Everyone wants a comfortable retirement. Nobody wants to be old and still have to worry about their daily expenses. There are so many roads (or methods) leading to a final destination. I have been laying bricks and building "4 blocks" for my retirement. I wish it could be completed ASAP and maybe, just maybe, I will consider retiring at 45 and venture into a new experience.
Essential Building Blocks
The Central Provident Fund (CPF) is a compulsory savings plan for Singaporeans and PRs. Since CPF is compulsory, it is definitely many Singaporeans way to fund their retirement.
For me, the CPF Special Account (CPF-SA) is my essential building block that solely focuses on building up the funds for old age. Leveraging the guaranteed interest rates of 4% per year, I hope to quickly meet the Minimum Sum (now known as Full Retirement Sum) and let the magic of compound interest do its work.
My CPF-SA building block is currently close to 50% completion (based on the Minimum Sum in 2015).
Once my CPF-SA reaches the Minimum Sum, I know I will be receiving a monthly payout once I reach 65. Not fantastic payouts we are talking about, payouts for very basic expenditure. So if anyone is just relying on their CPF for retirement, please think again.
According to Ministry of Finance, Supplementary Retirement Scheme (SRS) is part of Singapore government's strategy to address the financial needs of a graying population by encouraging Singaporeans to save more for their old age. The SRS complements the CPF; however, it is voluntary. The voluntary contributions (subject to a cap) to the SRS are eligible for tax relief. These contributions can be used to purchase various investment instruments too. Well, there are some drawbacks too - like your funds will be locked away for a few decades and 50% of your withdrawals are still taxable at retirement.
I have contributed for 4 straight years into my SRS account. The plan is to contribute for 20 years.
My SRS building block is currently close to 25% completion.
As mentioned, the contributions can be used to purchase investment instruments. And since the money is locked for a few decades, it gives me the opportunity to invest for the long term and that is exactly what I am doing.
3. Stocks Portfolio
I want to create a portfolio that is able to give me dividends that exceed my expenses. Building such a portfolio takes time. I have categorized my progress in stages:
Stage 1: Dividends of S$2,000 (monthly) - That will pay for one of my biggest expenses monthly - housing.
Stage 2: Dividends of S$5,000 (monthly) - At this stage, I believe it pretty much covers all my expenses monthly.
Stage 3: Dividends of S$10,000 (monthly) - A goal I would like to achieve. Really inspired by AK - How did AK create a 6 digits annual passive income?
My Stock Portfolio building block is currently only in Stage 1 and it is just 25% completed.
It took quite some time just to receive slightly more than S$500 of dividends monthly. Building this block is a long marathon. It feels like an Ultra-marathon.
The bedrock! Not for investing in Investment-Linked Insurance Policy. But for policies that cover the cost of medical treatments and for policies that my beneficiaries are taken care of in some ways financially from my sudden dismissal. Anything can happen; accidents or illnesses could wipe away my savings.
In summary, these building blocks are not exhaustive. Your retirement plan or building blocks could consist your own personal savings or your housing etc. Each building block will take a lot of work and time to complete. So do plan for your retirement blocks early and work on it.
I am a working salaried professional who strongly believes in planning for something that is inevitable - It is never too early to plan for retirement!