Practical Ways to Prepare Yourself Financially for Retirement
Many Singaporeans procrastinate regarding retirement planning due to sheer figures and not wanting to think about old age. Due to high living cost and risk of long-term inflation continuously chipping at spending power, golden years planning is as important as ever.
Thanks to CPF investment accounts, many Singaporeans have a way to save for a comfortable future. Future retirement must be considered regularly. Here are a couple of actionable steps to consider as you start building your retirement nest egg.
CPF Retirement Sum Topping Up
Singaporeans and permanent residents (PRs) have CPF investment payouts as basic monthly income during retirement. The exact CPF LIFE payout that will be received is computed based on the CPF Retirement Account (RA) balance plus the type of plan you picked: Basic Plan, Standard Plan, or Escalating Plan.
The amount in your RA will be based on your mandatory contributions to CPF Special Account (SA) and Ordinary Account (OA) in your working years.
A larger RA amount means greater monthly CPF LIFE payouts. A quick way to increase your retirement nest egg is by making voluntary contributions to your SA. The contribution will go directly into SA (or RA aged 55 or above), earning a risk-free interest of around 4% per annum. There will also be a tax relief of up to $14,000 annually when you tap on the Retirement Sum Topping Up (RSTU) Scheme on contributions to personal and loved ones’ CPF accounts.
Regardless, CPF LIFE monthly payouts only start from age 65. If you look to retire earlier, you can’t count on CPF LIFE payouts for living expenses. Moreover, voluntary top-ups into CPF accounts are irreversible.
Singapore Savings Bonds
Singapore Savings Bonds (SSBs) are issued by the Singapore government and offer a risk-free investment option for growing the retirement nest egg. Additionally, it provides superior liquidity, allowing withdrawals if you need it.
Savings plans through financial institutions are a good alternative to the SSBs. Unlike the SSBs, most of these plans are less liquid, requiring you to hold them for an agreed term to enjoy interest returns. It’s also shorter-term, typically between 3 to 5 years.
Many of these saving plans are additionally offered with a small insurance component, giving you basic added protection. Some also offer their policy duration, letting you select a suitable plan based on when you may need to withdraw your money.
Retirement products like CPF investment options offered through insurance providers are good for those looking to build retirement income levels to supplement CPF LIFE monthly payouts. CPF Investment Account (CPFIA) is a channel for investing your CPF savings+. Investing your CPF money allows you to reap greater potential gains, enriching your savings for a comfortable retirement.
Retirement doesn’t mean you need to stop living a meaningful life. It actually leads to a more meaningful life that can be lived to the fullest by pursuing your interests and passion, which may not be possible without a sufficient nest egg. Ensure this by having a sufficient retirement income. If you’re new to investing, check out this CPF investment to find out how it can maximize your savings and get the best options at every milestone.