We all want to retire as early as we can. But the question is are we well prepared for retirement? Do we have enough savings and how much savings is "enough"?
Some tips on how to retire comfortably at age 65!
1. CPF Special Account (CPFSA): Between 4% to 5% returns per year.
This is the first and perhaps most stable method of growing your money. Your very own, government guaranteed, CPF Special Account (CPFSA).
Monies in your CPFSA earn 4% interest year on year. An extra 1% interest every year is currently paid on the first $60,000 of a member’s combined balances (with up to $20,000 from Ordinary Account). That means if you have $60,000 or more between your CPF OA and SA, your yearly returns jump on your monies in your CPF account earn an additional 1%!
That’s an additional 30% over 30 years without even accounting for compound interest!
At 4% interest: A sum of $500 deposited in your CPF Special Account every month will accumulate $343,756.98 in 30 years.
Assuming your ordinary account has zero dollars, and with $343,756.98 forming the whole of your Retirement Account, you will receive about $2,500 a month upon reaching age 65.
2. Dividend Investing
Dividends investing sounds complicated as hell but it’s actually really straightforward.
Dividends Investing Concept:
You buy stocks of good companies (value buys!).
Stocks pay dividends (cash every year for being owners of their stock).
As you own more and more stocks. Your dividends grow and grow. Especially when reinvested and allowed to compound over time.
Soon enough, your dividends will actually exceed your take-home pay, at which point you can retire peacefully.
3. Start Planning Early For Your Retirement Funds!
People often say, if you fail to plan, you plan to fail.
Here are some statistics from the Straits times on the budget required to meet basic standards of living for elderly aged 65 and above!
Other important information:
On the other hand, if you want the government to #returnyourCPF, your retirement funds will only be available to you from age 55. That’s a whole different “retirement age”.
Withdrawing money from CPF Account?
It turns out that you can only drain your CPF savings if you have less than $5,000 in your CPF account (Ordinary and Special Accounts combined) at age 55.
In such a scenario, CPF won’t even bother to set up a Retirement Account for you. Your funds are all unlocked.
However, if your OA + SA balance is more than $5,000 when you reach age 55, CPF will merge the two to form your CPF Retirement Account (RA).
You can withdraw money, but there’s a minimum balance that you cannot touch. This amount is pegged to either the Basic Retirement Sum or Full Retirement Sum, both of which change yearly. We’ll use the current numbers, which apply to those who turn 55 in 2019.
All in all, we hope these information are useful to help you plan ahead and prepare for your retirement!