Tips to stay frugal during retirement

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Retirement may make it tricky to adjust to life in general, notably if you have always been on a tight budget.

You don’t automatically have to stop paying your bills and keep up with house maintenance just because you’ve entered the next phase of life. In fact, it’s more crucial now than ever to allocate additional expenses for outings to the country club or for relaxing holidays.

Now’s the perfect time to employ your knowledge in personal finance if you’re thinking of retiring! Here are several tips to help you stay frugal during your golden years.

Define your goals and budget

First, you need to define your goals and budget. What do you hope to achieve in retirement, and how much money do you need to make that happen? Once you have a firmer idea of what you’re working with, you can start brainstorming ways to save.

Next, take a look at your regular expenses and see where you could cut back. Maybe you don’t need that expensive subscription plan anymore, or maybe you can start brown-bagging your lunch instead of eating out every day. Paring down your expenses will free up more money to save for retirement.

Bonus advice: One of the smartest things you can do for your retirement savings is to invest them. Investing allows your money to grow over time, so you can comfortably retire without having to worry about finances. There are many diverse types of investments available, though, so talk to a financial advisor to figure out which one is best for you.

Invest in quality over the price tag

When it comes to spending your money during retirement, it’s essential to invest in quality over the price tag. Sure, you may be able to save a little bit of money by buying the cheapest version of something, but in the long run, you will be much better off if you spend a little bit more and purchase something that’s going to last.

For illustration, instead of buying the most inexpensive watch available, invest in a quality timepiece that will last for years. Likewise, rather than opting for the most affordable clothing options, choose well-made pieces that will resist wear and tear. By spending a little bit more upfront, you will avoid having to constantly replace items and will be able to stick to your budget much more efficiently.

Seek free or relatively low-cost activities
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When you retire, it’s important to find ways to stretch your dollar. One way to do this is by seeking free or low-cost activities. There are several things you can do to keep costs down.

For example, you can take complimentary online courses, visit museum exhibitions with free admission or participate in meetups and group activities. You can also save money by cooking at home and avoiding expensive restaurants. Whatever you do, make sure that you’re budgeting wisely and that your retirement expenses don’t put too much stress on your budget. Retirement should be a time of joy and relaxation, not financial worry.

Get creative with your living situation

One way to save money during retirement is to get clever with your living situation. For instance, consider downsizing to a smaller home or moving to a less expensive neighborhood. You could also consider sharing a home with a friend or family member or renting out a room in your house.

Another way to save money is to be mindful of your spending habits. Try to avoid buying unnecessary items and be conscious of the things you do spend money on. There are many ways to be economical without having to deprive yourself of the things you enjoy. It just takes a little bit of restraint and inventiveness.

Learn to cook and enjoy meals at home
Singapore supermarket

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One of the wisest things you can do to save money during retirement is to learn to cook and savor meals at home. Not only will you save a ton of money on delivery food, but you will also have the satisfaction of knowing that you made your meal from scratch. Here are a few suggestions to help get you started:

  • Try no-frills recipes that are effortless to follow and don’t require a lot of ingredients.
  • Browse cooking blogs for inspiration, or take a cooking class at your nearest community center or a cooking school.
  • Invest in some quality kitchen utensils and equipment. A fast blender, for example, will make cooking much more pleasurable.
  • Be creative and experiment with distinct flavors and ingredients. You might be pleasantly surprised at what you can come up with!

Being thrifty and living within your means is more paramount now than ever when you’re retired. But keep in mind that a thrifty way of living values conserving money as effectively as possible and is cost mindful. It’s critical to assess your financial situation in retirement and determine whether being frugal is a good match. It should not be thought of as a punishment to be thrifty since it can be financially empowering in the long run. Strive to maintain your retired lifestyle while keeping within your budget by considering the advice provided in this article.

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Singapore Parents Spend More Money on Children’s Needs than Retirement

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Starting a family requires careful planning. With a clear idea of what it entails and the schemes available to help ease new parents’ financial load, you will be able to embrace one of life’s greatest blessings.

As you allocate your budget, you must consider both your childcare expenses and your retirement fund. Prioritizing these two is easier said than done. A 2021 study by AIA Singapore revealed that young families in Singapore have deprioritized planning for their retirement to give way for the monthly expenses on their children.

The participants of the study (i.e., parents) were found to be spending 2.5 times more money on their children’s monthly expenses, rather than taking charge of their own retirement planning. These Singapore parents spend almost 20% of their income on their children’s needs and allocate less than 7% on their retirement fund. Furthermore, 70% shared that they intend to either increase or maintain the amount of income allocated to their children’s expenses. The increase of allocation to the children’s expenses is affected by the higher childcare costs amidst the pandemic.

