You will be able to turn today's spending into a retirement spending estimate.
Jasmine is 55, works in operations at a logistics firm, and plans to stop full-time work at 60. When she first asked herself how much she would need, she reached for the figure everyone quotes: some share of her last salary. It gave her a number. It told her nothing about her own life, because her salary pays for things she will stop doing and leaves out things she will start.
This lesson builds the estimate the other way round, from what you actually spend. Jasmine carries through the whole course, and every figure about her is a made-up example.
A percentage of salary assumes your spending is a fixed slice of your pay. For most people it isn't. Someone who saves hard has a much lower spending rate than a colleague on the same salary who saves nothing, and a percentage rule gives them both the same target. Your salary also carries costs that end when work ends, such as CPF contributions, transport to the office and the lunches that come with it.
So begin with last year's actual spending. Bank and card statements are the most honest source, because they record what happened rather than what you think happened. Twelve months matters, because a single month misses yearly insurance premiums, festive spending and the trip you take once a year.
Jasmine pulled twelve months of statements and grouped them. Her spending last year came to about S$42,000, or S$3,500 a month, in this example. She lives alone in a four-room HDB flat she owns outright, and she gives her mother, who is 82, S$400 a month.
Next, go line by line and ask what happens to each cost once you stop work. Three answers are possible: it falls, it stays the same, or it rises.
Some costs fall. Transport to work disappears, though you may travel more in the day. Work clothes, office lunches and the coffee runs go. If you still have a mortgage, the instalments stop once the loan is cleared, which for many Singaporeans is the largest single drop. Jasmine's flat is paid off already, so her biggest falls were transport, from S$4,200 to S$2,400 a year, and work costs of S$3,000 that disappear entirely.
Some costs rise. Healthcare is the obvious one. Premiums for hospital insurance and any riders go up with age, and you visit doctors more. Lesson 6.2, Healthcare and long-term care costs after 65, works through those costs properly. Travel often rises in the first years, when people finally have the time. Further out, many people pay for help at home, which is a cost that barely exists at 55.
Jasmine's travel goes up from S$4,800 to S$6,000 in her estimate, and her health line from S$4,200 to S$5,000 at today's prices. She knows the health figure will keep climbing, and lesson 1.4 gives it its own growth rate.
Everything else she left unchanged. Food, utilities, her phone plan and her mother's allowance don't care whether she works.
The last step is to split every line into two groups. Essential spending is what you must pay to live safely: housing costs, food, utilities, healthcare, insurance and support for people who depend on you. Flexible spending is what you could cut for a year or two without real harm: travel, eating out, hobbies and gifts.
The split matters because the rest of the plan treats the two groups differently. Module 2 tries to cover essential spending with income that can't run out, such as CPF LIFE. Flexible spending comes from investments, and in a bad year it is the part you trim. If you lump everything together, you lose that lever.
Be honest about what goes where. Eating out a few times a week feels essential until you list it next to your electricity bill. On the other side, the allowance to a parent may feel generous, but if your mother depends on it, it belongs with the essentials.
Here is Jasmine's retirement estimate at today's prices, with each line marked:
Essential: housing costs S$4,200, food S$8,400, transport S$2,400, phone and internet S$1,200, her mother's allowance S$4,800, healthcare and insurance S$5,000, a total of S$26,000 a year Flexible: eating out S$4,200, travel S$6,000, hobbies and gifts S$3,000, other S$800, a total of S$14,000 a year
Her total is S$40,000 a year at today's prices, a little below the S$42,000 she spends now. Most people expect a bigger fall. The work costs went, but travel and health rose to fill much of the gap.
First, check for costs you pay less than once a year. Replacing an air-conditioner, renovating the kitchen and changing a car all come round eventually, so spread them as a yearly figure.
Second, check for spending someone else pays now. If an employer covers your health insurance, that cost becomes yours when you leave. Jasmine's company plan covers her outpatient visits, so she raised her health line to allow for it.
Third, check the people. Will a parent need more support, or none? Will an adult child still live with you? Jasmine's mother is the biggest unknown in her plan, and she noted that her allowance might grow if her mother needs more care.
You'll need your own twelve months of statements for the activity. Group the spending into the same kinds of lines Jasmine used, then decide for each one which way it moves when your pay cheque stops.
Take last year's spending and mark each category as likely to fall, stay the same or rise in retirement.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).