The thought about saving for retirement can be frightening because of the amount of pressure and diligence required. However, careful planning can make things easier and set clear goals for you, your budget, and how you manage your finances. The official retirement age in Singapore is 62 years old. As a result, you have from the moment you receive your first paycheck to make sound financial decisions until you retire. Here is how much savings you should accumulate until you retire.
What Percentage of Your Salary Should You Save?
Of course, everybody's financial situation is different. Every individual has a different salary and different financial commitments. You may choose never to purchase a home, never get married, or never have children. On the other hand, you may have more massive student loans, multiple personal loans, or even a larger housing loan than the average Singaporean. Nevertheless, a good rule of thumb is to start saving 10-15% of your salary every month. However, as you can continue to afford it, you should gradually increase your savings rate by 1%.
Experts also agree that at any age, the bare minimum you should have saved is six months of your income. All surplus should be directed into a retirement fund. Six months of your income is sufficient to deal with emergencies and any unexpected expenses.
How much should the average Singaporean save every year to retire by 62?
Ages 22 to 45
The amount that each person can save depends on his or her yearly expenses. For example, from ages 22 to 45, most adults have a lower savings rate. This early stage in life requires higher financial commitments because of education loans, the cost of marriage, the cost of raising children, and housing loans.
According to Seedly, a financial budgeting app, on average, a 25-year-old should save $1,953 per month. A 30-year-old should save $2,143 per month. A 35-year-old should save $1,544 a month. A 40-year old should save $1,725 a month. Finally, a 45-year-old should save $2,032 a month.
Ages 46 to 62
Those in this age group tend to have a higher savings rate. Your children have finally grown up and have theoretically moved out or at least can pay for their own expenses with a job. Furthermore, you have likely paid off most, if not all, of your loans by now. The most motivating factor in saving is because your retirement age is now dauntingly much closer. Most people start to realize that they need to save for retirement now!
Seedly recommends that a 50-year-old should save $2,620 a month.
How Much Should the Average Singaporean Save Every Year to Retire by 55?
Let's say you are especially ambitious and 62 is too late for retirement. Most Singaporeans are in good health until age 74. If you want to maximize the number of years you have in good health during retirement, you may decide to shoot for 55. If you intend to stop working earlier, you are shortening the number of working years and extending the number of retirement years. Unfortunately, when you retire, everything becomes pure expenses. As a result, how much you need to save before retirement reflects this increase.
Seedly recommends that a 25-year-old with a low salary and student loans should save $1,953 per month. A 30-year-old who is likely preparing for marriage should save $2,143 per month. A 35-year-old in the market for a house should save $2,444 per month. A 40-year-old who is probably also paying for his children's education should save $2,969 per month. A 45-year old who has perhaps recently paid off his housing loan should save $4,051 per month. Finally, a 50-year-old debt-free adult should save $7,366 per month. It is evident that the amount you put away starting at age 50 is a significant jump up. This increase is because you should be completely debt free and actively planning your retirement.
Do Singaporeans Really Have This Much Saved?
These calculations are all estimates and are the ideal amount to save in a perfect situation with the average life expectancy of 82.9 years old. However, you may have financial responsibilities that are less than ideal, such as parents or siblings with medical conditions and hefty medical bills. In fact, a survey conducted in 2013 by HSBC revealed that more than 4 in 10 Singaporeans have never saved for retirement. Many blame the high cost of living, unemployment, and familial responsibilities. Most consider their CPF their savings account and their property their ticket to retirement. Therefore, if you are 35 years old and aren't saving $18,529 annually, you are not alone!
Saving for the future is an investment for your retirement. Of course, you should have enough savings for a rainy day. The amount you should have easily accessible should be at least six months of your salary. You may consider increasing this if you have a family and more significant financial commitments, such as multiple loans.
The calculations for average monthly savings based on age are only a guideline to help plan for retirement. These numbers do not include your CPF's monthly payment or any profit from selling property, such as by downsizing your home, or from investments. It is not essential to become bogged down comparing what you earn and can afford with these numbers. It is more impactful to start with the mindset of putting a little away for many years and slowly building your nest egg for the future. For many, retirement may seem a long way off, but we do ourselves a big favor by planning for it now.