Are you set to retire comfortably in Singapore?

Straits Times

6 hours ago

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SINGAPORE – You're in your 50s, the kids are grown and off your hands, the mortgage is nearly paid off and a comfortable retirement beckons, but life's next chapter can bring unexpected challenges.
A friend who thought he had more than enough to retire on had to stop work earlier than planned to care for her elderly parents and a dependent sibling.
Such surprises, along with longer life expectancy and higher living costs, can derail the best-laid plans, making preparations for your golden years more critical than ever.
The road to retirement requires immediate attention, from understanding how far your savings will stretch to making sense of the Central Provident Fund (CPF) and various government support schemes.
Healthcare becomes a key focus. A comprehensive insurance plan covering critical illness and long-term care is crucial, says Mr Harpreet Bindra, chief executive of HSBC Life Singapore. This can help offset the financial impact of unexpected medical emergencies and ensure access to necessary care without depleting your savings.
Ms Irma Hadikusuma, chief marketing and healthcare officer at AIA Singapore, reminds us that 'retirement isn't just a finish line; it marks the start of a new, potentially decades-long chapter in your life without an active income'.
So how much do you really need for a comfortable retirement? Experts have sobering advice on this and whether it makes sense to those close to retiring to take up new insurance plans.
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So how much?
A nest egg of $1 million has long been a common aspirational retirement target. With this much in cash and liquid assets, a retiree can expect a comfortable withdrawal of more than $4,000 a month over 20 years after retirement.
Other retirement sums have also been bandied about – from $550,000 to $1.9 million.
Fortunately, CPF Life, a national longevity insurance annuity scheme, provides Singaporeans and permanent residents with a monthly income from age 65 for as long as they live.
If you hit 55 in 2025, you can give your retirement income from age 65 a big jump if you plan for the current CPF Enhanced Retirement Sum of $426,000. Doing so will enable you to receive $3,300 a month.
A DBS study found that the median CPF payout covers over half the median expenses of its retiree customers.
According to the 2023 Household Expenditure Survey, households with non-working individuals aged 65 or over spent an average of $2,349 per month.
This means aspirational needs will have to be supplemented by income-generating solutions such as unit trusts or other investments to complement the CPF payouts.
What constitutes 'enough' is deeply personal.
'For some, it may include travel, dining out frequently and pursuing hobbies. For others, it could simply mean covering essential financial needs without worry,' says Mr Bindra.
'What remains important to remember is that individuals need to plan not just for today's cost of living, but for years to come.'
The focus shouldn't be on hitting a universal number, but more on building a plan that is tailored to your needs and flexible enough to evolve through life stages. Integrating both wealth and health to help you face the future with confidence, he says.
Mr Jason Lim, head of product management at Prudential Singapore, suggests that you ask yourself some questions to determine your financial readiness:
What is your desired retirement lifestyle and the estimated expenses?
Do you have sufficient income streams or savings to fund this lifestyle?
Do you have adequate health insurance coverage for retirement?
How much debt or liabilities will you have and how will you service them?
Do you have an emergency fund to cover unexpected expenses?
Common mistakes in planning
Mistake 1: Thinking it's too late to start
The most pervasive myth among late starters is that if you've missed the golden window for compounding in your 20s or 30s, it is pointless to start now.
But financial planning is a journey, not a race. While you may not be able to fully harness the magic of compounding, you can certainly avoid the paralysis of inaction.
'No matter what their horizon, there are always steps that pre-retirees can take to ensure that they are prepared for retirement,' says Mr Thomas Lee, chief product officer at Manulife Singapore.
Even modest action such as calculating your current net worth, for example, lays the groundwork, he adds. From there, a clear-eyed inventory of assets, liabilities and likely future income can transform a sense of helplessness into agency.
The next step is to map out your goals and determine realistic actions which can range from topping up your CPF account to setting up a regular savings plan.
Mistake 2: Assuming spending will decrease with age
It is a fallacy to think that as life slows down, so too will our expenses.
The CPF's Retirement and Health Study shows that spending often accelerates in later years, driven by healthcare, housing modifications and, increasingly, helping out with grandchildren or enjoying the leisure previously deferred.
Planning with rose-tinted glasses and assuming your cost of living will magically halve only set up nasty surprises.
Instead, aim for conservative estimates on spending, and factor in inflation, new hobbies, travel or unexpected family obligations.
Mistake 3: Grossly underestimating healthcare costs
The most common mistake pre-retirees make is underestimating healthcare costs and overestimating how long their savings will last.
