How to ensure you have enough retirement savings?

Each of us live in a different country and has different ideas on what retirement life is about. For me, its about having enough funds to pay my bills in my retirement and able to go for an occasional travel once a year. As such, I was looking at the standard of living currently and looking at how much I would need to ensure a comfortable retirement.

In Singapore, where I have lived all my life, I am constantly wondering if I am able to meet my retirement needs. As such, I thought I can shed some light on this and hopefully help anyone who is looking at this. In my country, we have this retirement savings account term as central provident fund (i.e cpf). Once you have started working, your employer and you have to contribute to the cpf for your retirement fund. The cpf account can also be used to pay for both public and private housing (commonly term as hdb for public housing). In hdb, the government subsidies the payment for housing. After all, the mission of the public housing is to ensure hdb stays affordable to the citizens of the country.

Housing is usually the biggest expense we incur and it will impact how much we have in retirement. So is there a strategy to ensure we have enough money for retirement? Take for instance, if you have reached a retirement of age 65 years old, would you want to be still paying down your mortgage? Surely, most of us would prefer to cut down on any monthly expenditures. Therefore, for those who are looking to rent your housing all their lives, you will be struggling to pay your rental every month when you reach 65 years old.

To state the obvious, the first step is to own and pay off your housing before you reach 65 years old. If you can do this, you are already halfway there. As such, when you are still in your 20s or 30s, do work out with your financial planner on the mortgage payments for your hdb. Usually, the mortgage loan tenure stretches to 65 years old. The earlier you pay off the housing loan, the more money you have for retirement.

This brings us to the next point. How much do you need for retirement? Because each of us has different ideas on this, I would like to state a baseline assumption. This assumption is, having enough to pay off the monthly bills (i.e inclusive of inflation) and have spare funds to live comfortably. According to the cpf website see link (Central Provident Fund Board (CPFB) , we can expect a monthly pension of $1500 at 65 years old for as long as you live, if we have $180,000 when we reached 55 years old. This $180,000 will be compounded to $270,000 when you reached 65 years old. In other words, your cpf will grow from $180,0000 to $270,0000 to help you retire, at no risk. Of course, if you wish to invest this $180,000 for higher returns, you can do so too.

There you have it. This is the 2 simple steps to have enough for retirement. In summary, first pay off your housing before you reach 65 years old. Second, have enough in your retirement fund of $xxx,xxx so that you can grow this money to fund your retirement.

There are other ways to have sufficient funds for retirement. If you are investment savvy, you would have invested in shares, etf or real estate investment trusts( i.e reits) to help grow your funds. For those who have the means to own second or multiple properties, this is another way to reach your retirement goals.

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