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Adulting 101: Retiring by 40 is a fantasy for most but proper planning can ensure comfortable retirement in silver years

SINGAPORE — As a young Singaporean, the idea of retiring with more than S$1 million in the bank before I turn 40 seems like a complete fantasy.

Some younger Singaporeans find it hard to imagine themselves at the age of 65 or 70, which makes the task of retirement planning seem rather abstract.

Some younger Singaporeans find it hard to imagine themselves at the age of 65 or 70, which makes the task of retirement planning seem rather abstract.

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Adulthood is an invigorating stage of life as young people join the workforce, take on more responsibilities and set their sights on the future. But its many facets — from managing finances and buying a home to achieving work-life balance — can be overwhelming.

In this series, TODAY’s journalists help young Singaporeans navigate this stage of their lives and learn something themselves in the process.


SINGAPORE — As a young Singaporean, the idea of retiring with more than S$1 million in the bank before I turn 40 seems like a complete fantasy.

That's the aim of the Fire movement, short for “financial independence, retire early”, popular among millennials in various countries over the past decade.

Proponents say that saving hard, investing well and living frugally can deliver this financial Shangri-la.

For me, it's more realistic, though hardly a stroll in the park given the financial obligations of young Singaporeans, to achieve my own idyllic vision.

I’ve long imagined myself sipping cocktails on a beach overseas a few decades down the track.

But even that distant goal has seemed increasingly improbable to me as obligations such as paying a mortgage dominate my bank statement.

A chat with my friends found that they are also worried about their financial futures.

One said that she wanted a financially comfortable retirement to ensure, for example, that she would not be taking the bus to the hospital as a frail old person.

Another said that she did not want to rely on her future children for allowances like her parents do.

One thing we have in common is that we have had trouble kickstarting our financial planning for retirement.

Before I took a closer look at the issue, my own back-of-the-envelope calculations suggested that I would need about S$500,000 to retire.

This is assuming I retire at 65 and need an income of S$2,000 monthly for 20 years to cover basic expenses. This figure excludes the beach holidays and the medical and caregiving expenses.

However, online forums suggested that I may need much more.

A survey by Fullerton Fund Management in April this year showed that, on average, Singaporeans estimated that they would need S$1.4 million for their desired retirement.

Just learning that I have to save so much was daunting.

With our retirement decades away, other friends also felt little motivation to get started.

One said: “How do I know what 70-year-old me will need? It’s so abstract.”


Experts and millennials interviewed for this piece said that the motivation to plan for retirement should come from taking a look around at the signs of Singapore’s rapidly ageing population.

Mr Vincent Chan, the head of the multi-asset team at Fullerton Fund Management, cited the example of larger fonts for public housing block numbers as a prompt that could spark conversation among young people on how they intend to spend their retirement.

This, along with the circumstances faced by their own ageing parents and grandparents, would make the topic of retirement seem less abstract to millennials.

This was the case with personal finance blogger, Ms Jeraldine Phneah, who said that she started planning for her retirement after meeting unemployed people during a volunteering stint in her early 20s.

Ms Phneah, a 30-year-old technology professional, said that she encountered professionals, managers, executives and technicians in their 40s and 50s who had lost their jobs and were struggling to support their older parents and young children.

She said: “My experiences made me insecure and fearful about our generation’s future. Can we retire or will we be trapped in this rat race forever?”


It seems that I am not the only one who has been off the mark with estimates for their retirement savings.

A survey by OCBC bank’s Financial Wellness Index last year found that close to 80 per cent of Singaporeans underestimated the retirement amount they needed based on their ideal retirement lifestyle.

The age group that underestimated the most — by 40 per cent — was millennials.

My interviewees said that to kickstart my retirement planning, I would have to get a more accurate estimate of how much I would need.

Mr Chan of Fullerton said that having firmed up a target figure, individuals can then estimate how much they would need to save yearly or monthly to reach their financial goal.

Providing an example, Mr Chan cited a recent study published by the Nanyang Technological University and National University of Singapore Lee Kuan Yew School of Public Policy last week that suggested that a retiree needs a minimum of S$1,421 monthly for expenses.

After adjusting for inflation and assuming an individual needs to be supported for 25 years of retirement, this translates into savings of S$852,600 by the age of 60, Mr Chan said.

