time horizon to build your wealth. It gives you more time to save, and lets compound interest work its magic on your investments over a longer period. By investing early and allowing your wealth to compound over time, you can be much closer to your financial goals more quickly.

A longer investment time horizon also means that you are able to take on more risks in investing for higher returns. A long investment horizon would allow you to ride out any short-term volatility in the market and capture long-term returns. 

Key ages relating to retirement

Take note of these key retirement-related milestones and the corresponding ages. Remember to factor them into your retirement planning.

Key event Age
Retirement 63*
Re-employment 68*
CPF withdrawal 55
SRS withdrawal 62
CPF LIFE payouts 65-70

*With effect from 1 July 2022.

How much will you need to retire?

The earlier you want to retire, the more money you will need to have saved up by then.

Given the current average life expectancy of 84 years and the statutory retirement age of 63, most Singaporeans will spend at least 20 years in retirement. Your desired retirement lifestyle will also affect how much you need to retire. A frugal lifestyle with just the bare necessities will cost much less than a luxurious one with daily restaurant visits.

Your retirement expenses will generally consist of your daily living expenses, medical expenses, and an emergency fund. Medical expenses will very likely rise in old age, especially if you suffer from any chronic illnesses. Having a sizeable emergency fund is recommended, seeing as you will no longer be drawing an active income.

For elderly people in Singapore, the minimum income standard was about $1,379 per month if they're living alone and $2,351 for elderly couples, according to 2019 study by the Lee Kuan Yew School of Public Policy. With inflation, this amount would increase over the years. A 2021 survey by Fullerton Fund Management also found that Singaporeans estimated that they would need $1.4 million for their desired retirement.

The amount each person needs to retire will definitely differ depending on your lifestyle needs. Therefore, it's important to find out how much your basic expenses, necessities, and additional leisure activities would cost.

Using the 4% withdrawal rule to determine your retirement expenses

The 4% rule states that you should be able to comfortably withdraw 4% of your savings in your first year of retirement for expenses, and adjust that amount for inflation for every subsequent year without the risk of running out of money for at least 30 years, if you invest your retirement savings 50:50 in stocks and bonds.

It can be used to estimate your monthly available funds, based on the total amount of money you have when you retire.

For example, if you retire with $1 million, you can withdraw $40,000 (4% of $1 million) to spend in your first year of retirement. Going forward, you would always withdraw $40,000 plus the inflation rate. If the cost of living increases by 2% in the second year, you would withdraw $40,800, and so on for the remaining years. This accounts for inflation, ensuring that you can still maintain your current standard of living each year. 

Staying invested even during retirement would allow you to earn returns over time, preventing your retirement fund from depleting too quickly.

However, keep in mind that the 4% rule is just a general guideline. Some critics argue that the rule is too rigid, since expenses may change from one year to the next. The rule is also built on a hypothetical portfolio invested 50% in stocks and 50% in bonds. In reality, your actual investment portfolio may differ, and you might change your investment allocation over time during retirement.

The 4% withdrawal rule can be used as a helpful starting point for retirement planning, but it should be tweaked according to your personal circumstances.

For more details on the 4% rule and how to apply it amid high inflation, refer to this article.

Ways to plan for retirement and finances as a millennial or Gen Z

Understand your time horizon

If you take a goal-based investing approach, you'll be able to plan for both your short-term and long-term expenses. This way, you can be sure that your short-term expenditures are paid off before retirement, and that you can save sufficiently for retirement. 

Understanding the amount of time available to accumulate your desired retirement fund would also help determine how much money you should allocate to saving for retirement.

Use CPF and SRS for your retirement

CPF and SRS would naturally play a big part in Singaporeans' retirement. By taking advantage of CPF and SRS payouts, funding your retirement will be much less daunting. As a young adult, you have plenty of time to amass your CPF and SRS funds before retirement. 

Using CPF 

When you're 55 years old, you can withdraw a portion of your CPF balance. The amount that can be withdrawn is dependent on the Basic Retirement Sum, the Full Retirement Sum, and whether you own a property. The amount available for withdrawal is also subject to the amount of CPF monies you have accumulated over the years.

Amount of CPF withdrawal depending on BRS and FRS


At age 65, the untouched monies in your CPF account would be paid out to you monthly through CPF LIFE. That's a national longevity insurance annuity scheme, which provides you with monthly payouts no matter how long you live.

The more money you have left in your CPF Retirement Account, the higher your monthly CPF LIFE payouts will be. There is no minimum sum required in your CPF account for you to receive the CPF LIFE payouts — the payouts will simply be pro-rated according to how much savings you have.

CPF LIFE payouts from age 65 depending on CPF account balance
Source: CPF

Using SRS 

Instead of only saving for the future, you can cut down on your expenses now by contributing to your Supplementary Retirement Scheme (SRS) account and receiving tax breaks.

The SRS contributions you make are eligible for tax relief (subject to a personal tax relief cap) the following year. Upon reaching the statutory retirement age of 63, you can withdraw up to $40,000 of your SRS savings per year tax-free.

To read our comprehensive guide on the Supplementary Retirement Scheme, click here.

Grow all your wealth for retirement

Although CPF withdrawals, CPF LIFE payouts, and SRS withdrawals can all help bolster your retirement fund, you should not rely on them completely. This is because the amounts you receive from these schemes might not be enough to cover your monthly expenditure, especially after factoring in inflation. Other sources of income and savings should also be included in your retirement nest egg.

Indeed, many millennials and Gen Zs are trying to plan more proactively for retirement. Given the harsh economic environment and lower expected growth, these individuals are less likely to rely on CPF payouts for retirement, and more likely to take charge of their finances. Out of different generations, millennials are the most likely to have their own financial plans (67%) for retirement, and the least likely (40%) to rely on CPF payouts.

Bar graph: How different generations in Singapore plan for retirement: using CPF payouts or with personal finance plans
Source: Endowus Retirement Report 2022

To maximise your retirement fund, you should aim to grow all your wealth — cash, CPF, and SRS — by investing them.

Leaving your money in CPF will only yield you a paltry 2.5% in your Ordinary Account, and 4% in your Retirement Account. Your SRS account returns a meagre 0.05%, which is not even sufficient to outpace inflation. Therefore, it's crucial to both save and actively invest your wealth, as part of your retirement plan.

Income investing based on your life stage

You may also consider an income solution to fund your retirement. An income investment portfolio can maintain capital appreciation of the invested amount, build wealth over the long term, and provide a regular income stream in the future.

Unfortunately, prevailing income solutions typically have low historical returns, and are riddled with high fees that eat away at returns even further.

In contrast, the Endowus Income Portfolios can help millennials and Gen Zs lay the foundation for their future — all three of the portfolios have consistently met their payout targets in 2022. Investing in the Endowus Income Portfolios allows you receive monthly payouts while growing or preserving your capital. They are designed for different life stages, whether you're a working adult with a family to support, or a young adult with major life goals ahead. To learn more about the Income Portfolios, refer to this introductory article.

With a longer investment time horizon, those of us who start income investing early can grow their pot of wealth to enjoy higher payouts during retirement.

Retirement planning is not as challenging as it seems, and there is no better time to start than now. Get a head start on building a cushy nest egg by planning for it as early as possible.

Learn more about other retirement strategies such as bucketing and decumulation.

If you're ready to invest, read about how to build passive income. To get started with Endowus, click here.

Next on the Endowus Fin.Lit Academy

Read the next article in the curriculum: The big global retirement gap


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