The biggest dilemma in retirement planning is balancing the life you want to live today with the life you want to live in the future.  Saving is never enough. You’ve got to have a concrete plan to work towards a better retirement. Today I will share with you 4 simple and practical steps you can follow towards a better retirement.


If this year you can only choose to go on holiday or save towards your retirement, which one would you choose? A recent HSBC’s recent survey reveals that most Singaporeans will save for retirement rather than holiday, yet the same survey shows nearly half pre-retirees say they have not adequately prepared for a comfortable retirement.

Why does retirement planning seem to be so hard? Singaporeans are good savers, but the knowledge and skills you need to plan for retirement are not primary school mathematics. It is a tough choice you have to make for your own life.

Step #1: Get real about your retirement needs and start early

The real obstacle to saving for retirement is that people prioritise their immediate needs. If your targeted retirement age is 65, what is the latest age should you start saving for retirement? Is it age 20, 30 or 40 years old?

Overconfidence will drown you in the sea of reality. – Norain

I hope you did not choose age 50, but Singaporeans definitely have diverse opinions.

Many retirees could have started planning earlier

Survey result of the Singaporeans, when asked this question: “What would you say, is the latest age people can start planning for their retirement (assuming retirement at 65) and still expect to maintain a standard of living similar to the one that you were used to when working?”

In hindsight, most people hope that they had done things differently, only when they near retirement. From the chart below, you can see 41% of retirees say that they would have saved more before age 30, but if you are not a retiree yet, you tend to think you can always start a bit later.

Retirement can seem far away when you are young, but not starting to save early enough is the top reason for many Singaporeans feeling insufficiently prepared for a comfortable retirement.

Working-age people are pre-occupied by a lot of other priorities

What stops people from saving for retirement? Here are the survey results:

  • Buying a home or paying a mortgage (36%)
  • Children’s education (19%)
  • Starting a family (17%)
  • Saving for a rainy day (17%)
  • Paying off other debts (13%)

Maybe our pursuit of success has distracted us from focusing on the essential things that produce success in the first place. Living in a first world country and being the top 1% earners in the world may have blunted our abilities to comprehend Priority.

“The word priority came into the English language in the 1400s. It was singular. It meant the very first or prior thing. It stayed singular for the next five hundred years. Only in the 1900s did we pluralize the term and start talking about priorities.” – Greg McKeown in his book “Essentialism: The Disciplined Pursuit of Less

Action Step: Start to evaluate if you can do one of the four things today

  1. Stop purchasing the things you don’t need to impress the people you don’t like
  2. Stop paying too much for your house
  3. Start spending less on your children
  4. Start to support your own retirement.

Step #2: Know how much you need

The current life expectancy in Singapore is 83 years now. If you retire at age 60, you have a good 23 years to spend your savings. How long can your savings and investments last? Only 13 years.

When asked how long do Singaporeans expect their retirement savings and investments to last in retirement, the result is 13 years

In my years’ of experience talking to people about retirement, I realise that the biggest mistake you can make is that you assume you can retire the same way as our previous generation. “If my parents can retire without planning, so can I.”

Mortgage limit our abilities to save for retirement

You see, our parents lived in a different era. Our parents did not have to pay for a house which is equivalent to 25 times of their annual income. As a result, they really built up a nest egg if they wanted, and most of them did. My parents never had to borrow money to purchase houses in the past, but today people have no hesitation to sign their life off to a million dollar mortgage loan agreement.

Because so many Singaporeans have used so much CPF for the mortgage, they end up with no retirement fund. In fact, many people will end up withdrawing only $5K from their CPF when they retire.

Pension cannot be replaced by CPF

Our parents have the pension, we don’t. A pension is a lifetime obligation from the government or company to guarantee future income to our parents. In another word, our parents have transferred their retirement problems to the government or the companies. That is why most pensions are sitting on a time bomb.

Sometimes I am shocked when people tell me their CPF will take care of their retirement income. In our generation, CPF is merely a supplementary retirement scheme. Most people’s CPF can only provide $1,100 a month for 20 years, and That’s it!

Action Step: Calculate how much you need for retirement based on the lifestyle you want. 

There is no universal way of calculation for retirement needs. But if you follow the textbook or use some basic online retirement calculator, you will get a deadly wrong answer. Those figures you will get is based on theory, it does not work in real life.

