# How Realistic Is An Early Retirement Goal In Singapore?

Saving enough to retire in one of the world’s most expensive cities can be hard. Saving enough for an *early* retirement is even harder. However, if you harbour the dream of reaching financial independence before the statutory retirement age, here’s what you need to know about retiring early in Singapore.

**How much do you need to retire?**

The minimum age of retirement in Singapore is 62, although you can be eligible for re-employment up to age 67.

So, how much do you need to retire, anyway?

A much-touted rule of thumb in the U.S. is that you need 70% to 80% of your last drawn income to maintain your current lifestyle in retirement. This rule works for some people, but it’s not for everyone. The percentage doesn’t take into account how much of your salary you actually spend or save. If you have a high rate of savings (keeping in mind that you already contribute 5% to 20% of your salary to CPF), you may be able to get by with less than 70%, as you’ll no longer be taking out chunks of your income to put towards savings. Having a higher rate of savings also means a lower rate of spending, making it easier to subsist on less during retirement.

On the other hand, low-income individuals who live from pay cheque to pay cheque may need more than 80% of their income during retirement, as they spend a larger proportion of their income to make ends meet.

Ultimately, how much you need in retirement boils down to the kind of lifestyle you want to live. However, if you’re curious about how much you’ll need in retirement if you live a fairly basic lifestyle, we’ve done the maths for you.

We’ve made a few assumptions in our calculations:

- The average life expectancy in Singapore is 83.1 years – we’ve rounded this to 83 years.
- The basic monthly expenses you’ll incur during retirement add up to S$1,200 to S$1,500 a month. We’ve used S$1,500 in our calculations.
- The inflation rate is assumed to be 2.5% a year.
- CPF monthly payouts were not taken into account in these calculations.

Assuming you’re 25 years old today, here’s how much you would need to save to retire by these ages:

However, take note that these calculations represent the retirement fund you may need if you plan on living a fairly basic lifestyle. If you want to enjoy luxuries like international travel, dining at nice establishments or treating your grandchildren to the occasional indulgence, you should be prepared to save for more.

On top of saving for your retirement fund, you may also need to save up for other shorter-term financial goals and responsibilities, such as saving for your first home, paying for children’s education or caring for your aged parents.

On the bright side, these numbers also don’t take into account your CPF savings or the home equity you may have built up during pre-retirement, which may bolster your retirement fund.

**How much do you need to save now to retire?**

Having to save up over S$1 million to retire at 67 – let alone to retire early – can be pretty daunting. In order to reach that amount, you’ll have to save a part of your income every month:

For most people, putting away thousands of dollars every month to retire simply isn’t possible. This is why you should consider investing your money – investing allows your money to beat inflation and grow over time. Here’s how different investing rates of return can affect how much you need to save for retirement:

Once you include investing in the picture, saving up for your retirement becomes much more feasible.

**How do you reach your retirement goals?**

Here are three things you can do to make an early retirement dream possible.

**1. ****Start early**

The earlier you start saving and investing, the more time you’re giving your money to grow. If you delay saving now, you’ll have to save a larger proportion of your income in the future in order to catch up. For instance, if you are 25 years old today, here’s the difference between saving for retirement now and saving when you are 35:

(assuming your savings produce an investment return of 7% a year) |
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**2. ****Increase your savings rate**

Your savings rate is one of the most important metrics when it comes to achieving your retirement goals. Being able to put away a large proportion of your income – especially if you’re still young – will produce greater investment returns by the time you want to retire.

Here’s what you can do to increase your savings rate:

**Cut spending.**One of the ways you can increase your savings rate is, unsurprisingly, to save more. Optimising big-ticket spending, such as housing (consider refinancing your home loan to potentially save thousands of dollars in interest charges), food (eat out less) or transportation (ditch the car) can greatly boost your savings rate.**Save on existing spending.**Using cashback tools, discounts and coupons can helps you save on existing spending – this means saving more without having to reduce spending.**Increase earnings.**Boosting your income could mean becoming more valuable at work to negotiate a raise or a promotion, or picking up a side income job. However, as your income increases, you should try to keep your increase in spending (if any) to a minimum in order to maximise your savings rate.

**3. ****Invest**

Once you’ve paid off your high-interest debts and put aside emergency funds in a high-interest savings account, look into investing your money. If you have a long time horizon until you retire and can tolerate higher-risk investments, it is recommended to allocate more money into equities. If you’re closer to retirement, move your funds into lower risk investments like bonds.

**An impossible dream?**

It’s not impossible to retire early, but it does require a lot of discipline in managing your finances. Unfortunately, the longer you take to start planning, the higher the odds stacked against you for achieving early retirement. However, you can still take advantage of your remaining time horizon to build your retirement fund.

For a more precise estimation of whether your retirement goal is achievable, use the CPF Retirement Calculator. It takes into account your income, projected CPF returns, investment returns and lifestyle expenses.

Working towards an early retirement goal will be hard, but not entirely impossible.

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