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With the cost of living going up, you wonder how much longer you’ll have to work before you can retire. Your Central Provident Fund (CPF) money isn’t likely to be enough to survive on. Like most Singaporeans, it’s probably gone into paying for your home. So cash savings are important. But it doesn’t mean you have to slog until you’re, say, 85.

Financial planners say it takes about 40 years to save for retirement. So if you’re planning to retire at 65, you should have started at 25. But who does? Says Vasu Menon, president of Wealth Management Singapore, OCBC Bank: “Not many of us even begin thinking about our retirement fund until we’re in our 30s, or when it’s time to buy a place and start a family.”

No worries, though. Even past your 30s, Vasu says it’s not too late. And you may even be in a better position to make retirement plans. “Starting later does mean you have to set aside more money, or take on a higher investment risk, or both. But you’re never too old to start saving,” he says. “Work backwards. Once you know how much you need, you can start saving for it.” Here’s how to do it.

1. Pay yourself first

Be realistic about how much you can save every month. Alfred Chia, chief executive officer of Singcapital, says: “If you’re 30 and wish to retire at 60, and want to accumulate $1 million by then, you’d have 30 years to begin saving and investing. Say your investments provide a 5 per cent return per year, you’d need to save $1,196 a month.” If you delay saving until you’re 40, you’d then only have 20 years left to save, and would have to put aside $2,422 every month.

Once you’ve worked out what you can save, prioritise paying yourself first. “We all have different financial priorities,” says Alfred. “But the two things we should all do are to devise a reasonable budget and pay ourselves before other expenses.”

2. No amount is too small

If you have many financial commitments, you may worry about how to set aside anything at all. But saving a small amount every month can add up to a big sum over the years – and it’s better than nothing.

Invest this small amount wisely to make it grow. If you find an investment that gives you a 10 per cent return per annum, you’d only have to save $1,306 a month – if you start when you’re 40. “If you have a long investment time horizon, you can afford to go for investments with higher risks that could potentially provide higher returns,” says Alfred.

3. From just $100 a month

If you are the sort of person who can’t sleep at night after investing, or if you’re older, don’t take high-risk options. “Don’t put all your eggs into one basket – spread out the risk,” says Vasu. What you invest in depends on your risk appetite, family circumstances, where you’re at in your life, and your age. See a fi nancial advisor, who can customise an investment portfolio to suit your needs.

“When it comes to investing, start small but think big,” says Alfred. He recommends this rough plan:

  • Start a regular investment programme for as little as $100 a month.
  • Include fixed income instruments that give you a consistent annual return, like bonds.
  • When you’ve amassed a tidy sum, consider investing in property for a passive rental income.
  • Near your retirement age, start looking at annuities for a perpetual income in the future.

4. Don’t think about your savings

Remove your emotions from the equation. “Decide what to invest in, do it monthly, then just leave it,” says Vasu. “Don’t keep monitoring your savings because it’s not that exciting. Plus, you don’t want to waste time and energy thinking about it. Saving for your retirement is a long-term thing, so look at your prospects over the long term and just review it every six months.”


This story was originally published in the November 2012 issue of Simply Her.