You can read this article to learn how to set retirement goals.

Step #3: Invest for the future, not in the future

In today’s world. with a shaky banking system, unpredictable economy, while Goldman Sachs rules the world, good investment return is hard to come by. The balance between investment risk and return is always hard to manage.

According to Natixis Global investor Survey, more than 70% investors struggle with the conflicts between obtaining return and preserving capital. This is not only for Singaporeans but a global phenomenon.


Unrealistic investment expectations

Singapore investors say that they will need average returns of 9% a year above inflation to meet their retirement goals. Is this realistic?

The long-term average return of Straits Times index is merely 6% and that is assuming you are fully invested in the stock market. Through my experience, I discovered the real reasons that people have to rely on high investment return are:

  1. Invest too little: Singaporeans invest merely 21% of their take-home pay, which is among the lowest in developed countries.
  2. Invest too late: many people think they must have a big lump sum before they can start investing, and that lump sum never came because they always spent the money elsewhere.

If you are able to invest a bit more and a bit earlier, the expected return you need can be much less. That means you can take much fewer risks.

If you are not yet aware, today you are spoiled with choices. You can start investing unit trusts with as little as $1,000. You can set up a monthly investment plan with a few hundred dollars through Phillip Share Builder Plan, POSB Invest Saver or OCBC Blue Chip Investment Plan. You have no excuse not to invest today!

Misunderstood risk

Despite many investors aspiring to have an investment return of at least 9% above inflation, few are willing to take necessary risks. As many as 70% of Singaporeans say that they would take investment safety over performance if forced to choose.

But what is safe today?

We do not live in Utopia. With globalisation, euro debt crisis in the other half of the earth can have a direct and significant impact on every Singaporean’s life.

If you have never “invest” before, start something small. Even opening an investment account without making any investment decision is a significant step.

The best time to plant a tree was 20 years ago. The second best time is now. – Chinese Proverb

Action Step: Start seeking advice and learn to invest today

Step #4: Expect the unexpected

Life is unpredictable. We all know unforeseen life events can lead to serious financial hardship, but it is unfortunate to see over a third people would use their retirement savings to deal with a crisis.

HSBC Survey: If you were to experience financial hardship, which of the following actions would you be most likely to consider?
HSBC Survey: If you were to experience financial hardship, which of the
following actions would you be most likely to consider?

Almost a quarter of working-age people say that illness or an accident has prevented them or their spouse from working and this significantly affected their ability to continue to save for retirement.

That is probably why the government has to force everybody to join Medishield Life when they are tackling Singapore’s ageing problem. If you have not realised, you are your best income generating asset for your retirement, yet I have seen many people insure everything else but themselves, and it is especially true for small business owners.

Healthcare is the foundation of any retirement planning, and it is not just about financing it. You have to maintain good mental and physical health to maximise retirement success.

Action Step: Don’t start exercising tomorrow, start today!

No one can see into the future, but you can consider what could happen and how this will impact your retirement planning. You cannot avoid risks, but you can mitigate or transfer risks.

Have a formal retirement planning

Don’t blindly save for retirement. You’ve got to have a plan.

The research clearly shows that people who had a formal retirement planning done or used a professional financial adviser have much more financial success than those who didn’t.

When asked: Thinking now about the total value of all your retirement savings and investments, approximately what is the total value of these savings and investments?

By now you probably know that retirement planning involves a lot of work. You can scratch your head all day to figure these out or if you need help, you can engage me to help you with it. Simply submit your request using the form below the article.

Even if you want to do it yourself, let me help you kick-start your retirement planning. Many people can talk but until you sit down and work out the plan, you are nowhere near to the financial freedom you ever wanted.

Here are the five questions you must ask yourself:

  1. What lifestyle do you desire?
  2. How much do you need to maintain that lifestyle if you stop working?
  3. What financial resources do you have to sustain that lifestyle?
  4. Have you got your healthcare and long-term care covered?
  5. Do you want to “die broke” or leave a legacy?

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The best way to understand retirement planning is to discuss it. Leave your questions by commenting below and I will answer all of them.

What are you struggling with right now?

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
The views and opinions expressed in this article are those of the author. This does not reflect the official position of any agency, organization, employer or company. Refer to full disclaimers here.

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