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Introduction to planning for retirement
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3 min. read

It pays to plan for your retirement as early as possible. Find out what planning for retirement means, and the effects that time and inflation have on your savings.

Key takeaways
  • Planning ahead allows you to better enjoy your retirement.
  • Starting early gives you more time to reap the benefits of compounding interest.
  • Inflation has a big effect on cost of living in the future.

What is retirement?

Retirement is about being able to choose whether to work. You are in a better position to make that decision if you start retirement planning early. Here are some indicators of whether it's time to consider the retirement option:

  • Have a roof over your head (that is fully paid for)
  • Are free of debt obligations
  • Have adequate health insurance cover for medical expenses
  • Have enough savings or passive income to pay for your retirement lifestyle

When should I start?

For many people, retirement is regarded as a life event that's too far away to start planning for. But this mindset hinders the goal of being able to retire.

Those who do not act early on planning for retirement say it requires too much discipline and sacrifice. Or that it is still early. Some point to their CPF savings to provide for their retirement needs.

Those who do, however, may be saving too little, or know too little about how to go about accumulating and preserving their wealth.

Many people are uncertain of achieving a comfortable retirement, because of these common doubts:

  • How much would be enough?
  • What happens if I outlive my savings?
  • With inflation, will the retirement funds I have amassed be enough for the lifestyle I want?

Why it pays to start early

While it is never too late to start saving and planning for retirement, the earlier you start, the better. Starting earlier means more time for your savings to benefit from the effects of compounding returns.

Conversely, the longer you wait, the less time you have for your money to grow and the harder you'll have to work to reach your retirement goals.

Just how much of a difference does it make to start early?


Andy started saving $250 a month 30 years ago while Bob started saving $400 a month 20 years ago. Assume that their investments both grow at 4% a year:

Andy Bob
Savings per month $250 $400
When they started 30 years ago 20 years ago
Total saved $90,000 $96,000
Value today $174,000 $147,198

Despite saving less per month and less in total, Andy ended up with a significantly greater amount of savings than Bob because he started out earlier. That's the power of compounding and having time work for you.

The effects of inflation

All of us have to cope with the impact of inflation. Consider how inflation affects your cost of living:

  • If the inflation rate is at 3%, the cost of living would double every 24 years
  • If the inflation rate increases to 4%, the cost of living would double every 18 years

If inflation grows faster than your retirement savings, it could mean that:

  • You'll need to adjust your expenditure
  • Your present retirement funds may not last throughout your retirement
  • There is a chance that you may outlive your savings

Rule of 72

To get the approximated number of years it takes for the cost of living to double, divide 72 by the inflation rate. This is one easy way to compute how much you may need to save up in order to fund your retirement.


Assuming an inflation rate of 3%, the current cost of living would double in 24 years. If you wish to retire in 24 years’ time, how much would you need to have then in order to be able to fund your retirement for 20 years?

Current annual cost of living Annual cost of living 24 years later (with inflation) No. of years of retirement Amount needed to retire




$24,000 x 20 = $480,000




$36,000 x 20 = $720,000




$50,000 x 20 = $1,000,000




$72,000 x 20 = $1,440,000

See also: Effects of compounding interest

Building a retirement plan

What does it take to draw up a retirement plan? Here are the steps you'll need to go through:

Step 1: Define your retirement goals

Step 2: Assess your current situation

  • Review your finances to see if you are on track to reaching your retirement goals.

Step 3: Close your savings gap


Find out more

“Approaching Your Retirement Years”  - A booklet targeted at citizens (aged 40 and above) who may be starting to plan for retirement or in the process of planning for retirement.  

Download :

Retirement Booklet_English

Retirement Booklet_Chinese

Retirement Booklet_Malay

Retirement Booklet_Tamil

Last updated on 18 Apr 2023