Living life on your own terms during and beyond your working years. Here’s how!
Every passing day brings you closer to retirement. If you plan to stop working at 65, you will still expect to support yourself for several decades. During this time, you would have to meet your regular expenses without a steady source of income.
The average longevity of Singaporeans has been steadily rising over the years. Back in the 1960s, males were expected to live for only up to 59 years and for females, the figure was slightly higher at 63 years. Today, life expectancy for both men and women are in the 80s.
How will you support yourself without working for more than two decades? Will your savings be enough to finance your desired lifestyle?
Of course, there is the option of relying on your children and future generations for financial assistance, but this adds to their financial burden, making this a less viable option. After all, it is likely that your children would have families of their own. Would it be fair to expect your children to support you?
The importance of retirement planning
When you are in your 20s or 30s, retirement might seem like something too far removed from your current stage of life. You think of it as something that other people go through, and as something that will only apply to you much later. Don’t make the mistake of being short-sighted about your future – it’s never too early to make plans for the future and start thinking about the day you will stop working.
An early start will give you a better shot at accumulating the financial assets that you need to see you through your sunset years.
Another crucial factor you should consider is the increasing demand for healthcare that comes with longer lifespans in Singapore. A recent report in the Straits Times projects that annual elderly healthcare costs could go up to US$49 billion (S$67 billion) by 2030. That’s an average of US$37,427 (S$51,020) every year for each elderly Singaporean.
While part of this sum could be taken care of by your health insurance, a large chunk would have to be accounted for with individual resources like your cash assets. In addition, inflation affects healthcare costs and your other expenses, potentially putting even more pressure on your finances down the road.
Consumer prices – up, up, and away
In the 15 or 20 years or more that you would have to sustain yourself using your savings, you can expect costs to go up consistently.
Let’s take a look at how consumer prices have fared over the decades:
Consumer price index history in Singapore
(Index reference base: 2010 = 100), Source – World Bank
How much will a dollar be worth 15 or 20 years from today? Although it’s impossible to predict future price trends accurately, the Goods & Services Inflation Calculator provided by the Monetary Authority of Singapore provides a rough projection. This tool offers details of the depreciation of the buying power of the Singapore dollar over the years.
For example, a “basket” of goods and services that set you back by S$738 in 1998, cost S$1,000 in 2018. You can use the calculator to estimate the price increase for specific items of everyday expenditure.
For those who do not want to go through the complicated exercise of estimating the future rate of price increases, an inflation rate of 2% per year is a conservative assumption. Therefore, you need to bear in mind that you’ll need substantially more money in the years ahead to take care of your day-to-day needs.
How to calculate your retirement needs
How much money will you need going into retirement? This isn’t the easiest figure to compute. You have to factor in health expenses, your regular living costs, and inflation.
Don’t forget that you will have far more leisure time than you had before. Consequently, you may need to set aside additional funds for recreational activities.
A quick way to arrive at your requirements is to use the CPF Retirement Estimator. This exercise will take only a minute to complete, and you can calculate the sum that you need to have a monthly retirement income of 70% of your last-drawn salary for a period of 20 years.
If you have a little more time, you could choose to use the CPF Retirement Calculator. This exercise will take approximately ten minutes but will provide a more detailed picture of your financial position.
If you think that you need help with your retirement planning, consider buying an endowment plan for retirement from Etiqa, the insurance arm of Maybank Group. Etiqa’s new plan ePREMIER retirement offers a host of benefits that include guaranteed monthly payments in your retirement years, your choice of which year to start receiving payments, and additional benefits if you develop certain types of cancers.
Living your retirement years on your own terms
You are going to have a great deal more spare time when you finally hang up your boots. What will you do then? How will you fill your days?
Here are several ways retired Singaporeans make the most of their time:
- Going on overseas trips
- Participating in various types of leisure activities
- Meeting family and friends
- Taking up new hobbies
- Pursuing things they had no time for during the working years
Most of these activities involve some form of expenditure.
Nobody wants to pinch pennies in their retirement years, in favour of an adequate financial cushion. This is where Etiqa can help. Of course, it’s essential to make an early start to your savings to maximise benefit.
|Case study 1 – Amy Tan is a 50-year-old mother of two. She has at least 12 years of work at her full-time job ahead of her. However, when she reviewed her financial position recently with the help of a financial advisor, she discovered that she would fall far short of her targeted savings by the time she retires.|
The solution? Her financial advisor encouraged her to start saving more. Additionally, Amy was advised to buy a suitable endowment plan for retirement. This would provide her with protection as well as a regular source of income when she is no longer working.
|Case study 2 – At age 35, Michael Hao has a high-paying job and two small children. Despite his earnings, he doesn’t save much. Putting money aside for retirement is the last thing on his mind.|
However, a discussion with an older friend gets him thinking. He realises that he can easily afford to save a few hundred dollars every month towards his retirement, and given the remaining 30 years or so of his working life, he would accumulate a significant sum. Time is on his side – the power of compounding will do the rest.
Let’s examine how Etiqa’s ePREMIER retirement can fit into your retirement planning.
Etiqa’s new endowment plan for retirement
When you invest in an endowment plan for retirement, you’re buying a product that will benefit you in the long run. It is possible that your payouts may begin even decades later.
After 15 or 20 years (or more), your needs may change drastically. It is paramount that the plan you choose gives you the flexibility of making the changes that you need when you reach retirement age.
Etiqa’s ePREMIER retirement includes a choice of premium terms, two options for selecting your retirement age and a choice of income payout period. Furthermore, you will be covered in case of death, terminal illness, and major cancers.
The policy also has another unique feature. Upon reaching your retirement age, you can choose from three options other than receiving a monthly retirement income. These options are:
- Deposit the monthly retirement income with Etiqa at a non-guaranteed interest rate of 3% per annum and receive the lump sum payout at maturity.
- Get a partial lump sum through a partial surrender and receive a reduced monthly retirement income for 10 or 20 years starting from your selected retirement age.
- Receive a full lump sum at the selected retirement age.
The bottom line
When you buy an endowment plan for retirement, you want to have utmost trust in your chosen insurer. Etiqa has been a refreshing presence in Singapore’s insurance landscape since 1961, and in 2018, was adjudged as the “Most Innovative Finance Firm” in Singapore by World Finance Markets. The insurer is also rated ‘A’ most recently in April 2019 by credit ratings agency, Fitch, for its financial strength and stable outlook.
Etiqa is committed to providing insurance products that are simple to understand, and meets the ever-changing needs of the modern consumer.
Like all of Etiqa’s product offerings, ePREMIER retirement keeps you the priority. This policy offers you the benefit of guaranteed returns, regular income, flexible premium payments, and even the choice of receiving a full lump sum at your selected retirement age.
You can find more details about ePREMIER retirement at any Maybank branch. Remember that an early start can give you a significant advantage in ensuring a comfortable retirement.
Information is accurate as at 30 May 2019.
Protected up to specified limits by SDIC.
This advertisement has not been reviewed by the Monetary Authority of Singapore. As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid. You should seek advice from a financial adviser before deciding to purchase the policy. If you choose not to seek advice, you should consider if the policy is suitable for you.