Without a plan, retirement can feel like an abstract and lofty concept rather than a concrete goal to work towards. With increasing life expectancy, it is more important than ever to start planning early for our golden years.
So what can Singaporeans do to get ready for retirement? The answer may lie with the very people who are already living their golden years — so we spoke to three women who have retired in Singapore. Here are three tips we gleaned about what to do before retirement:
1) Research Thoroughly
Now retired, Lilian Teo, 63, used to work in an administrative role at a travel agency. She now spends her time going on holidays with her family, meeting her sister for meals, and her favourite activity, shopping!
With a love for pretty jewellery, Lilian recalls a time when she went shopping for a charm bracelet, “I went around the store, picking up every charm that I liked. And when I brought it to the cashier, I nearly fainted when I saw the price. I ended up not buying it and I felt so silly!”.
She sees this, however, as a good parable on personal finance and the importance of understanding the purchases we commit to. Lilian finds the differences between her generation and the current one fascinating.
“We’re the last generation, more or less, to know the value of money. If not for CPF, I think a lot of people now may just spend and not save at all. On the other hand, I find that this generation is so much better at doing research and making informed decisions. I think that’s important when you plan your retirement,” she opines.
One key area Lilian believes in doing plenty of research on is health insurance. “We always think more is better; it’s the kiasu side of Singaporeans! But it’s very important to make sure we have health insurance that suits us personally”. Lilian makes a strong point with this. All Singaporeans are covered by MediShield Life; while we can purchase an Integrated Shield Plan (IP) for additional coverage, not everyone needs one. Two-thirds of all patients choose B2/C ward types when they are admitted to hospitals, which is already covered under MediShield Life.
To help you understand better, here’s a quick look at what MediShield Life and IPs entail:
While comparing the options, think about the type of ward you are likely to use, and whether you can afford higher premiums, including in the long-term. Note that while MediShield Life covers pre-existing medical conditions, the additional private insurance coverage component of your IP may not.
Read also: Your guide to 4 common types of health insurance
2) Adapt To Change
For 30 years, Helen Lee worked at the Singapore Corporation of Rehabilitation Enterprise (SCORE) as an accountant before retiring.
“I’ve really just been a numbers person all my life,” the cheerful and energetic 70-year-old says.
Inspired by the rehabilitation of many ex-convicts, she has since gone on to become honorary assistant treasurer at Singapore Association for the Deaf, and also does accounting work for her family during her free time.
Helen sheepishly admits to being a creature of habit, “It’s quite hard for [senior citizens] to change or do new things. We’re so used to our way of life, but I think that needs to change if we want to be ready for retirement”.
She offers her own cautionary tale as advice. When Helen was first told about CPF LIFE when it was introduced in 2008, she was not very receptive and decided to stick to the traditional way of saving money in a bank account. By the time she understood the value of CPF LIFE, she did not have as much as she needed in her CPF account and realised she could have enjoyed higher payouts if she had simply put the same amount of money into her Retirement Account (RA) earlier.
“Life expectancy used to be 80; now it’s 90,” Helen says. “If you retire at 60, you must know what you will do for the next 30 years. It’s a long time and people need to factor in the latest information when planning their retirement. Not to mention, inflation and price increases in future!”.
Helen has raised a valid point, and it is worth taking some time to educate yourself on CPF LIFE and how it helps in the face of rising expenses and increasing longevity.
Read also: Why you need to include annuities as part of your financial planning
There are three types of CPF LIFE plans: Standard, Basic and Escalating. These plans differ according to how much you get in monthly payouts, and how much you leave behind for your loved ones as a bequest.
Here’s an easy way to understand the three plans at a glance:
Read also: Is the new CPF LIFE plan ideal for you?
No matter which plan you choose, how much you receive in monthly payouts is dependent on how much you have saved in your RA. That’s why the next and final tip is so important!
3) Start Saving Early
Meet Pathma Rajakrishnan. The savvy 78-year-old spends her golden years travelling, catching up with old colleagues and improving her IT literacy — she now listens to music on YouTube, reads news on the Internet, and stays in touch with loved ones via WhatsApp!
While her philosophy is that it’s never too late to learn, she believes the opposite rings true when it comes to finance. “It’s never too early to save!” she says. While she describes her husband as “someone who wasn’t careful with money”, Mdm Rajakrishnan saved regularly from a young age and bought annuity plans to get prepared for retirement.
Here’s why getting an early head-start makes financial sense for your retirement:
By starting your preparations at a younger age — say, at age 21 — you can potentially earn $213,905 more just from compound interest alone! Start saving early and making regular top-ups to your Special Account (SA) before you turn 55.
If you didn’t start early, there’s no need to panic! Here are two things you can do to boost your CPF LIFE payouts:
Defer your payouts – you can grow your CPF LIFE payouts simply by delaying them. They grow by up to 7% for each year that you defer them, up till age 70.
Top up your CPF – another way to grow your CPF LIFE payouts is to make top-ups to your SA if you’re below age 55, or RA if you’re aged 55 and above. Find out how: https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/retirement-sum-topping-up-scheme
All three women have different methods and tips, but at the crux of it, wise money management is one thing everyone agrees is important for a stress-free retirement. Let’s learn from their insights and take retirement into our own hands today.