Apart from this, the pandemic also affected their savings. One in three Singaporeans’ savings was negatively impacted in 2020, with a median amount of between S$251 to S$500 set aside monthly for retirement. It is challenging to find a balance between all the primary categories of your budget, but you must not overlook the importance of retirement planning.

“Retirement planning is an essential part of securing our longer-term financial security, not just for parents, but for the entire family, so everyone can look forward to a brighter future with peace of mind,” said Melita Teo. Melita Teo is AIA Singapore’s Chief Customer and Digital Officer.

As parents, you want to support your children by giving them the best opportunities to secure their future. Hence, you must consider creating a retirement plan to help navigate your seamless transition to the golden years. With this retirement plan, you will not need to fully rely on your children.

Start by reviewing your financial situation and financial plans. Establish a fresh budget for your household that will accommodate both your childcare costs and your retirement fund.

Talk to professionals, your trusted friends, and family members to have an idea of what it costs to pay for your child’s needs and your personal retirement needs.

Image Credits: pixabay.com

Research on various government schemes such as Enhanced Baby Bonus, Enhanced MediSave Grant for Newborns, and other subsidies for center-based infant and childcare. Newborns who are registered as Singapore Citizens at birth are automatically insured under MediShield Life. These schemes and benefits can help free up some of your expenses to boost not only your childcare budget, but also your retirement fund.

Sources: 1, 2, & 3

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Endowus Singapore Retirement Report 2021: Almost 50% of Singaporeans have not started retirement planning

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Singapore residents crossing the road

Do you know that though CPF members’ total balance has increased from roughly S$125 billion in 2006 to S$474 billion in March 2021, only 63.6% of active CPF members who turned 55 could set aside their Full Retirement Sum (FRS) or Basic Retirement Sum last year?

Hence, to better understand Singaporeans’ attitudes towards retirement, Endowus has worked with YouGov Singapore to develop the Endowus Singapore Retirement Report 2021. The survey took place in May this year with a sample size of 1099 adults, reflecting our tiny red dot’s adult profile population.

Here are its findings.

39% of Singaporeans are worried about retirement inadequacy

The survey revealed that about 1 in 3 Singaporeans are worried about retirement inadequacy. However, the results varied between the genders. Twice as many men than women confidently agreed that they hold sufficient money for retirement.

Almost 50% of people have not started planning for retirement

While 53% of Singaporeans are planning to use or are currently using CPF to fund their retirement, almost 50% of people have not started retirement planning. This is especially true for the younger age group under 35.

Lower-incomers are less likely to plan for their retirement with CPF
younger Singapore residents

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Another worrying factor is that those earning below S$3,000 are less likely to plan for their retirement with CPF when compared to those with incomes above S$6,000 per month. This thus also means that lower-incomers are not making full use of their CPF. It also lowers their chances of achieving the FRS for financial stability at retirement.

Only 25% are currently investing their CPF

The report also showed that close to 70% lack confidence in investing their own CPF monies. That is why only 25% are currently investing their CPF. However, most Singaporeans seek higher returns and ranked it as the most critical criteria for CPF investing.

30% are asking for tools on CPF investing knowledge

There seems to be a gap in using CPF around financial decisions; as such, a third of Singaporeans are requesting tools to help them understand the impact of their financial decisions around their CPF. Some are also appealing for resources to aid them in estimating retirement income from their CPF.

To that, Samuel Rhee, Chairman and Chief Investment Officer of Endowus, agrees. He said, “Considering these shifting time horizons and other uncertainties, more education may be needed to help Singaporeans make better use of their CPF, especially earlier in life, when savers have more time to take advantage of asset growth.”

What about you? Have you started retirement planning? Ponder over these things if you want to be on track to building your retirement fund. For the full Endowus Singapore Retirement Report 2021, please head to endowus.com/insights/singapore-retirement-report-2021.

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Ponder over these things if you want to be on track to building your retirement fund

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two elderly persons sitting on a swing

Whether you’re young or old, it’s never too early to start thinking about saving up for retirement. After all, it’s the best way to guarantee a comfortable life after you cross that critical stage.

However, you must start planning to make sure everything gets taken care of. Even though it might seem scary at first, have no fear. By reading this article alone, you’re already making that crucial first step.

It takes dedication and discipline to get where you want to be, including consistent savings and investments. You’re going to need to consider various factors specific to you and figure out how to handle risk best.

When jumping into retirement fund planning, it’s best to set a particular goal to build around it. Let’s dive right into the things to ponder over.

Your retirement goal

retirement savings in a coin jar

Image Credits: Mint

To get a basic idea of how much money you need to have after you retire, you must consider what age you want to retire and what you envision your lifestyle to be. After that, there are several methods to give you an estimate of what you might need.

Take advantage of the Central Provident Fund (CPF) Board’s tools to help you with your planning:

You can also do a quick computation to see how much you will need if you plan to retire for a certain number of years. For example, if your retirement will last 20 years and you require S$5,000 a month to get by, you will need S$5,000 x 12 months x 20 years = S$1.2 million.

