Tough, but not impossible to retire happy in Singapore

A 2016 survey found that 82 percent of Singaporeans are worried about growing old.  

Most Singaporeans are worried about growing old and maintaining their standard of living once they stop working. But experts point out that starting early to save for retirement and investing wisely are key to building a nest egg.   

By Romesh Navaratnarajah

Singaporean property consultant Mr Kamal (not his real name) works in Malaysia and shuttles between Kuala Lumpur and Singapore every month to care for his elderly mother who lives alone in a flat in Jurong.

Life is tough for the 41-year-old who feels that the cost of living here is much higher than in Malaysia.

His main concern about growing old in Singapore is financial security, and whether he will still have a roof over his head once he retires.  

“Some elderly people are often left to fend for themselves by selling tissue paper and working as cleaners just to maintain a standard of living,” he told PropertyGuru. 

His concerns mirror those of most Singaporeans, according to the results of a survey carried out last year by NTUC Income and the Lien Foundation. 

The study which polled 998 respondents between the ages of 30 and 75 found that 82 percent of them are concerned about ageing in Singapore.   

Among their top fears is financial preparedness, with respondents citing a fear of “running out of savings” and the inability to afford healthcare and medical expenses. 

Cash is king 

Experts we spoke to agree that it’s very hard to retire comfortably in Singapore due to the high living standards.

“There have been many reports, articles and calculations done that suggest that you would easily need about $1 million in cash, minimally, to be able to retire comfortably and maintain the same lifestyle as compared to when you were still working,” said Eugene Huang, Director at Redbrick Mortgage Advisory.  

“You would also have to put into consideration the medical bills that you may chalk up eventually due to old age.” 

Despite this, he noted that there are several measures put in place by the Central Provident Fund (CPF) Board to help Singaporeans plan for retirement. 

These include being able to withdraw your CPF savings upon turning 55, the Retirement Sum Scheme, and CPF Lifelong Income for the Elderly (CPF LIFE) Scheme. 

Huang explained that the Retirement Sum Scheme allows CPF members to receive a monthly payout until the savings in the Retirement Account balance is depleted, whereas CPF LIFE supplies members with a life-long monthly payout. Started in 2009, all Singapore citizens and permanent residents (PRs) born from 1958 onwards automatically join CPF LIFE. 

No safety net 

While this is helpful in many cases, iCompareLoan chief mortgage consultant Paul Ho reckons there is no safety net for retirees who are not rich. 

He believes that Singaporeans cannot rely solely on the government for help, and should instead start planning for their retirement as soon as possible by setting aside 10 to 20 percent of their monthly income for insurance and savings. 

“Medical insurance is to help you put a ceiling on your medical bills,” said Ho, adding that medical costs have become “so expensive” due in part to the rise of medical tourism and costly medical equipment. 

He also pointed out that public hospitals sometimes have an insufficient number of beds or operating theatres, hence for those who are severely ill, they may have no choice but to go to private hospitals. 

family finances

Younger Singaporeans should start planning for their retirement now, say experts.

Save and invest 

Separately, having a savings plan will allow you to accumulate sufficient cash to buy your first property, Ho said. Any excess cash should be put into medium and long-term investments that generate a higher return. 

His advice for young Singaporeans is to not rely on their day job as their only source of income. “Younger couples must have the energy and drive to think outside the box, innovate and start their own business. Be hungry and passionate. Develop an alternative source of income, either passive income or active income that you can rely on. 

“If your passive income exceeds your expenses, then you can already retire as you are financially free. Hence, young couples must be able to defer their enjoyment, reduce expenses and build an income stream.” 

Huang suggests either relying on properties for retirement or minimising the use of CPF for property purchases. 

The purchase of an investment property would either be for capital appreciation, should you choose to sell the property, or rental yield, which will provide a rental income stream. 

Another option would be to refinance and cash out on your property by borrowing against the value of your property to secure additional cash for your retirement needs, said Huang. 

This was further supported by the government’s announcement in March on the relaxation of the Total Debt Servicing Ratio framework to equity loans with loan-to-value ratios of 50 percent and below. 

“This means that you could have access to an additional lump sum of cash. With this amount, you could put it through other investment methods to grow it,” said Huang. 

Keep your savings in CPF 

He also warned home buyers against unnecessarily using their CPF savings to purchase an HDB flat as problems will arise when they decide to sell the property due to CPF accrued interest. 

“Essentially, whatever amount you take out of your CPF savings would have to be returned with compounded interest. The government introduced the CPF to ensure that all Singapore citizens and PRs would have a sufficient amount for retirement, so whatever that was taken out prior to retirement would have to be refunded into the account,” he noted. 

“Additionally, the interest rate payable on an HDB loan is 2.6 percent, compared to the interest rates offered by the banks, which have been consistently below two percent. Even though this is not part of your cash on hand, it is still your money, and you are losing out on your retirement savings interest, which is a much higher interest rate compared to the savings in your bank account.” 

Grow old with dignity 

Looking ahead, Mr Kamal hopes that the government will put policies in place to ensure that Singaporeans grow old with dignity and “do not have to wipe tables or sell tissue paper”.  

“They have contributed to Singapore’s nation-building and deserve to be looked after via social welfare for the elderly. Cut the bureaucracy by not always having to check if they have an income or show they are really poor to be deserving of help,” he said.  

Ho wants the medical safety net to be enhanced for all Singaporeans so nobody becomes bankrupt due to illness or is denied treatment on the grounds of cost.  

In addition, taxes for the rich could be raised together with the amount of government subsidies handed out to lower income groups, he said.  

One suggestion is for a portion of the Government Land Sales proceeds, which goes into the reserves, to be distributed to low-income senior citizens in the form of food vouchers, cash top-ups or free public transportation. 

Aside from the CPF scheme, Huang noted that the government has come up with other policies to benefit seniors such as the Lease Buyback Scheme, which allows elderly homeowners to sell the tail end of their flat’s 99-year lease back to the HDB, the Pioneer Generation Package and the Senior Citizen Concession Card. 

“By recognising the needs of our ageing population, be it through affordable healthcare, financial security or even elderly employment, it will provide our seniors with the opportunities to stay active and remain healthy, both mentally and physically,” he said. 

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