Retirement planning for millennials in Singapore
Endowus Insights

Retirement planning for millennials in Singapore

Sep 2022
Feb 2022
millennials planning for retirement, life-stage investing

Retirement might seem like a distant dream for most millennials, and most would baulk at the thought of planning for the next 50-70 years of their lives. In fact, OCBC’s Financial Wellness Index 2021 found that only 62.5% of millennials (people born between 1981-1996) have retirement plans, compared to the national average of 66%. However, it literally does pay to start planning for retirement earlier — the earlier you start, the more you can comfortably line your nest egg, and the less it will cost.

What challenges do millennials face with retirement planning?

Sandwiched generation

Millennials are part of the sandwiched generation, struggling to raise their children and support their aged parents at the same time, with rising costs from both sides. Advances in science will prolong the life of their parents, while more millennials are choosing to start families at a later stage in life compared to previous generations, which means their mountain of financial responsibilities get dragged on for longer.

As the sandwiched generation, the twin pressures of supporting both young and old causes millennials to neglect their own retirement planning. 

Lack of time and resources

Being a part of the sandwich generation drains millennials of not only their finances, but also their time. Between slogging it out at work, caring for your aged parents, and running after your children, it is a wonder if you have any time to take a breather at all, much less take on the herculean task of planning for retirement.

Need for flexibility

Since millennials still have a ways to go till retirement, their retirement plans need to be as flexible as possible to account for any life changes down the road. This might pose a challenge to millennials, since many retirement products currently on the market do not offer the level of flexibility millennials require.

Why is it important to start retirement planning?

Having adequate retirement funds

The most important part of retirement is arguably having sufficient funds to live on without an active income stream. The Endowus Retirement Report 2021 found that 39% of Singaporeans are worried about retirement inadequacy. This concern is exacerbated by rising costs of living and longer life expectancies, and is most prominent among millennials.

Confidence of Singaporeans in having sufficient funds for retirement
Source: Endowus Retirement Report 2021

With higher living costs and longer lifespans, more money would be required to maintain your current standard of living after retiring. Even if you are a retirement supersaver, inflation will slowly eat at your savings if you do not invest, eroding your retirement funds. In order to not outlive your savings, doing proper retirement planning is crucial.

As the generation sandwiched with so many dependents, millennials need to take extra care to plan and budget for their retirement. Retirement planning not only gives you peace of mind in your golden years, but also prevents your child from becoming yet another member entrapped in the sandwich generation.

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, planning for retirement can be a much more pleasant and relaxed experience. 

By starting early, you are able to plan ahead sufficiently. By accounting for any foreseeable big ticket expenses, you are able to budget for these expenses accordingly. In your retirement plan, you should delineate steps such as:

Define your retirement goals

  • When do you want to retire? 
  • How much do you want to retire with?

Assess you current financial situation

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

Determine how will you fund your retirement

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

It is also important to adjust these steps accordingly in the face of potential life changes.

Starting young also gives you a longer time horizon to build your wealth. Not only does it give you more time to save, compound interest also works its magic on your investments over a longer time period. By investing early and allowing your wealth to compound over time, you can be much closer to your financial goals much quicker.

A longer investment time horizon 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 dates around retirement

There are a few key dates regarding retirement that you should take note of to factor them into your retirement planning.

Key events of retirement at different ages

How much will you need to retire?

Naturally, the earlier you want to retire, the more money saved up you will need. 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 the bare necessities would 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 also recommended, since you are no longer drawing an active income.

A 2019 study by the Lee Kuan Yew School of Public Policy found that the Minimum Income Standard of elderly people in Singapore is $1,379 per month for an elderly person living alone and $2,351 for elderly couples. A 2021 survey by Fullerton Fund Management found that Singaporeans estimated that they would need $1.4 million for their desired retirement. The amount needed to retire would definitely differ depending on your lifestyle needs.

Therefore, it is important to determine the cost of both your basic needs and additional leisure activities. 

Using the 4% withdrawal rule to determine your retirement expenses

The 4% withdrawal rule states that you can comfortably withdraw 4% of your savings in your first year of retirement and adjust that amount for inflation for every subsequent year without risking running out of money for at least 30 years, if you invest your retirement fund 50-50 in stocks and bonds. You can use the 4% withdrawal rule to determine your monthly available funds based on the total amount you have at retirement.

For example, if you retire with a $1 million fund, you could withdraw $40,000 (4% of $1 million) in your first year of retirement. Going forward, you would always withdraw $40,000 plus inflation. If cost of living increases by 2% in year two, you would withdraw $40,800, and so on for the remaining years. The additional amount withdrawn compensates for inflation, ensuring that you can 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 starting point for retirement planning, but it should be tweaked according to your personal circumstances.

Ways to plan for your retirement and finances as a millennial

Understand your time horizon

By taking a goal-based investing approach, you can 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 have saved sufficiently for retirement. 

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

Utilise 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 seem less daunting. As a millennial, you have plenty of time to amass your CPF and SRS funds before retirement. 

Using CPF 

At 55, 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. Naturally, 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. 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 — your SRS contributions are eligible for tax relief (subject to personal tax relief cap) the following year. Upon reaching the statutory retirement age (63 with effect from 1 July 2022), you can withdraw up to $40,000 of your SRS savings per year tax-free.

While CPF withdrawals, CPF LIFE payouts, and SRS withdrawals can help bolster your retirement fund, you should not rely on them completely since, as seen, the amounts you receive might be insufficient to cover your monthly expenditure, especially after factoring in inflation. Other sources of income and savings should be included in your retirement nest egg.

Grow all your wealth for retirement

To maximise your retirement fund, you should aim to grow all your wealth — your 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 is not only crucial to save for retirement as a millennial — you should also actively invest your wealth as part of your retirement plan.

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

Prevailing income solutions typically have low historical returns, and are riddled with high fees that eat away at returns even further. The Endowus Income Portfolios can help millennials lay the foundation for their future. With a longer investment time horizon, millennials who start income investing early can grow their pot of wealth, to enjoy higher payouts during retirement. 

Different types of income portfolios by life stages

Retirement planning might seem like a daunting task to millennials, but 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 here. 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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