Delayed Retirement Age And Other Changes In Singapore Retirement

Despite the economic headwinds, the retirement age will begin to shoot up in 2022. Manpower Minister Josephine Teo highlighted they “did not arrive at this date lightly even though towards the later part of our deliberations, it was clear to us that the economic conditions have changed quite considerably.” All that is left for us to do is to adapt to the recent changes in the retirement age and CPF contributions.

INCREASED MOM RETIREMENT AGE

Foresee a gradual increase in Ministry of Manpower’s retirement age. Currently, the official retirement age is 62 years old. This number will increase to 63 years old in 2022 and to 65 years old in 2030. Do you think a higher retirement age is desirable?

Nonetheless, Prime Minister Lee Hsien Loong greatly emphasized that there is no change to the CPF payout ages and withdrawal. You may withdraw money from your CPF RA upon reaching 55 years old and start receiving CPF LIFE payouts from age 65. All these were discussed during the National Day Rally.

ALTERED EMPLOYMENT PROCESS

Possibly one of the most affected with the changes in the retirement and re-employment age is your employer. It is completely legitimate to work up to the MOM re-employment age. Your employer cannot deny you that.

At the moment, the re-employment age is 67. It will increase to 68 years old by 2022 and eventually become 70 years old by 2030. It is highly encourage that employers equip these employees with necessary training and skills to help them tackle the contemporary positions.

In light of the aging workforce, the Tripartite Workgroup on Older Workers made several other suggestions to restructure the work environment in Singapore.

RAISED CPF CONTRIBUTION RATES

Aside from the changes in retirement and re-employment age, the CPF contributions for workers beyond age 55 will be raised. This will be felt from January 1, 2021 onwards. The extra CPF contributions will go straight to your CPF Special Account.

When the CPF contributions for the 55-60 years old age group increases by 2021, the allocation for your CPF (SA) will jump from 3.5% to 5.5%. The rest will remain the same.

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May these guidelines and significant changes help you decide for a better future ahead!

Sources: 1 & 2

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Countdown To Retirement: The Final 5 Years

One of the most significant transitions in your life is about to begin. In a blink of an eye, you have reached your 60s. Retirement may not be a pressing concern for most of your working life, but it is surely happening soon.

The sense of urgency stimulates your awareness. You will begin to pay close attention to insurance commercials and to the company’s retirement benefits. You will go through your CPF savings and analyze whether it is enough. How about your investments? Is your money invested on an aggressive portfolio or not? More importantly, do you have a last will and testament?

Many of us consider retirement as a vague and seemingly distant concept rather than something happening in the near future. With this mindset, you may not be able to prepare well it. Use the last five years to examine your financial situation. Make the appropriate moves to substantially improve your life during retirement.

CLOCK: FIVE YEARS BEFORE RETIREMENT

There is no doubt in the saying: “the first cut is the deepest”. You can call it a rude awakening, but this initial step will dictate your future actions. Examine your overall financial situation.

Be honest with yourself. How much have you saved up while you were working? Do you have other streams of income that can generate enough cash to cover your fixed expenses in retirement? How much can your CPF cover?

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I understand the brewing worries tied up to these numbers. It is time to face your fears! Know that there is still time to change your investment strategies, to eliminate unnecessary expenses, and to re-frame your retirement expectations. Seek the help of a qualified financial adviser who specializes in retirement planning. He or she can sort out all your concerns including the making of you last will and testament.

CLOCK: THREE YEARS BEFORE RETIREMENT

While work can be stressful, it can also give a sense of accomplishment. What will happen once it is taken from you?

Aside from organizing your financial plans during retirement, you must determine how you will occupy your time. Many of us forget this aspect of aging. It is important to contemplate on how you will occupy yourself in retirement. Consider the Psychological or emotional impact of not having a steady job or not having a routinely “purpose”. Your feelings may be similar to undergoing loss.

Yesterday, my grandfather told us that he is planning to travel overseas. He wants to dedicate this time of solitude on searching for peace and happiness. This may sound cliché to some, but he never had the time to travel on his own. You may want to spend your retirement touring the world. Like my grandfather, consider what will bring you happiness.

Do not be afraid to explore hobbies or join social group within your neighborhood. These things will keep engaged once you are retired.

CLOCK: A YEAR BEFORE RETIREMENT

During this time, your primary goal is to cut down your debts and spending. This is where your retirement budget comes in handy!

You will probably experience a considerable drop in income once your paychecks go away. Following this logic, your retirement expenses should not necessarily mirror your current expenses. You need to adjust your lifestyle following a monthly budget that will include costs like healthcare and leisure activities. Know how much you can realistically afford with the help of your financial adviser.

