Have you started your retirement planning? Find out how to boost your retirement savings with CPF, insurance and investments. 

Singapore has been consistently ranked as one of the most expensive cities to live in. In addition, the Consumer Price Index for February 2022 has also risen 4.3% compared to 2021. Inflation is real, and expenses are only going to go one way – up.

Couple that with a rise in average life expectancy and suddenly the thought of outliving your savings becomes more real. This is why retirement planning is important, and we’re here to show you how you can avoid that by growing your retirement savings today using your CPF, insurance and investments.  

When should you start planning for retirement?

Thanks to the magic of compounding, the earlier you start, the more time you have and less effort you need to grow your savings.

You can also afford to put more away when you’ve just entered the workforce, compared to when you’re older and busy trying to juggle your family’s expenses, child’s education, house loan and retirement all at the same time.

To start planning for retirement, first find out how much you need before saving up towards a goal. 

How to build your retirement savings

Once you have a goal in mind, you can utilise these three tools – CPF, insurance, and investments – to increase your retirement income. Here’s how.

Planning for retirement with CPF

Did you know CPF was designed to help Singaporeans be retirement-ready? Some of the schemes you can leverage include:

1. CPF Lifelong Income for the Elderly (CPF LIFE)

CPF LIFE, which replaces the Retirement Sum Scheme, is the national annuity insurance scheme for Singapore citizens and residents that offers lifelong monthly payouts no matter how long you live. This effectively ensures that you do not outlive your savings.

Singaporean citizens and PRs born after 1958 with at least S$60,000 in their Retirement Account (RA) will automatically be enrolled into the scheme. You can also enrol for CPF LIFE if you are not automatically included.

Under the scheme, you can start receiving your payouts from 65, or defer it up till 70 years if you want to earn more interest – a whopping 7% each year! You’ll also get to choose between three CPF LIFE plans depending on your preferred monthly payouts.

1.     CPF LIFE Basic Plan: Offers lower monthly payouts that are first drawn down from your RA, and becomes lower once your RA balance has been depleted

2.     CPF LIFE Standard Plan: All your RA goes into CPF LIFE in exchange for higher monthly payouts that remain the same each year. Good for those who are willing to spend less in future years to cope with inflation

3.     CPF LIFE Escalating Plan: Offers monthly payouts that start lower but progressively increases over the years along with inflation

Need help? The CPF LIFE estimator gives you an idea of how much you might need for your dream retirement.

2. Retirement Sum Topping-Up Scheme (RSTU) 

Under the RSTU, you can top up yours and your loved ones’ CPF Special Account (SA) and RA to maximise your CPF LIFE payouts. Top-ups can be made with cash or via CPF transfers from your Ordinary Account (OA).

By doing so, you’ll enjoy the higher base interest rate of 4% on your SA and RA savings – compared to just 2.5% on your OA – as well as tax deductions of up to S$8,000! These savings can then be used to grow your retirement funds further.

3. Matched Retirement Savings Scheme (MRSS)

Senior Singapore citizens who have not reached their Basic Retirement Sum (BRS) and are eligible for MRSS will enjoy a government grant that matches the top-ups made to their RA, up to an annual limit of S$600.

Similarly, you’ll get to enjoy tax deductions on the top-ups, which is great news for those looking to boost their parents’ retirement savings while saving on taxes.

Planning for retirement with insurance 

While CPF is great, sometimes it may not be enough. This is when you should start looking at other ways to supplement your retirement income, such as insurance.

1. Insurance savings plans

Insurance savings plans, also known as endowment plans, are favoured for being a safe way to grow your savings with relatively high returns.

Most plans offer capital-guaranteed returns as well as coverage for death, terminal illness and total and permanent disability. One other benefit is that you can choose your preferred premium and coverage period to match your retirement timeline and goals.

2. Private annuities and retirement plans

These are a great option if you’re looking for a guaranteed monthly retirement income like CPF LIFE. They also offer greater flexibility, where you can choose to start your payouts earlier and enjoy other additional benefits.

Some retirement plans also come with a surrender value, which provides liquidity if you’re in need of some emergency cash.

Planning for retirement with investments

With the potential returns they offer, investments are a good addition to any retirement plan.

Here are some ways that you can invest with retirement in mind.

1. Supplementary Retirement Scheme (SRS)

A voluntary scheme to help you boost your retirement funds, you’ll enjoy tax reliefs for each dollar you contribute to SRS, up to S$15,300 a year. Your SRS contributions can then be used to purchase a host of investment instruments including bonds, stocks, REITs and single premium insurance plans including endowment plans.

The only catch is that penalty-free withdrawals can only be made after your statutory retirement age, which is not really an issue if this is part of your retirement plan. In addition, your investment returns are tax-free before withdrawal while only 50% is taxable when withdrawn after the retirement age.

However, by planning your withdrawals properly, you might not even have to pay tax if your total taxable income at retirement is below S$20,000.

2. Singapore Savings Bond (SSB)

Fully backed by the government, SSBs are a long-term, low-risk investment tool that offers capital-guaranteed returns. You can choose to invest from as little as S$500 a month for up to 10 years.

Safe and flexible, SSBs are suitable for younger investors who don’t have much to start their retirement planning, as well as those nearing retirement who want a safe space to maintain the value of their savings.

3. Investment-Linked Plans (ILPs)

ILPs are hybrid products that combine insurance with investments. They’re flexible and are also a great way to diversify your investment portfolio with access to various funds that are managed by professional fund managers. Beginner investors may find this a better option than hitting the stock market alone.

Although riskier than insurance savings plans for example, they also have the potential to give you higher returns. However, ILPs are best suited for those with a longer time horizon to ride out market volatility.

Need help supplementing your retirement income or planning for retirement? Speak to your trusted financial adviser to learn more.