When Huiqi (not her real name) decided to retire at the age of 37, she knew that her lifestyle choice represented an opportunity cost: Retiring early meant that she would be not be able to own a home or buy that fancy car, but it would give her the freedom to enjoy the independent life she’d always wanted. 

In the past year since she’s retired, the 38-year-old former business consultant has travelled extensively, and redirected her efforts to helping the community through numerous volunteer activities.  

For Huiqi, the prospect of remaining in the endless rat race was not aligned with her values. “A lot of decisions are supported by the overall picture and what’s important to [the individual]: I had to ask myself, do I want to look rich, or do I want more time freedom? It was pretty easy to convince myself.” 

She might shop at “swop meets” and not be able to afford fancy meals, but for her, the sacrifice is worth it. 

For many others, however, retirement conjures up images of leisurely business class trips to Europe, weekly golf sessions, and a private condo to boot – and why not? We work incredibly hard, and it’s normal to aspire to an upwardly mobile lifestyle. 

A 2022 OCBC survey revealed that 34% of Singaporeans in their 20s want to retire in style. That means: living in a private property, owning a car, and travelling regularly. Calculations reveal that such a lifestyle would cost about $6,000 a month. 

When Her World polled 800 women for the What Women Want 2023 survey, we found that the average Singapore woman believes that she needs around $880,000 in savings to retire. 

Huiqi’s goal was $600,000, but she quickly points out that it’s not just about achieving that magical number, but also about “making sure you have systems in place that can generate money”. 

Savings vs investments

Simply put: When planning for your retirement, it’s not enough to simply save money in the bank. It’s important to have an investment portfolio that keeps generating returns. 

Unfortunately, only 58.4% of women are cognisant of that fact: Our survey revealed that while more than half plan to rely on investments for their retirement, 83.6% of respondents plan to leverage their CPF, while 81.6% will count on their savings. 28.5% will rely on passive income, while 5.1% have no retirement plan. 

“Investors need to understand the difference between savings and investments,” reiterates Jeffrey Yap, HSBC’s head of Investments and Wealth Solutions, Southeast Asia, Global Private Banking and Wealth. 

“Savings alone may not help you achieve your financial goals, especially over the long term. The return on your savings if kept with a bank will barely cover inflation – the core inflation rate in Singapore in 2022 was 4.1%. 

“As such, savings are more suited for short-term needs or goals (vacation, shopping, etc), while you should invest for medium to longer term financial goals, such as your retirement,” he says. 

So what does this mean? In a nutshell, you need to supplement your savings by investing now to ensure that you’re on track to meeting your retirement goals. 

Nandini Joshi, chief operating officer at Stashaway, explains: “Stashing away money in a bank account that’s earning you just 1%  per annum may not be enough to safeguard your savings against inflation. It’s also not enough during the building phase of your retirement funds. 

“Building an income portfolio comprising a variety of bond assets could offer regular dividends, and provide a more steady income stream in your retirement years.”

How much do you really need to retire?

Still, the question remains: How much is enough to retire comfortably? 

A quick Google search reveals that there’s no magic number: Some surveys suggest that one needs a monthly income of $1,200, others $4,000, and yet others, $6,000. 

“Savings are more suited for short-term needs or goals (vacation, shopping, etc), while you should invest for medium to longer term financial goals, such as your retirement”

Jeffrey Yap

Jeffrey dismisses these numbers: “The amount for one’s retirement is largely dependent on several factors such as lifestyle choices, living expenses and retirement age. Some other factors to consider would be housing, healthcare and other expenses – for example, if there’s a need to provide for elderly parents or young children, as Singapore parents are also starting to conceive at an older age.” 

And it’s important to note that the typical Singapore woman’s life expectancy is four years longer than her male counterpart. 

“Women therefore statistically have more retirement years to plan for, manage on their own, and may incur higher healthcare expenses,” Nandini explains. 

She also adds that women tend to rely on their partners for long-term financial planning. “According to a UBS study, only 19% of women share their long-term financial planning equally with their spouse. Taken together, this means that women in long-term relationships need to have the means to take care of themselves. They should take part in the decision-making process of the household finances, and also have a financial plan in place for themselves,” she says.

Taking the necessary steps 

That doesn’t mean you need to study finance, or be a banker to take control of your finances. Take Huiqi, for instance: She didn’t study finance at university, and, in fact, only embarked on her learning journey in her late 20s, when she made the decision to retire early. She leveraged on her brother’s expertise, but she also spent a lot of time diligently researching and understanding how to translate concepts into investments. 

She shares: “My brother, who has an interest in personal finance, got me started on the books The Intelligent Investor and Your Money or Your Life, as well as the blogs Mr Money Moustache and Four Pillar Freedom to change the fundamental assumption that you cannot decouple time and money, and hence have to stay in the rat race until retirement age. 