While Singaporeans are covered by Medishield Life or Integrated Shield Plans, and have access to government subsidies, these safety nets are not enough as not all expenses are covered.
'Outpatient costs, for example, can add up, especially if one is suffering from a major illness that requires substantial cash outlay,' Mr Lee says, adding that a critical illness policy may be helpful.
Working Singaporeans who rely on company-provided insurance coverage while employed must remember that this will typically lapse upon retirement, just as higher medical needs emerge.
Mistake 4: Too conservative
It is common for pre-retirees to move all their investments into conservative ones or assets with guarantees.
Ms Hadikusuma says while these options may offer higher certainty, their returns are often low and may not keep up with inflation.
As we are living longer, retirement can stretch over 20 years or more, so your money needs to keep growing throughout that time. Higher-risk assets have the potential to withstand inflation and market fluctuations and deliver better long-term returns.
'A better approach is to gradually reduce your investment risk during your retirement years, rather than making an abrupt shift, and to ensure you secure a sufficiently diversified source of income before and during retirement,' she adds.
Mistake 5: Not reviewing plans
Early and consistent planning is essential as retirement is not a one-off event but an evolving strategy that requires regular reviews and adjustments, ideally with a trusted financial adviser, Mr Bindra says.
This ensures that your plan remains robust and relevant throughout retirement, providing confidence, dignity and freedom in later life.
Is it too late to buy insurance?
It's never too late to review your protection needs, but as you approach retirement, it's important to focus on healthcare coverage. Health risks increase with age, so ensure you have suitable medical insurance to manage expenses and reduce out-of-pocket costs.
Buying life insurance in your 50s may not be the best choice if you have no dependants or debt, says Ms Hadikusuma.
'It may be more practical to direct those funds towards health-related coverage, topping up your CPF, building income-generating investments or strengthening your emergency fund,' she adds.
If you do need life insurance, choose plans with shorter premium terms and ensure you can afford the premiums with your retirement cash flow or MediSave balances.
That said, if you have dependants, you can consider plans with shorter premium terms of five or 10 years that allow you to complete your financial obligations before retirement, she says.
The goal is to identify a plan that offers adequate protection without over-stretching current finances, Mr Bindra adds.
Getting on track
A good gauge to see if you are on track to securing a comfortable retirement is to look at your projected monthly income in retirement, which includes CPF Life payouts, savings, investments and insurance.
Compare them against your estimated expenses, which typically range from 70 per cent to 90 per cent of your current spending, according to FWD Insurance Singapore.
You are likely on track if your projected income meets or exceeds these needs, with added buffers for inflation and healthcare costs.
Here's a list to help you:
What to keep:
Policies with fully paid-up premiums, as these continue to offer coverage without additional financial commitments. This includes your protection, savings and life insurance.
What to review and adjust:
Policies that require ongoing premium payments into your retirement years. If these payments are likely to strain your retirement income, consider adjusting the coverage amount, which may lower the premium payments, Ms Hadikusuma says.
Health insurance premiums typically rise with age and if the cost becomes unsustainable, consider switching to a plan that aligns with both your healthcare needs and budget. Always seek professional advice from your trusted financial consultant before making any decisions.
For both protection and health insurance, the critical consideration is premium sustainability – ensuring you can continue to afford the premiums comfortably during retirement.
If necessary, consider adjusting your coverage level or benefits before retirement while your health status still qualifies you for plan changes.
Safeguarding against unplanned medical costs often requires securing additional policies such as critical illness cover well before retirement. The earlier you apply, the more affordable (and certain) the cover. Relying solely on employer perks, or even public healthcare coverage, can leave significant blind spots.
A Manulife Asia survey conducted in 2025 found that Singaporeans are acutely aware of the risks.
Despite this, nearly half of their assets outside property are still kept in cash – hardly ideal when you consider the eroding effects of inflation over 20 years or more.
Many realise the need for diversified investments for long-term income.
Ms Koh Hui Jian, chief executive of Manulife Investments Singapore, says diversifying investments, building sustainable income streams and making better use of idle cash are essential steps in future-proofing your financial plans.
'With inflation and longevity top of mind, it's important to start early and stay invested, even into retirement,' she says.
Ultimately, experts say knowing that our expenses are manageable and that our health is at its best provides the peace of mind to enjoy our golden years to the fullest.
As Prudential's Mr Lim notes: 'As the saying goes, health is wealth. Maintaining good health through good diet, exercises, and regular check-ups can reduce the likelihood and severity of health shocks, which may need us to dip into our retirement funds.'