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Is early retirement in Singapore a possibility?

10 Nov 2021

Early Retirement Singapore | VI

To retire early is a goal most of us hold – and for understandable reasons. We want to have more time to enjoy life, perhaps do charity work, pursue a passion project, travel the world, and spend more time with our family, kids, and grandkids. Yet, early retirement has remained a dream for most of us in Singapore.

Blame it on stagnant salaries, inflation, being the sandwich generation, or the pandemic, but we’re sure you’ll soon realise these reasons are not essentially roadblocks to early retirement in Singapore.

Ultimately, it’s in the planning that will get you there. Recognising that challenges lie ahead in your path to early retirement is the first step. From there, you’ll get a more comprehensive idea of what you need to solve to take another couple of steps forward.

So yes, early retirement is a possibility. The only catch is you ought to know how to make it possible.

Figure out your retirement numbers

Singapore is an expensive country to live in. The cost of living won’t go down when you retire, whether you aim to retire at 50, 55, or 65. It’s just the way it is because of inflation. Prices of goods, properties, and services will inevitably go up. But when you retire, your income will significantly drop. How do you then fix the gap?

This is the next step to planning for your early retirement – you need to calculate how much you need to retire in your 50s (or earlier, depending on your goal).

Recent surveys reveal that a retiree in Singapore would need at least $1,400 per month to cover living expenses. Of course, it doesn’t take into account the lifestyle some lead, the medical and caregiving bills that are unavoidable in our silver years, and other miscellaneous or emergency expenses.

To figure out just how much you need to retire at a certain age, multiply your desired retirement income per year by the number of years you expect to spend in retirement.

For example, a 30-year-old who wants to have a $2,500 income per month ($30,000 per year) and wants to retire at 55 years old (30 years in retirement, since the life expectancy in Singapore is at 85 years old) would need $900,000 to ensure he retires comfortably at 55.

If you wish to get a higher monthly income or wish to retire even earlier than 55, the figure will go up. Hence, it is best if you can compute your nest egg requirement before you plunge into the ways to get this amount.

Fulfil your retirement calculation

Knowing how much you need is one thing; fulfilling the amount is another. Let’s admit that getting a monthly salary is not enough (except maybe if you receive more than $15,000 per month) to guarantee you $900,000 or $1,000,000 for retirement. You need passive income to add on to your salary.

Fortunately, in Singapore, we have a variety of options to achieve passive income. The unfortunate fact, however, is almost 50% of us do not maximise these opportunities. Ergo, the majority just settle on putting their savings in the bank – which is not the best idea unless you are fine with a 0-1% interest despite a 3% inflation rate.

One of the most recommended options to get passive income for your early retirement is investing. You can invest in properties, bonds, precious metals, and stocks. By investing some of your money, you are opening new doors to make more money which will then go to your retirement fund.

Investing opportunities for your retirement fund

The below list won’t cover all opportunities to generate passive income in Singapore, but it will give you an idea of what to explore to start building your nest egg.

Rent out your property

If you have an extra room or a unit, consider renting it out. The Singapore property market has always been a profitable place for investors. You’ll probably just spend a little on renovations and advertising costs but the monthly rent you’ll get will undoubtedly add to your retirement fund.

Invest in stocks

Investing in stocks is an underrated way to secure passive income. But if you know how stock investment can give you good returns over time (therefore, investing for the long term is key) through compounding return, you’ll grab the first chance to learn about it.

You can even choose to invest in dividend stocks and get monthly payouts. As such, you’ll earn money in two ways: monthly in the form of dividend payouts and over the long term (say when you’re finally ready to retire) in the form of capital gains from your years of staying vested.

Invest in REITs and ETFs

Another option is investing in REITs (real estate investment trust) and ETFs (exchange-traded funds). Think of REITs as investing in a property but minus the hassle of owning and managing a unit. Think of ETFs as owning a variety of stocks in one go.

Explore the CPF Investment Scheme

Do you know you could invest your CPF? Yes, you can find more information on using your CPF to invest in different investment vehicles, including stocks and bonds, on their official website. But we urge you never to touch your CPF if you don’t have adequate knowledge to do so.

See also: FAQs in using your CPF to invest in stocks

Before you decide to invest in any of the above options, make sure you have the following covered: insurances and emergency funds. And remember to equip yourself with relevant know-how before investing in anything.

Join us for a free online masterclass on creating passive income in Singapore.


DISCLAIMER

No income guarantee or promises of any type are being made in this article. Know that your results will vary due to circumstances that are outside of our control. All forms of investments carry risks, including the risk of losing all of the invested amount. Such activities may not be suitable for everyone. The reader, thus, agrees that the author and the company are not responsible for the success or failure of readers’ investment and business decisions relating to any information provided herewith.