26 Oct 2023

SOURCE: CPF Board

1. Visualise the retirement lifestyle you want

Before diving into the nitty-gritty of retirement planning, start by envisioning the retirement lifestyle you desire.

Put a dollar value to that lifestyle, including the monthly expenses you need. Other than housing and healthcare expenses, account also for your day-to-day expenses. This can typically be categorised into two types: essential and discretionary.

Essential spending covers daily necessities like food, groceries, transport, utilities, and telecommunication needs. Discretionary spending is additional expenses incurred to maintain one’s desired lifestyle, like overseas travel and hobbies.

2. Grow your retirement funds

If you have no immediate plans to utilise your Ordinary Account (OA) savings for your housing needs, you can consider transferring your OA savings to your Special Account (SA) before age 55, or to your Retirement Account (RA) from age 55.

Such transfers can significantly boost your retirement income as SA savings earn a higher interest rate of up to 5% per annum*, compared to interest earned on your OA savings of up to 3.5% per annum*.

Do note that CPF transfers are irreversible.

*Includes 1% extra interest

3. Fund your retirement lifestyle with CPF LIFE

As the cost of living rises over time, it is important to plan for the future. If you are spending $1,000 a month in expenses today, you may need about $1,500 in 20 years’ time for the same lifestyle. CPF LIFE offers different plans to suit your preferences, which plan you choose depends on how willing you are to adjust your retirement lifestyle.

If you are worried about rising prices, consider the Escalating Plan, which provides monthly payouts for life that increase by 2% every year. The increasing payouts help you maintain your retirement lifestyle.

If you are willing to live a more modest lifestyle and buy less as the years pass, the Standard Plan with steady payouts may be suitable for you.

If you do not mind starting with lower monthly payouts which gets progressively lower later on, you can consider the Basic Plan. Compared to the Standard Plan which gives a higher steady monthly payout, Basic Plan payouts are lower and will get progressively lower when your combined CPF balances eventually fall below $60,000.

4. Defer your retirement payouts if you don’t need them yet

You are eligible to receive your payouts from age 65. If you do not need the payouts just yet, you can defer them till you are age 70. For every year that you defer, your payouts will increase by up to 7%.

5. Manage your spending in retirement

Set a budget and keep track of your expenses to ensure you live within your means. You can use a simple spreadsheet or budget-tracking app to help, or simply jot down your expenses in a notebook. If you need to cut your expenses, identify non-essential areas that you can cut down on, such as eating out at restaurants frequently. Other cost-cutting tips include:

- Making use of subsidised courses and activities at your local Community Centre

- Using membership cards to earn rewards points or cashback when you shop

- Looking out for weekly or monthly deals on shopping apps or retail shops

- Buying house brands instead of more expensive brands

- Making full use of concessions and discounts for seniors, like on public transport, and at supermarkets and cinemas

Remember the journey to retirement is just as important as the destination. While taking care of your current financial needs, do also start saving for your future. Take the first step today by putting these tips into action. This will give your retirement plan a boost and achieve a greater peace of mind in your golden years!

The information provided in this article is accurate as of the date of publication.