Lastly, you must take a look at your investment portfolio. If your savings appear to deliver the income you need in retirement, some experts recommend to pull back on your stocks. Use this money to invest on short-term investments or other conservative asset classes. I am not saying that you should suddenly become a risk-averse investor. Instead, you need to make more calculated moves. Growing your portfolio over the next couple of decades entails exposure to stocks.

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Ultimately, preparing for retirement will support the remaining years of your life.

Source: NY TIMES

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The Risky Assumptions When Planning Your Retirement

Have you ever wondered how much money do we need in our silver years to be able to afford our desired lifestyles? Most adults would be relying solely on their CPF funds to finance their retirement. Asset-rich but cash poor retirees could be thinking of renting their HDB flats out to supplement their retirement funds. There are indeed several ways to build up our retirement income. However, we must be mindful of avoiding some of the dangerous assumptions when planning for our retirement.

Oversight To Account For Inflation

Inflation can have a big impact on retirees even if they have been historically low. According to Monetary Authority of Singapore, Singapore’s historical core inflation averaged an annual 1.7% since 1990. While 1.7% per annum may not appear alarming, it will compound to a staggering 66% over a span of 30 years! If you are a retiree receiving a fixed amount of stipend, the value of your money will decrease with each passing year. Hence, your retirement funds will be eroded by inflation if they are not carefully managed. Unfortunately, inflation does not stop just because you have stopped working. Therefore, it becomes important that your investment grow at rates that are at least equal or better than the rate of inflation to protect the value of your retirement funds. How do we then continue to enjoy the taste of life at our retirement years without feeling the pinch of inflation, especially when we have stopped working and receiving salaries?

Reliance on Rental Income From Property

Some adults plan to rely on rental income from investment properties to supplement their retirement funds. However, with the recent cooling measures announced in July 2018, investing in a second residential property is increasingly out of reach for most working adults.

Some retirees might be thinking of renting out the vacant rooms in their HDB flat especially as their children gradually might have left the home that they grew up in. However, this option comes with its own set of inconveniences. It could take a couple of months before a tenant can be found. There is also the administrative hassle of providing tenant’s details to HDB for record-keeping. Of course, all these pale in comparison to stories of horror tenants who damage the HDB flat or are tardy in their rental payments. In such circumstances, renting out their HDB flats may not be the best option to supplement your retirement income.

CPF LIFE Alone Might Be Insufficient

For a retiree who sets aside the maximum Enhanced Retirement Sum (S$271,500), the monthly payout from CPF LIFE is expected to be about $2,000 per month. If this amount is sufficient to pay for your daily expenses during your retirement, then this is definitely a good safety net for you to rely upon. However, it is not true that all Singaporeans and Singapore Permanent Residents can depend on their CPF funds to finance their retirement entirely. In fact, it is widely reported that almost 4 in 10 CPF Accounts do not even have enough funds to meet the Basic Retirement Sum. For the group of retirees who do not generate enough funds from their CPF LIFE payouts, it is necessary to generate extra income from alternative sources such as investments.

Future-proof Your Retirement Funds With The AIA Retirement Saver (III)

Given that young professionals lead hectic lifestyles, they may not have the time and energy to plan for their eventual retirement. Yet, planning ahead to future proof our retirement is essential and the AIA Retirement Saver (III) is one of the ways to do that. The AIA Retirement Saver (III) is a simple and hassle-free retirement solution which provides a guaranteed stream of retirement income for 15 years. Your hard-earned savings is safely secured since the capital is guaranteed; you will get back every dollar that you contributed at your desired retirement age. On top of that, you will receive potential monthly dividends which could help to cushion the impact of inflation. Premium payment duration is also flexible; single lump sum, 5 years, 10 years or simply pay till your desired retirement age – 55, 60, 65 or 70. It is easy to get started because no medical underwriting and check-up is required. In essence, the AIA Retirement Saver (III) is truly an easy and stress-free solution tailored to any individual retirement plan.

Conquer The Uncertainty & Plan For Your Desired Retirement

With the AIA Retirement Saver (III) solution, individuals can cast aside their retirement worries as their savings will be in the good hands of professionals. The AIA Retirement Saver (III) can be an additional pillar to supplement your retirement funds. As it can be tailored to maintain the purchasing power of your retirement funds, you can be assured that you will still be able to enjoy your desired lifestyle during your twilight years. Don’t leave your retirement to uncertainty. You can certainly plan for the uncertainty by taking action now.

