List the sources of a retirement income and what each one depends on.
Many people in their twenties expect CPF to pay for their retirement. Few of them could tell you what CPF will actually pay them, or what they will spend each month at 70. Retirement feels far away, so it gets treated as a problem for an older self to sort out. Once you have retired, though, you have very few ways to fix your income, because most of what decides it is set in the thirty or forty years before you stop work.
In Singapore, retirement income usually comes from CPF LIFE, your own savings and investments, part-time work and your home. Each depends on different things, and knowing what drives each one shows you which parts you can still change while you are working.
For most Singaporeans, the first source is CPF LIFE, which lesson 5.3 explained. It turns the savings in your Retirement Account into a monthly income that starts from the payout eligibility age and lasts for life.
The size of the payout depends on how much is in your Retirement Account when payouts begin. That balance depends on four things: how much you and your employers contributed over your working life, the interest it earned, how much CPF you used for housing, and whether you made top-ups. Someone who earned well for many years and used little CPF for housing will get a larger payout than someone with long gaps in work, or someone who used most of their Ordinary Account on a flat.
It helps to treat CPF LIFE as a floor, the base level of income you can count on. For many people it covers basic needs, and for some it covers more. The CPF LIFE estimate you found on cpf.gov.sg in lesson 5.3 shows roughly where your floor is today.
Anything above the floor has to come from money you build yourself: cash savings, investments in your own name, and the Supplementary Retirement Scheme (SRS). Your own savings and investments are the source you control most. How much they grow to depends on three things: how much you put in each month, how many years it has to grow, and what it earns.
The number of years matters more than most people expect. Money invested at 30 has many more years to grow than money invested at 50, so the monthly investing amount you set in lesson 6.4 is worth setting early, even if it is small.
Lesson 6.3 covered SRS, a voluntary retirement savings scheme. Contributions can lower your income tax while you are working. In retirement, you can spread withdrawals over a number of years, and only part of each withdrawal counts as taxable income. The full rules, including how withdrawals are taxed, are on the IRAS website.
Part-time work after you leave a full-time job is another option, for the income, the routine or both. Even a modest part-time income in the first few years of retirement lets your savings stay invested longer. Don't build the whole plan on it, though, because your health and the job market may not cooperate.
Your home counts too. A paid-off home lowers your retirement costs, because with no loan repayments and no rent your monthly costs drop a lot. You can also turn a home into income, by renting out a room or by moving to a smaller place and keeping the difference. HDB runs schemes for older flat owners, such as the Lease Buyback Scheme, and the current terms are on hdb.gov.sg.
None of these income sources means much until you know what you want to spend, and that number is personal. Two people on the same salary today may want very different retirements. One may want to travel twice a year and help pay the grandchildren's school fees, while the other wants a quiet life near the hawker centre.
Start with a rough monthly figure at today's prices. Pretend you are retired now and picture an ordinary month after you stop full-time work, then list what you would spend in each category. Using today's prices keeps the figure easy to judge, and converting it to future dollars comes at a later step.
As you list, drop the costs that would be gone. Loan repayments, CPF contributions, saving for goals, work clothes and lunches out usually disappear. Then raise the costs likely to be higher than today, such as healthcare, and add up the monthly total.
Wei Ling has made a first attempt. She assumes the flat she plans to buy (from lesson 7.1) will be paid off by the time she retires. Her monthly budget at today's prices has seven categories:
Food and groceries: S$900 Utilities, conservancy charges and phone: S$300 Transport: S$200 Healthcare and insurance premiums: S$450 Travel: S$400 Gifts and family: S$250 Hobbies and everything else: S$500
That comes to S$3,000 a month (900 + 300 + 200 + 450 + 400 + 250 + 500 = 3,000). Her budget leaves out costs she has now: her loan, CPF contributions, saving for goals, work clothes and lunches out. It includes some costs that will be higher than they are today, such as healthcare.
Wei Ling knows this is a first guess. Its purpose is to give her a number to compare with her CPF LIFE estimate, which she will do in lesson 7.3. Later, the Retirement & Estate course shows how to refine the figure for inflation, for how long the money has to last, and for how to draw it down.
Now try the same thing for yourself. Picture an ordinary month after you stop full-time work, the costs that would still be there and the ones that would have gone. Write down each category at today's prices and add up the total, so it is ready to compare with your CPF LIFE estimate in lesson 7.3.
Write a first estimate of the monthly spending you would want in retirement, measured at today's prices.
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