Just keep in mind that this doesn’t include other factors like assets and liabilities. Those who want a more accurate number should seek a financial consultant’s assessment.

Things to think about

#1: Inflation rates
Singapore's inflation rate

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Singapore’s inflation rates have averaged at around 2.51% from 1962 up to 2020 and have fluctuated recently within the last four years at percentages between -0.52% and -0.57%.

If you haven’t started investing already, consider doing so because your money will lose purchasing power if it sits in a savings account.

#2: Risks
a man reaching for an apple on stacked chairs

Image Credits: wsj.com

Risk can be defined as the degree of uncertainties in an investment decision and/or possible financial loss. The younger you are, the more risks you can afford to take. If you’re a little older, it might be riskier to invest a lot of money and potentially lose it all when the market is greatly affected.

Therefore, it depends on what point you are at in life. Be sure to consider how much risk you’re willing to take on and set up some plans accordingly.

#3: Diversification
never put all your eggs in one basket

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“Never put all your eggs in one basket” is a tactical move that makes perfect sense in several areas of our lives. This includes investments and fund management.

For healthy risk management, diversification in your retirement portfolio is always crucial. Balancing your investments means that there won’t be a disaster for you if one industry crashes in the market.

The importance of diversification in investing is not to be taken lightly. For more details on the technique to reduce potential risks, click here.

#4: Time horizon
investment-horizon

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Try to identify what time horizon your investments are geared towards, whether short, medium, or long-term.

If you’re leaning towards short-term, you can afford to go for riskier investments, potentially earning you higher expected returns. On the other hand, if you’re long-term, you will want to invest in lower-risk funds that provide stability and predictable returns.

In general, if you start your retirement journey when you’re young, you can invest with higher-risk investments and slowly transit to low-risk ones in the future.

#5: Payout mode
savings against time

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Take your payout mode into account.

Sometimes, insurance savings plans, for example, will need you to lock in your amount for several years before you can even access it. If liquidity is important to you, pay attention to the fine details of your plans you’re considering and consult a financial planner for elaborate help along the way.

Search on the internet, and you will find a couple of retirement savings plans. We will list some here for your perusal:

Final thoughts
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You will already be way ahead of the curve if you start early and stop putting off retirement planning.

A study has shown that Singaporeans start planning for retirement at around 38 years old. That’s why within the age group, only two-fifths of Singaporeans feel confident with a comfortable retirement. See if you can look for little areas around your life where you can save some money to invest without affecting your current lifestyle or budget.

Oh yes, before we let you go, have you heard of CPF’s Matched Retirement Savings Scheme (MRSS) for senior Singaporeans?

MRSS is ideal for those aged 55 to 70. As the Singapore government will match every dollar of cash top-ups (annual cap at S$600) made to the Retirement Account, this is one way to increase monthly retirement payouts effortlessly.

Help your parents, aunts, and uncles check if they can tap on the scheme using the MRSS eligibility checker here!

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How To Save For Retirement As A Young Adult

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Time is of the essence. Crippled with all the uncertainties brought by the pandemic, having reserved funds can help cushion the blow of unforeseen events such as pay cuts and layoffs. Saving money is important, especially when your finances are limited. Consider saving money to grow your emergency and retirement fund.

Retirement may seem like a long walk ahead for someone in his or her 20s or 30s. However, it is best to start saving for retirement before you hit 35 years old because your priorities will change at that time. Financial priorities such as spending for a wedding, an education loan, house loan, and other major transitions may occur once you hit your 30s. Typically, you spend more money on yourself during your 20s. Why not consider spending more money for your future?

In your early 20s, you may save at least 5% of your income or sign up for your employer’s Retirement Plan. Avoid debt as much as possible and get educated about your finances. Widen your financial knowledge by reading financial books on investments and business opportunities. Pay off your debt, if necessary. It makes sense to pay off your debts or at least your high-interest debts before you save for your retirement. Not all debts are created the same. Pay off your high-interest debts first followed by the lower-interest debts.

The next step is to set up a budget. Systematically allocate your income onto distinct categories and stick to that budget. Do not spend beyond what your budget is for that month. This allows you to save regularly rather than arbitrarily. Make critical decisions about your expenses and cut down the unnecessary, especially when you hit your late-30s. Ideally, this is when you hit maximum savings. By this time you should have at least S$50,000 to your Retirement Savings.

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The third step is to seek for an employer that supports your goals. If your employer offers Retirement or Pension Plan then embrace this company benefit. As a young adult, you may also invest your money in accordance to your financial goals.

Lastly, you are saving money for your retirement to prepare for the unexpected. Contemplate and reconsider the realistic measures that are suited for you and your lifestyle. Seek the financial experts’ help as much as possible. Then, plan your exit with joy because you are well prepared for it.

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