As a Real Estate Consultant, there are 3 things I tell people about retirement that they NEVER want to hear about:
How old are you right now?
I do hope that, by the time you are reading this article, you are still young and able to plan for your Retirement.
Even if you are in your 30s, 40s or 50’s, fear not. There is still a way for you to build your retirement income.
Ask yourself these questions:
- Do you have retirement savings? What is your retirement goal? Through this question, you will be able to determine if you are already close to reaching your retirement savings goal.
- Do you own the home you’re staying in? If yes, the property can be used to reach your retirement savings goals.
- How do you spend your money right NOW? Necessities versus Wants. Because this is crucial towards creating the life you want when you reach the age of Retirement.
THINK ABOUT HOW CLOSE YOU ARE TO REACH YOUR RETIREMENT SAVINGS GOALS
According to OCBC Bank, 73% of Singaporeans need help with their retirement plans, but they still have a chance to do well if they start to do something NOW.
There is a long way for my friends who are young and able to start early: Set aside a portion of your monthly income.
Some suggest 10%. According to Lee Kuan Yew School of Public Policy, an elderly individual needs $1,379 per month, $2,351 for an elderly couple. This is for the basic standard of living.
If you do the math, you need $330,960 for an elderly individual to sustain him for 20 years. And $564,240 for an elderly couple. So you need to save at least $690 if you start at age 22.
The money you have saved can be deposited in the bank. But with the unpredictability of LIFE, you might not help but use that money for emergency cases.
As a Property Consultant, the home you own is considered as your retirement plan. This is your savings which will eventually contribute to your Retirement.
For those who are already in their 50’s, you have to face the inevitable truth that you have to catch up with your savings. And this is something people don’t want to hear about but is TRUE.
At this age, you have to be more aggressive towards funding your Retirement. You most likely know when you will retire or if you are likely to retire at a certain age. When you are aware of the “when”, you are able to adjust your plans to set you off on the right path towards a comfortable retirement.
If you thought of this late, fortunately, the Government has prepared it for us through the Housing Board and Central Provident Fund (CPF) policies as recognized retirement plans for families.
If you’ve been working for 20 years or more without even over-stretching your CPF for home loans, you should have at least $500,000 or more – Ordinary and Special Accounts combined.
PROPERTY: THE QUICKEST APPROACH TO START WEALTH ACCUMULATION
As a property consultant, I have always believed that property is a safe savings method for you.
Instead of taking a portion of your monthly income into the bank, with the property you bought, you are paying for the property as your savings for any plans in the future.
- Right Sizing Your Property with Silver Housing Bonus (SHB) Scheme
Objective: Unlock equity in their homes to provide them an income for their retirement years.
How it Works: Owners get to enjoy up to $20,000 in cash when they sell their property and utilize part of their sales proceeds to top up their CPF Retirement Account and join a CPF Life Plan that pays them an income for life.
Conditions:
(a) Must be at least 55 years old who have met the Minimum Occupation Period (MOP)
(b) Have a monthly gross household income of less than $12,000 and not own any other properties
(c) Purchased a flat not larger than 3 rooms. (Other terms and conditions apply)
- HDB Lease Buyback Scheme (LBS)
Objective: Allowing owners to continue receiving a stream of income for their retirement while still having a room over their head.
How it works: Owners can sell part of their flat’s lease back to HDB in return for proceeds that will help them top up their CPF Retirement Account to purchase a CPF Life Plan which pays them a monthly income for life.
Conditions:
(a) Available to owners of 4 room flats or smaller who have met their MOP and are at least 64 years old with no other properties.
(b) At least one of the owners must be a Singaporean and monthly gross household income must not exceed $12,000.
(c) The minimum tenure remaining must be at least 20 years. (Other terms and conditions apply)
- Renting Out Rooms for Regular Income
Objective: When your HDB has been fully paid, you can rent them out for passive income
A 4 room flat owner would usually rent out 2 bedrooms for an average of $400 each while occupying the master bedroom for themselves.
For retirees who have the option to live with their children, renting out the entire flat would usually yield at least $1600 to $2000 per month income.
WHAT ABOUT PRIVATE HOME OWNERS?
Private property owners whose property annual values do not exceed $13,000 get to enjoy the same Silver Housing Bonus benefits if they fulfill the criteria mentioned in the above.
What about those with higher value private properties? You may choose to unlock equity in your homes.
- Equity Loans
These are loans taken out when a property has appreciated in value or has its loans paid down partially or fully over time.
-the loan taken will be similar in cost to the current mortgage loan
-can have tenures extending to 75 years of the borrower’s age or 35 years in maximum tenure.
This is still subject to case by case through in depth financial calculations and credit checks.
- Private Banking
This is relevant to high net worth clients where private banks offer various manners to monetize using their fully paid properties as collateral for funds.
While there are various ways to swap out your current properties to unlock your Retirement, everyone’s situation is different to plan. What works for others may not be ideal for you. Thus always do an overall review of your plans before execution.
YOUR SPENDING. YOUR LIFESTYLE. DEBTS AND EXPENSES.
When we’re young, we take YOLO as our motto – calling to live life to its fullest. Seize the day!
While it’s true, this concept takes for granted what we need to prepare, even if we live our lives one day at a time. We will soon age and we have to prepare for it. Why? Because we don’t want to depend on our children for financial help (we might not know what their lives will turn out of).
What people fail to see is our ideal life isn’t always going to happen. There are unpredictable situations that we will encounter when we are at the age of Retirement. It could be healthcare costs, a medical condition, school fees for our children and others.
Professionals aged 45 to 50 reach the peak of their earnings potential. With this increase also comes the rise in inflation and cost of living so they are less likely to acquire substantial cash from their salary unlike their 20’s and 30’s.
Because they are already in their golden age, many of them feel that they are entitled to buy the things they’ve always wanted (not necessarily needed) but couldn’t afford to buy – a big house, fabulous furniture, extravagant cars, designer clothes and other luxuries to feel good with themselves.
A caution for this age group is to be conscious of their spending to ultimately have a comfortable retirement life. Wise decisions and Sacrifices will lead us into a happy and easy life.
REDUCE YOUR EXPENSES AND PAY OFF DEBT
As you plan for your Retirement, identify the expenses you will be spending on even when you reach the age of Retirement. We all know that even without work, we have bills and expenses to pay. With that in consideration, we will be able to more or less find out how much we need monthly and annually.
Another thing to consider is paying off debts. It may sound easy to pay it off and avoid any new debts but it can be very challenging. As I’ve said before, we are sometimes blinded by this syndrome of “I deserve this” because I’ve reached this salary amount or this age.
When you start to take Retirement as a part of your future, begin it NOW and enjoy the journey. Make your Retirement goals achievable so that you will be able to stick with them. Spend more on what really matters and truly makes you happy. Spend also for your pleasures once in a while.
Retirement is a new chapter of our lives. It is better to create a plan right now so that we can take care of ourselves in the future and build the lifestyle we want.
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