Understanding your retirement goals

Starting the process of retirement begins with a few questions, says Stashaway’s Nandini: “What type of lifestyle do you envision during your retirement? Retirement looks different for many people. While someone might want to live modestly, another person might wish to travel the world six months a year. So depending on your goals, you’ll need to account for the associated expenses and include them in your retirement plan. Then, consider: Are your medical needs covered? Do you want to leave money for future generations? Where are you placing your retirement funds?” 

Says Jeffrey: “The first thing to do would be to first understand your goals and financial situation. Differentiate between your needs and wants, and understand your risk appetite.

If you’re confused, they both recommend consulting with the experts, and using saving calculators and budgeting apps. This will help “identify the changes you need to make that will reduce your expenditure, and redirect these funds towards savings for your future”, says HSBC’s Jeffrey.

Huiqi’s goals

For Huiqi, her goals were simple: She wanted to explore a life that was “aligned with what I really wanted to do with my time”. A combination of pull and push factors influenced her decision to retire early, and while she wasn’t burnt out, she simply felt neither satisfied nor fulfilled with the rat race. 

She also wanted the freedom to travel long-term. This meant that she would have to sacrifice material acquisitions. She muses: “[Material goods] do the opposite of what I wanted to achieve; I’d have to take care of things that are specifically here, but I knew I wanted to travel.

“A good rule of thumb is to consider if you’d be able to replace around 70% of your pre-retirement income – this is what you’d need to maintain your current standard of living during your golden years.”

Having dealt with a sickly father when she was young, Huiqi also wanted to have the time to care for her ageing mother. She still lives with her mum (her father has since passed on), and that’s one of the biggest reasons why she’s OK with not being able to afford buying a house. 

“I stay with my mum and younger brother, and we each have our own rooms. If I buy one property, the unit and consumer durables like washing machine and kitchen utensils will only service one person for costs. Rental means time to manage and maintain, when the time can be used on other aspects. The decision to own my own house isn’t necessary for now,” she explains. 

Can we rely on CPF?

Huiqi currently relies on dividends and interests from her investments, and hopes to keep her capital amount intact. She’s also invested in insurance products so she can be protected if anything goes wrong. In 30-odd years, she’ll have access to her CPF, and she is open to taking the payout when the time comes. 

Given Huiqi’s pared-back lifestyle, adding her CPF payouts to her current passive income is feasible. For those who want to retire in style, it might not be enough. 

Says Nandini: “The size of your payout depends on how big a retirement sum you have. In 2023, Singaporeans who hit the Full Retirement Sum of $198,800 at 55 years old and opt for a standard payout will receive $1,510 to $1,620 monthly from age 65 onwards. Conversely, if you hit the Enhanced Retirement Sum of $298,200, your monthly payout will be $2,210 to $2,370 monthly. 

“Remember, the retirement sum increases yearly to account for inflation, increasing standard of living, and longer life expectancy, to ensure that your CPF savings will be adequate for retirement. 

“Retiring beyond basics is an entirely different question. The OCBC study [mentioned earlier] estimated that retiring in style today would cost around $5,670 monthly. So, you’d likely have to build up additional income sources to support such a lifestyle.

“A good rule of thumb is to consider if you’d be able to replace around 70% of your pre-retirement income – this is what you’d need to maintain your current standard of living during your golden years.”

The realities of FIRE 

In order to meet her retirement goals, Huiqi was saving 100 per cent of her salary towards the last two years of her working life, and was relying on dividends. But this entailed some sacrifices: no indulgences, no meals out, no coffees, no impulsive shopping buys. While FIRE (Financial Independence, Retire Early) seems attractive to most of us who are stuck in the daily rut, we need to be aware that it’s not as glamorous as it sounds. If you’re imagining a crypto bro making millions and retiring in style with a membership at the swankiest clubs, we hate to break the news: They’re the exceptions, not the rule. 

“Retiring early requires a lot of sacrifice. It should be a conscious choice.”

“While the concept of FIRE may seem enticing, it’s important to understand the trade-offs involved,” cautions Nandini. “FIRE is about consistently living below your means. Putting this into practice shouldn’t be about saying, ‘I’m not gonna have a $5 latte’, but rather making space for what builds value in your life. 

“Start by saving up for your retirement first. Put away a minimum of 10% and build to 20% if it’s not immediately possible. Then, cover your needs, and lastly the wants that truly deliver value. 

“And if the $5 latte is what brings you joy and makes you more productive in the day, prioritise it over something frivolous and impulsive,” says Nandini. 

“Retiring early requires a lot of sacrifice,” says Huiqi. “It should be a conscious choice.”

Her advice to those who are looking to start working towards their retirement? “Do your homework and get advice from the people who know their [stuff]. Look at investments and financial products, and do not be swayed by your emotions.”