IntroductionHi everyone, welcome back to The Investing Iguana, where I share with you tips and tricks on how to grow your wealth and achieve financial freedom. I’m your host, Iggy, and today we’re going to talk about 8 of the worst money mistakes that can blow up your retirement in Singapore. Retirement is something that many of us look forward to, but also something that many of us are not prepared for. According to a survey by HSBC, only 27% of Singaporeans feel confident that they will be able to maintain a comfortable standard of living in retirement1. That’s a pretty low number, considering that Singapore is one of the most expensive countries in the world to live in. So what are some of the common money mistakes that can ruin your retirement plans? And how can you avoid them? Let’s find out. Mistake #1: Not having a retirement planThe first and biggest mistake that you can make is not having a retirement plan at all. A retirement plan is a roadmap that guides you on how much you need to save, invest and spend for your golden years. Without a plan, you’re basically flying blind and hoping for the best. A retirement plan should include:
Having a retirement plan can help you stay on track and monitor your progress. It can also help you adjust your plan as your circumstances change over time. If you don’t have a retirement plan yet, don’t worry, it’s never too late to start. You can use online tools like CPF Retirement Calculator or MoneySense Retirement Planner to get started. Mistake #2: Relying too much on CPF The second mistake that you can make is relying too much on CPF for your retirement income. CPF is a compulsory savings scheme that provides you with a monthly payout from age 65 onwards. However, CPF alone may not be enough to cover all your retirement needs. According to CPF, the Basic Retirement Sum (BRS) for those who turn 55 in 2023 is S$93,0002. This means that if you have at least S$93,000 in your Retirement Account (RA) at age 55, you can expect to receive a monthly payout of about S$740 to S$800 from age 65 onwards2. This amount is based on the assumption that you have a property to live in and do not need to pay rent or mortgage. However, if you don’t own a property or have other financial commitments, you may need more than the BRS to sustain your retirement lifestyle. According to the Department of Statistics, the average monthly household expenditure for retired households in Singapore was S$1,922 in 2017/20183. This means that if you rely solely on CPF, you may face a shortfall of more than S$1,000 every month. Therefore, it’s important to supplement your CPF with other sources of income, such as personal savings, investments, annuities or part-time work. You can also top up your RA with cash or CPF savings to increase your monthly payout. Alternatively, you can defer your payout start age or withdraw less than the full amount each month to stretch your payouts longer. Mistake #3: Not investing or investing poorlyThe third mistake that you can make is not investing or investing poorly for your retirement. Investing is one of the best ways to grow your money and beat inflation over the long term. However, many Singaporeans are either not investing at all or investing in the wrong way. According to a survey by BlackRock, only 39% of Singaporeans invest their savings in the financial markets4. The rest either keep their money in bank accounts or fixed deposits, which offer very low interest rates. This means that they are missing out on the opportunity to earn higher returns and compound their wealth over time. On the other hand, some Singaporeans who do invest may be making poor investment decisions, such as:
These mistakes can result in losing money or underperforming the market. Therefore, it’s important to invest wisely and prudently for your retirement. You should:
If you’re not sure how to invest or need some guidance, you can seek professional advice from a licensed financial planner or use online platforms like MoneyOwl or Endowus that offer robo-advisory services. Mistake #4: Not saving enough or saving too much The fourth mistake that you can make is not saving enough or saving too much for your retirement. Saving is the foundation of your retirement plan, as it determines how much you can invest and spend in the future. However, many Singaporeans are either saving too little or too much for their retirement. According to a survey by OCBC, 56% of Singaporeans are not confident of saving enough for their retirement. The main reasons are:
These factors can make it hard to save enough for your retirement, especially if you start late or have competing financial priorities. Therefore, it’s important to save as much as you can and as early as you can for your retirement. You should:
On the other hand, some Singaporeans may be saving too much for their retirement. This may sound like a good problem to have, but it can also have some drawbacks, such as:
These factors can make you feel stressed or regretful about your retirement, especially if you don’t have a clear purpose or passion to pursue. Therefore, it’s important to find a balance between saving for your future and living for the present. You should:
Mistake #5: Not having adequate insurance coverage The fifth mistake that you can make is not having adequate insurance coverage for your retirement. Insurance is a vital part of your retirement plan, as it protects you and your family from unforeseen events that can derail your finances. However, many Singaporeans are either underinsured or overinsured for their retirement. According to a study by LIA Singapore, the average protection gap for working adults in Singapore is S$462,000. This means that if they were to suffer from death, disability or critical illness, they would face a shortfall of S$462,000 in meeting their financial needs. The main reasons are:
These factors can leave you exposed to financial risks and liabilities in your retirement, especially if you have dependents or debts to take care of. Therefore, it’s important to have adequate insurance coverage for your retirement. You should:
On the other hand, some Singaporeans may be overinsured for their retirement. This may happen if they buy too many or unnecessary insurance policies that overlap or exceed their needs. This can result in wasting money on excessive premiums that could be better used for other purposes. Therefore, it’s important to avoid being overinsured for your retirement. You should:
Mistake #6: Not taking care of your health The sixth mistake that you can make is not taking care of your health for your retirement. Health is wealth, as the saying goes, and this is especially true in your retirement. Your health affects not only your longevity but also your quality of life and happiness in your golden years. However, many Singaporeans are not taking care of their health for their retirement. According to a survey by Prudential, 60% of Singaporeans are worried about their health in retirement. The main reasons are:
These factors can compromise your health and well-being in your retirement, and also increase your medical expenses and insurance premiums. Therefore, it’s important to take care of your health for your retirement. You should:
Mistake #7: Not having a social networkThe seventh mistake that you can make is not having a social network for your retirement. Social network refers to the people that you interact with and care about, such as your family, friends, colleagues, neighbours, community members, etc. Having a social network is crucial for your retirement, as it provides you with emotional support, companionship, engagement and meaning. However, many Singaporeans are not having a social network for their retirement. According to a survey by NTUC Income, 41% of Singaporeans are concerned about being lonely or isolated in retirement. The main reasons are:
These factors can lead to loneliness or isolation in your retirement, which can negatively affect your mental health and happiness. Therefore, it’s important to have a social network for your retirement. You should:
Mistake #8: Not having a purposeThe eighth and final mistake that you can make is not having a purpose for your retirement. Purpose refers to the reason why you wake up in the morning and what you want to do with your life. Having a purpose is essential for your retirement, as it gives you direction, motivation, fulfilment and satisfaction. However, many Singaporeans are not having a purpose for their retirement.
According to a survey by AIA Singapore, 51% of Singaporeans are unsure of what they want to do in retirement. The main reasons are:
These factors can make you feel bored, aimless, restless or unhappy in your retirement, which can also affect your physical and mental health. Therefore, it’s important to have a purpose for your retirement. You should:
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