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5 Tips for a Comfortable Retirement in Singapore

30 Jun 2021

investment for seniors | VI
(c) Sadie Xiao

They say retirement is just like a never-ending vacation. Ideally, it is. But some of us get caught in the “vacation” part in the early months of retirement and eventually lose the means to enjoy the rest of the decade or two as a retiree.

Most seniors in Singapore fail to understand that retirement is also a journey that requires money -- and a huge sum at that, considering we live in one of the world's most expensive countries.

In 2019, The Straits Times found that a typical retired Singaporean needs at least $1,379 per month for his basic needs, not considering leisure activities and living upgrades. This amount will still go up over time because of inflation (roughly at 3 to 4%). So who says retirement in Singapore is cheap?

Some would argue that CPF could help. But do you really think your CPF monthly payout is enough to ensure you have a comfortable retirement in Singapore? How then can you enjoy your supposed to be “never-ending vacation”? Is there a way you can grow your retirement income?

See also: Investing with CPF: All You Need to Know

Fortunately, retiring in Singapore is a topic that gains a lot of traction. With it comes the many investment options you can consider to get a bigger nest egg for when you finally decide to retire.

Consider these things first

First, you have to identify how much of your fund, whether it comes from your savings or your monthly payout, will go to your investment. To do this, you need to review your expenses. Make sure you have enough to pay for your doctor appointments, utilities, medicine, and food. Then you can identify how much of the excess you can put into investing.

Second, you need to understand your limitations in investment. For one, your investment term will be shorter as you’re no longer too young. Likewise, you cannot afford to run out of money; hence, your best options are low-risk investments.

Third, you have to make sure your investments are liquid enough so you can access them in times of emergency. You have to have cash to pay for urgent and unavoidable events like medical emergencies.

Last, you must appoint someone to help manage your money. This person must be trustworthy and knowledgeable when it comes to finances, so you can rely on them whenever you’re unable to make decisions on your own.

Once you’ve settled all this, you can start exploring the ways to still be financially healthy while you’re retired.

Our tips for a comfortable retirement

Here are five ways you can do to preserve your money for your retirement in Singapore:

1. Go for safe investments

As mentioned above, you can’t afford to put your money into high-risk investments even though your risk tolerance may be high. Remember that your money is meant for you to retire happily and comfortably. Losing money from unsafe investments can ruin your chances.

The safest investment options for your money are banks and the Singapore Savings Bonds (SSB). Banks, despite their low interest rate, can guarantee that your money is safe. Moreover, you can readily access your financial resources when you need them.

SSB is also a safe option for you. As it is backed by the Singapore government, you’re sure your retirement money is safe, and you can get decent interest rates as well.

2. Invest in properties

Real estate is a popular investment for seniors in Singapore and other countries, especially when you have enough savings to purchase a unit, considering the high property prices in the country. A monthly rental of at least $2,000 for a two-bedroom HDB flat can ensure a stable income source to fund your retirement.

There are, of course, disadvantages to real estate investing. It requires a lot of effort to be a landlord. You need to manage the property and renovate it when needed. At times, it can be difficult to find tenants (or good tenants), too.

3. Or invest in REITs

If you want to invest in real estate minus the hassle of being a landlord, you may want to explore investing in REITs (real estate investment trust). Through REITs, you can own properties, including commercial ones (like malls). The management of the property will then be taken care of by a third party, usually professional property managers who know the ins and outs of the business.

With REITs, you can enjoy your retirement in Singapore without having to worry about your tenants, your property, and the monthly rent.

4. Earn money through dividends

If you want to invest in stocks, you can consider dividend stocks rather than growth stocks. A dividend is money paid out to you by the stocks you own whenever they make profits. This means you’ll get cash income monthly or quarterly when the company you invested in registers a good performance.

Investing in growth stocks might be too risky for you as a senior. Moreover, most growth stocks don’t pay out dividends to their shareholders.

If you want to check a company’s performance and whether or not they pay dividends, check out VI App, a tool that helps in easier and faster stock analysis for investing newbies and experts alike.

5. Diversify your portfolio by adding stocks

The best time to invest in stocks is as early as possible. But this doesn’t mean there’s an age limit.

Experts recommend that younger retirees (early to late sixties) put 50% investment in the stock market as they still have enough time to adjust to the market’s volatility. For those older, 20% to 30% of your investment portfolio can be allocated to stock investing.

Stocks can provide not only diversification on your portfolio, but can also give you high returns. However, you ought to have a comprehensive understanding of the stock market before you begin. You can read investment books, attend seminars, or talk to experts to be sufficiently prepared.

VI College has a weekly masterclass on stock investing. It’s a free two-hour online course you and your friends can attend. If you’re interested, register here.

Investing your money, with guidance and proper knowledge, guarantees you a retirement true to how it’s defined -- “a never-ending vacation.”