 

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6 Financial Pledges For The New Year 2018

What are your financial resolutions for the next year? Here are some ideas to get you started.

#1: BE DEBT-FREE

When it comes to minimizing your debts, it pays to be strategic! You can either conquer a volume of smaller debts or a decent amount of high-interest debts. The important thing is to restructure your debts in order for payments to go towards your principal rather than the interest.

#2: CANCEL UNNECESSARY ACCOUNTS

Look into your current financial situation. Keep an eye on the redundant and unnecessary elements. Do you really need to pay for everything with your several accounts (i.e., both credit and savings accounts)? In most cases, the answer is “NO”! Financial institutions charges fees for the simplest of things. Consider closing down or canceling your unnecessary accounts.

#3: IMPROVE YOUR DEFENSE

No one knows when the next financial crisis will hit! To help ease the burden of unexpected costs, your first line of defense is the emergency fund. Modify your budget in such a way that you would have an excess amount of cash for emergencies.

#4: BOOST YOUR GOLDEN NEST

Now is the perfect time to invest for your needs beyond retirement. As a Singaporean Citizen or a Permanent Resident, you are privileged to have a straightforward retirement plan. Just ensure that your company’s terms are in lined with the CPF’s. Grow your “golden nest” to its full potential by maximizing your personal contributions.

#5: GIVE MONEY AWAY

Fulfilling someone’s monetary plea is one of the most positive ways to start the year 2018! If you are capable of shelling out a portion of your savings without hurting your budget then, you may donate to a good cause. You will realize the true value of your money as you see it transform someone else’s life.

#6: BE A BOOKWORM

Knowledge is definitely powerful! Particularly, printed media allows you to directly interact with some of the century’s brilliant minds. You may want to explore the different non-fiction topics including the wonders of Investments as a renewed bookworm. Look into the interesting titles such as “The Intelligent Investor” or “Common Stocks and Uncommon Profits”.

Image Credits: pixabay.com

Image Credits: pixabay.com

These books and similar ones will allow you to learn the basics directly from the people who were most successful in the field.

Sources: 1 &2

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3 Ways To Make The Most Out Of Your SRS

Prudent individuals go through great lengths in order to build retirement fund. Many Singaporeans completely rely on the government-mandated Central Provident Fund (CPF). It is a savings plan to fund important expense categories such as retirement, housing, and healthcare. Unbeknownst to some, there is a scheme that is meant to complement the strength of CPF. I am talking about the Supplementary Retirement Scheme (SRS). SRS flourishes your retirement savings by providing tax relief and investment options. Unlike CPF, SRS is a voluntary scheme. SRS members are free to contribute varying amounts which are subjected to a specific limit.

Make the most out of your SRS account by employing these tips:

MAXIMIZING YOUR TAX REDUCTIONS

While helping you cultivate your future, SRS simultaneously reduces your tax expenses at the present moment.

There are different types of tax relief that you can claim, such as the Earned Income Relief, Qualifying Child Relief, NSman Self Relief, and Parent Relief. The first one refers to the deduction of taxable income for every dollar deposited into the SRS account. Furthermore, you can reap tax-free investment gains made through your SRS account (i.e., not applicable to Singapore dividends).

SCHEDULING YOUR WITHDRAWALS

Let us be honest! You can withdraw funds from your SRS account even before you retire. Unfortunate instances such as medical emergencies and bankruptcy are among the significant reasons why this happens. Withdrawals can be completed in the form of cash or investments.

You must strategize your withdrawals to receive the most profitable scenario. You see, there is a chance that you will end up paying more tax if you withdraw the entirety of the SRS account upon retirement. By “more”, I am referring to the comparison between the “withdrawal tax” and the income tax savings. Consider scheduling your withdrawals spanning the period of 10 years.

GROWING YOUR INVESTMENTS

SRS is more than just a scheme to reduce your tax as it is an efficient tool for growing your retirement funds. It is meant to supplement your retirement money by embracing investment options. An increasing number of Singaporeans had been making contributions to their SRS accounts. For instance, the contributions made until December 2015 reached more than S$4 billion.

Why are people drawn to investing their SRS funds? For starters, gains are non-taxable. Furthermore, the long-term returns are higher when invested as compared to leaving your SRS fund in idle. From the retirement age and beyond, only 50% of your withdrawals will be taxable. It goes without saying that your bigger risk appetite is subject to the volatility of the stock market.

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Image Credits: pixabay.com

A local institution that allows using SRS funds for unit trusts, index funds, unit trusts, or blue chip shares is OCBC.

Sources: 1 & 2

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