This means setting aside S$32,792 yearly or S$2,732 a month from the age of 24.

Mr Chan acknowledged that many young Singaporeans may not be able to set aside such amounts and suggested they start off with a regular savings or investment plan to accumulate savings. Over time, their savings will benefit from compounding over a longer period of time.


1. Set targets

Fellow millennials I spoke to also said that setting financial targets at different stages of my life will make my retirement goals seem more achievable.

Mr Yeap Ming Feng, 31, head of marketing at personal finance community Seedly, said that he had set such targets for himself, too, even if they’re not quite as ambitious as those in the Fire movement.

His first milestone, which he set and achieved last year, was to have a diversified investment portfolio of up to S$80,000 with exposure into different markets by the age of 30.

He also plans to have at least S$500,000 in funds at the age of 40 and close to S$1 million before he turns 45.

Some targets may seem bold, but Mr Yeap said it also ensures that individuals still have adequate finances if they fall short of their targets.

2. Contribute to CPF

The most fuss-free way to start saving, Mr Chan said, is to regularly top up my Central Provident Fund (CPF) account to earn higher returns rather than leave my excess savings in the bank.

The Special Account in CPF, for instance, has an interest rate of 4 per cent. This offers far better returns than banks, with prevailing interest rates on savings accounts well below 2 per cent.

CPF offers other options as well, such as using funds from a member’s Ordinary Account or Special Account to invest in the CPF Investment Scheme.

3. Invest

However, doing so may mean a person’s CPF monies will be sufficient only to address basic requirements. A recent survey showed that monthly payouts from the CPF basic retirement sum will be enough to just meet spending needs of around S$1,400, Mr Chan said.

For a more comfortable retirement, he said that individuals will need to invest in growth assets to accumulate higher retirement savings.

Mr Yeap said that investments should beat inflation rates so that an individual’s purchasing power remains the same in future.

He also recommended having some liquid investment products or investing funds in Government-backed Singapore Savings Bonds.

Such investments can be cashed in quickly if you are in need of emergency funds even before retirement, he added.

4. Get adequate insurance coverage

At the same time, millennials should also have basic insurance coverage such as hospitalisation plans in place to cover sudden expenses, said Mr Yeap.

Sharing his personal experience, Mr Yeap said that he would have been “living under a bridge now” if his late mother, who died of cancer several years ago, was not adequately covered for her medical and hospitalisation bills.

5. Get more pay

Ms Phneah said that she focused on increasing her earning power, given that there was a limit to how much she could save.

She built skills that were in demand for her job, stayed abreast of industry trends and networked to maximise the income from her career.

For the first five years of working full time from the age of 23, she was able to more than triple her annual income.


Several times, I have found myself setting aside plans for my retirement savings to focus on more immediate financial goals such as purchasing a house or supporting my parents in their old age.

Is it even tenable for a young Singaporean to start preparing for retirement so early when we have multiple financial goals to juggle?

Mr Yeap says that the concerns I raise were a symptom of the “sandwiched generation” of millennials.

Not only do millennials have to manage their own financial security, but they also have to financially support both their parents and their children. As a result, the retirement adequacy of one generation has a knock-on effect on the next.

As such, it is important to communicate with ageing parents on their retirement finances. This would help young Singaporeans figure out how to support their aged parents while saving for their own retirement, said Mr Yeap.

Mr Chan acknowledged that millennials face competing demands on limited savings. However, these demands have different target dates for when funds are required.

For example, a full home mortgage payment can take up to 30 years while an overseas education plan for one’s children could take 18 years.

To this end, it is important to have good financial planning to balance one’s priorities with their available resources, said Mr Chan.

Elaborating, Mr Chan said that a good financial plan will list all financial goals, as well as the amount and time required to meet them.

It should also state one’s financial resources, such as salaries, CPF savings, investment income and expected returns.


Having received advice from my interviewees, achieving S$1 million in savings seems a little less daunting though I certainly don’t expect to do so during my 30s.

I am ready to take another crack at planning for my retirement. I will hold off on my retirement beach plans for now.


Navene Elangovan, 31, is a senior journalist at TODAY, covering environment and education.

CORRECTION: An earlier version of this article stated that Ms Jeraldine Phneah started working full time from age 25. This was incorrect. She started working full time when she was 23. We apologise for the error.

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Adulting 101 retirement cpf investment financial planning

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