With the many financial obligations that we have, many of us put off planning for retirement, thinking that it is very far away in the future. Yet, retirement planning is crucial to a healthy retirement, especially considering that the rising average life expectancy of Singaporeans will mean that the vast majority of us will have a longer retirement period than previous generations.
Using the 4% rule, in order to retire and have a monthly spend of S$6,000, you would need to have a monumental S$1.8 million saved up by the time you retire. This is unfortunately not realistic for the average earner. Even a more modest retirement monthly spend of S$3,000, which the OCBC survey estimates would be required to sustain a mid-range retirement lifestyle, would require you to have S$900,000 saved up by the time you retire.
Let us illustrate just how powerful compounding interest is with an example. Assuming, given your current income and expenses, you can only afford to put aside S$100 a month towards your retirement. This amount could be invested in a relatively safe ETF that gives a modest average rate of returns of 4% per year. By investing your S$100 monthly, you would have accumulated $88,382.67 towards your retirement after 35 years.
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