Planning for your retirement and caring for ageing parents?

Ms Chong Wan Ting, 31, feels overwhelmed when she is sometimes forced to confront the prospects of retirement.

It carries a whirlwind of questions: How much will she need? How long should she plan for? How can she find out?

“Retirement isn’t something that I (often) think about right now,” says Ms Chong, who works in the technology industry.

She has been setting aside half of her four-figure monthly income for long-term investments and savings, including for her parents.

“I worry a lot about not being able to afford my parents’ financial and medical expenses as they get older,” adds Ms Chong, the eldest child. She is married without children, and lives in a condominium.

She is also concerned about the stability of the tech job market, the bills she has to pay, and the increased cost of living. Her monthly mortgage payments, which nearly doubled over the past three years, are in the mid four-figure range. Ms Chong has more than 20 years left on her mortgage.

Top concerns of Singapore residents

Finances continue to be the key concern for 73 per cent of Singapore residents, according to the UOB Asean Consumer Sentiment Study 2024.

It polled 1,000 Singapore residents between the ages of 18 and 65 in May and June.

When it comes to the impact of inflation, respondents say they worry about their ability to:

• Plan ahead for retirement (36 per cent)
• Set aside money for savings (36 per cent)
• Take care of parents’ financial and healthcare needs (29 per cent)

Mr Garry Chua, UOB’s group head of bancassurance, stresses the importance of balance when it comes to retirement planning and caring for your parents.

“The key is not to sacrifice one for the other,” he says, “but to prioritise ensuring appropriate financial planning (so we can) help our ageing parents on their financial and healthcare needs.

“With careful planning, budgeting as well as tapping on government resources, you would be in a better position to care for your elderly parents’ needs without compromising on your retirement goals,” he adds.

How to start planning for your retirement?

The first step is to decide when you plan to retire. This will determine how many years you have left to save and how long your savings need to last, says Mr Chua.

The official retirement age in Singapore is 63, while the re-employment age is 68. These will be raised to 64 and 69 respectively in 2026.

He adds: “People are living longer, so it is crucial to plan for potentially 20 to 30 years of retirement.”

The average life expectancy for Singapore residents at birth in 2023 was 83 years, according to the Singapore Department of Statistics.

As a rough guide, MoneySense, the national financial education programme, suggests using two-thirds to three-quarters of your current income to determine how much you’ll need for retirement.

For example, if you currently earn $50,000 a year, and your desired retirement age is 62, the annual retirement income you need would be about $37,500.

Inflation is another key factor. Prices rise over time, which means your spending power will decrease. Historically, inflation in Singapore averages at about 2 to 3 per cent annually, says Mr Chua.

You can set and track your retirement goals or plan your finances for the months ahead with the help of digital tools, such as the UOB TMRW app, says Mr Chua. A financial adviser can also help you calculate how much you’ll need and create a personalised retirement plan.

Ideally, you should clear all outstanding loans, including your mortgage and car loan, before retirement.

Insurance can also play a key role in retirement planning. Certain types of insurance solutions can help you build retirement savings while providing protection.

Preparing for retirement

• Boosting retirement savings: More Singaporeans are topping up their CPF accounts, with voluntary top-ups reaching more than $3 billion in the first eight months of this year.
• Protect and grow: What investments should you consider in times of persistent inflation? Find out here.

How to support your parents’ financial needs?

Beyond helping with their monthly expenses, Ms Chong also sets aside 20 per cent of her monthly income as savings for her parents, who are in their late 50s.

She has been thinking about making cash top-ups to her parents’ Central Provident Fund (CPF) Retirement Accounts so they can get higher monthly payouts in the future.

It’s a move that Mr Chua recommends. Making cash top-ups to your parents’ CPF retirement accounts will also enable you to receive up to $8,000 in tax relief annually, he notes.

If your parents are eligible for the Matched Retirement Savings Scheme, they will also receive dollar-for-dollar matching grants for cash top-ups to their CPF accounts.

The Matched Retirement Savings Scheme helps older Singaporeans reach their basic retirement sum.

Starting Jan 1, 2025, the scheme will be expanded to include Singaporeans aged 55 and above, and the annual matching cap will be increased from $600 to $2,000.

“Together with CPF Life, all this adds up to an extra boost that can help your parents enjoy larger monthly payouts for life,” says Mr Chua.

CPF Life provides monthly payouts to CPF members for as long as they live, even after the savings in their Retirement Account have been depleted.

You can also use funds from your CPF MediSave account to pay for your parents’ MediShield Life and CareShield Life premiums.

MediShield Life is Singapore’s national insurance scheme, which provides basic protection against large medical bills, while CareShield Life is the national long-term disability insurance scheme.

How to protect your retirement funds from inflation?

Inflation can reduce the value of your savings, so it’s important to take steps to protect your retirement fund. Here are some tips.

Increase your savings as your income rises, to stay ahead of inflation.

Diversify your retirement portfolio. Spreading your money across different assets can help improve your returns while reducing risk.

Before you start investing, understand your financial situation and the investment product, advises MoneySense. You should keep in mind factors like your investment horizon, risk appetite, and the investment product’s features, terms, benefits and risks.

One way to stay ahead of inflation is to consider assets that have historically outperformed during periods of high inflation. Examples include gold, real estate and Treasury inflation-protected securities, which are issued by the US government with earnings adjusted for inflation.

Stocks in general tend to outpace inflation over the long term, but it is important to invest in the right sectors and companies.

Those who prefer more support can consult a financial adviser. For example, UOB bankers have access to UOB’s Portfolio Advisory Tool to help you meet your investment and retirement saving goals more effectively.

The tool provides data-driven insights to help you optimise your portfolio according to your risk profile and UOB’s key investment recommendations.

Review your financial plan regularly, at least once a year. Major events, such as buying a big-ticket item like a house or a car, or receiving an inheritance, should prompt an immediate review, says Mr Chua.

Other factors like inflation, healthcare costs, and market performance may also affect your financial plan and require you to adjust your investment strategy.

“Some people may be tempted to take on more risk for potentially higher investment returns,” says Mr Chua. “However, be mindful that any losses will only push back your retirement plans.”

First published in Rethink Your Wealth, a series that provides practical insights and answers on wealth-related topics, to help you transform the way you approach finances.

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