Retire With S$1 Million even if you haven’t started to save
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Ways to retire a millionaire
By Stephanie Thng, Funds Supermart
Start saving early and it could make a world of difference to your retirement plans. Time is your best friend as you will find in this story. Here, we assume five individuals at different stages of their life, from those earning at entry-level, to those close to retirement age. All aim to achieve a monthly income of S$2,500 during their retirement years from age 62 to 82. We also taken into account that the inflation rate stands at 3% per annum, meaning that the general cost of goods and services rises by that amount each year.
Further, we assume that whatever the investors save during their pre-retirement days will earn 8% annually. After they hit the age of 62, we assume that the return on their savings drops to 4% per annum as they take less risk in their investments. This simple illustration does not take into account your other financial needs, such as whether you have planned for your insurance needs (life or term insurance, mortgage insurance, health and hospitalization plans).
If You're 25
Savings: S$0
Monthly Salary: S$2,500
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
Housing Loan: Not Required
What You Need to Save per Month for the next 37 years: S$158.30
Planning for your retirement when you are 25 years old may seem a bit far-fetched. But the benefits of starting early cannot be underestimated. Assuming that a person starts working at 25 with a salary of S$2,500, you would need to save S$158.30 per month to ensure that your retirement income can stand at S$2,500 per month during your retirement days, which we assume will run from the age of 62 all the way to 82. Even with no savings to start with, having a regular savings plan (RSP) may be a good way to start planning. An RSP would ensure that you have the discipline to force yourself to invest – there is little room for excuses! Very often, we may be tempted to use up our savings for a travel trip or to purchase that dream car. And even for those who believe in the merits of investing, they may not have the discipline of investing regularly because they feel it is not the "right" time to invest. This could be especially true when markets are going through a bull run and some may feel that it is too expensive to go into markets. An RSP is a disciplined way to ensure that you will invest no matter markets are up, down or sideways.
If You're 35
Scenario 1
Savings: S$0
Monthly Salary: S$6,000
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
Housing Loan: S$800 per month over 30 years
What You Need to Save per Month for the next 27 years: S$666.57
Scenario 2
Savings: S$40,000 (earning 1% p.a.)
Monthly Salary: S$6,000
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
Housing Loan: S$800 per month over 30 years
What You Need to Save per Month for the next 27 years: S$620.73
At the age of 35, the monthly salary is assumed to have risen to S$6,000. But being able to afford an expensive lifestyle has meant that there are no savings in the bank account, and now you have a housing loan to deal with. While things do not look very bright, it is not too late. Save S$666.57 per month and you could ensure that you have S$2,500 every month during your retirement days.
If You're 45
Scenario 1
Savings: S$0
Monthly Salary: S$8,000
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
Housing Loan: S$800 per month over 20 years
What You Need to Save per Month for the next 17 years: S$1692.34
Scenerio 2
Savings: S$40,000 (earning 1% p.a.)
Monthly Salary: S$8,000
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
Housing Loan: S$800 per month over 20 years
What You Need to Save per Month for the next 17 years: S$1582.63
At the age of 45, things will get tougher if no plans have been made yet for retirement. After all, the time horizon till the retirement age of 62 is less than 20 years. Assuming that there are no savings in the savings account, you would need to save S$1692.34 per month. And even with savings of S$40,000, you would still need to save S$1,582.63 per month.
If You're 55
Scenario 1
Savings: S$0
Monthly Salary: S$10,000
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
What You Need to Save per Month for the next 7 years: S$5319.54
Scenario 2
Savings: S$40,000 (earning 1% p.a.)
Monthly Salary: S$10,000
Rate of Increase in Wages: 3% p.a.
Number of Months in Bonus: 2 months
What You Need to Save per Month for the next 7 years: S$4937.02
The lesson is to start early. The later you drag your retirement planning, the higher the cost. You would need to save over S$5,000 per month (over half your salary) from the age of 55 to 62 to ensure that you have S$2,500 per month during your retirement days.
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I got a question. You really believe that this is a method to earn a million?
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$158.30/mth for 37 years at 8% interest would give you $399,700.
8%!!!
So I guess he is not putting all his money in his CPF account.
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so anybody here won the grup 1 prize today?
1m .. haha
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Everybody wants to be a millionaire.
But if you look at their assumptions of a monthly salary of $2,500, $6,000, $8,000 and $10,000 at various ages, a fixed % increase in wages every year, a fixed number of mths of bonus every year, then probably only a small minority of the population (5% maybe) might be able to fulfill these conditions every year on average till retirement.
Just like every investment / savings / insurance plan, there are always assumptions which might not hold in the real world. The positive calculations and projections you see are need to be taken with a pinch of salt.
Or maybe 10.
But nevertheless, it is good to save as much money as you can when young regardless of whether you want to be a millionaire or not.
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hmmm point taken
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Realistically in singapore, you want to expect on average a 3% annual wage increment?
2 months bonus every year?
6-10K a month salary?
Since 1997 there has been 4 recessions - 1997 Asian financial crisis, 2000 dotcom crash/Sept 11, 2003 SARS, 2008 credit crisis.
You do the math and ask yourselves if these investment/savings projected returns and assumptions will hold in the future.
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Not easy to have constant savings with all these recession.
I always believe in save as we earn and save as we feel comfortable.
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Originally posted by charlize:
Realistically in singapore, you want to expect on average a 3% annual wage increment?
2 months bonus every year?
6-10K a month salary?
Since 1997 there has been 4 recessions - 1997 Asian financial crisis, 2000 dotcom crash/Sept 11, 2003 SARS, 2008 credit crisis.
You do the math and ask yourselves if these investment/savings projected returns and assumptions will hold in the future.
8% is a reasonable estimation on a 37 year investment horizon.
Else put all your money in CPF.
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Great! We have 2 financial experts here.
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i am safe?
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because lao pei rich?
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Originally posted by GHoST_18:
because lao pei rich?
You so right to say that.How i wish my lao pey is also rich
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too many numbers, it hurts my hurts
*eyes burning*
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Which planet the writer comes from? Saturn?
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If you're 75?
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have to try singapore pools liao