I am a 20-something year old junior administrative executive. So how much do I need to comfortably save to have SGD$1,000,000 when I am 50 years old?
Question:
That’s fantastic that you’re thinking about retirement this early! Starting young is one of the greatest advantages you have for building a healthy and comfortable fund size in your later age.
Estimate your retirement needs
Consider your lifestyle. Think about the kind of retirement you envision. Do you see yourself traveling extensively, or living a more modest lifestyle? Do you want to travel 4 times a year or your focus is to be able to live in a comfortable private apartment? Or do you want to have both?
Are you planning to have children in future and how many children do you plan to raise in a family?
Estimating your retirement expenses will help you determine your savings target.
inflation
Inflation erodes purchasing power over time. Yakoon Coffee which cost $1.80 will cost more 5 years later. Consider a conservative inflation rate of 2-3% when calculating retirement needs You can go to our planning tool for a quick calculation reference!
Leverage time and compound interest
You might have already heard of this for the umpteen time, but really, time is your greatest ally. The earlier you start saving, the more time your money has, to grow through compound interest. Start NOW.
Compounding interest is often referred to as “interest on interest”. Even starting a small comfortable monthly contribution into your desire investment vehicle early on in your career, can snowball into a significant sum by retirement.
Invest for the long term
A well-diversified investment portfolio is key for long-term growth. This means spreading your investments across different asset classes, such as stocks, bonds, and real estate. Diversification helps to manage risk; If one asset class performs poorly, the others may help balance the losses.
CPF and Supplementary Retirement Scheme
As an employee, do the best in your career and do well to increase your salary as fast as you can while you are young, so you can accumulate employer-and-employee contributions into your Central Provident Fund (CPF). Although you cannot encash the funds, you may use allowable portion of your CPF monies to make payments for your first public housing, so the rest of your cash from your income can be deployed into your desired investment or saving vehicles.
As your salary increases through time and your capabilities, your tax brackets might start moving upwards. At that time, you may consider opening a free Supplementary Retirement Scheme (SRS) account with participating financial institutions and look for opportunities on available platforms to deploy the contributed funds into avenues to grow your investment port. The SRS is a voluntary retirement savings scheme in Singapore in which you may enjoy tax deductions on your contributions and tax-exempt withdrawals upon reaching retirement age.
Automate your savings
Set up automatic transfers from your salary crediting account to your retirement savings plan or other bank accounts. This will help you stay disciplined and consistent with your contributions. Be disciplined and do not withdraw from these savings pockets or vehicles as much as possible.
Here’s a rough calculation to get you started:
Let’s assume you want to save $1 million SGD by age 50 (25 years from now), and you expect a 6% annual return on your investments (this is a fairly typical historical average, but keep in mind that past performance is not a guarantee of future results).
To achieve this goal, using a retirement calculator, you would need to save around $1,823 per month (wow)! Of course, this is a starting point and a guide, and the actual amount may vary depending on your specific circumstances.
And if after googling and researching, and you still want to know if what you have research or come up with can works, do consider Seeking professional advice.
A licensed and independent financial and wealth adviser can help you create a personalized retirement plan that considers your risk tolerance, investment goals, and retirement needs.
Do also review your plan regularly. As your life circumstances change, revisit your retirement plan with your adviser and adjust your savings goals or investment strategy as needed.
If you think there is no better time to start and the time is NOW, do consider chatting with me if you need help in navigating your research points or just to clarify your approaches.
By following these recommended steps and taking advantage of your time horizon, you’ll be well on your way to a secure and comfortable retirement!
Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek unbiased financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
Published By:
Judy Lang
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