What sources of income do you have for your retirement years? Find out where you can draw income from and what you should do if there's a shortfall.
- You can receive a retirement income from CPF LIFE, by investing through the SRS, from your investments and by monetising your property.
- You could also take on part-time jobs to supplement your retirement income.
Besides your cash savings and CPF LIFE payouts, it is possible to have other sources of income after you retire. These can be your Supplementary Retirement Scheme (SRS) funds, insurance payouts, downsizing or renting out your property, investment returns, or any part-time employment.
Where will your income come from?
An important part of retirement planning is to assess your available resources for your retirement.
- How much do you expect to have when you retire, from your:
- Cash savings
- CPF and SRS
- Insurance policies and annuities
- Property rental income
- Cash proceeds from right-sizing to a smaller home
- Investments (e.g. shares, unit trusts)
- Income streams (e.g. dividends)
- Are you able to clear all outstanding loans and liabilities before retirement?
- Have you set aside money for your other goals, like your children’s education?
Don’t forget about your insurance
Is your insurance coverage adequate? Healthcare costs rise as we get older. All of us are covered under MediShield Life, but you could consider additional cover to meet other healthcare needs and preferences. Do weigh up the impact of the additional costs on your retirement savings, too.
Do ensure that you're still covered during your retirement years. Some policies offer an option to stop paying premiums upon retirement, while still enjoying coverage.
Do you have a shortfall?
The CPF retirement calculator can show you a clearer picture of the difference between your needs and your expected retirement fund.
If you have a shortfall, it’s time to start building your retirement fund.
Ways to save for retirement
Here are a few ways to build up your retirement nest egg:
From the moment you make your first CPF contribution to your Ordinary, Special, and Medisave Accounts (OA, SA, and MA), you're already leveraging on the risk-free and attractive interest rates.
When you turn 55, a Retirement Account (RA) is created for you where your savings can earn up to 5% interest* per annum. On top of this, you will also be eligible to earn an additional 1% interest on the first $30,000 of your combined balance, with up to $20,000 from your OA.
*Including an extra 1% interest paid on the first $60,000 of a member’s combined CPF balances, with up to $20,000 from the OA.
Supplementary Retirement Scheme
The Supplementary Retirement Scheme (SRS), operated by the private sector, complements the CPF to enhance your retirement savings.
Participation in the scheme is voluntary – your contributions can be used to purchase various investment instruments. You benefit from attractive tax reliefs:
- Every dollar contributed reduces your taxable income by a dollar
- Investment gains can accumulate tax-free
- Tax is only payable when you withdraw your savings from SRS, and on only 50% of the amount if you withdraw at retirement
Monetising your property
If you own your HDB flat and have met the Minimum Occupation Period, you could rent out a room or the whole flat to collect a regular rental income.
You can also consider the following:
- HDB’s Lease Buyback Scheme (LBS), which allows you to sell part of your flat’s lease back to it. The proceeds will be used to top up your CPF Retirement Account, from which you will get a steady income from CPF LIFE. You can continue living in your flat throughout your retirement.
- Right-sizing your flat to supplement your retirement income. As your adult children establish their own homes, you may consider selling your existing flat and buying a smaller flat from either the resale market or from the HDB.
- The Silver Housing Bonus (SHB), which offers a cash bonus when you use some of your sale proceeds from right-sizing to top up your CPF Retirement Account and join CPF LIFE.
Investing can help you to grow your retirement nest egg, but it is not without risk. You may need to rebalance your portfolio to more conservative investments as you near retirement, in order to protect your savings.
If you are early in or midway through your career and have the risk appetite to do so, you can consider investing in long-term and medium to higher risk products, which offer higher returns, in order to boost your savings.
If you are at the pre-retirement stage of life though, your investment horizon is shorter. That is when you will want to guard your savings so that you will have enough for your golden years.
This means you should:
- Lower your risk profile, and avoid products which might cause you to lose your capital
- Buy products which can be easily liquidated for cash
- Consider products which generate a regular income at regular intervals
When you retire
One strategy to maintain an income flow throughout your retirement is to stagger your access to funds. “Bucket”, or allocate, your investments according to the short-, medium- and long-term.
You could adopt different investment goals for each period. For example:
- For your short-term “Bucket 1”, you can consider conservative or more liquid products to cover your immediate living expenses.
- Subsequent buckets could aim for higher growth to hedge against possible inflation risks.
This approach may not suit everyone, so do take time to carefully consider whether it suits you in terms of your personal circumstances, risk appetite and also how well you understand the various financial products. You should assess whether a product is conservative, liquid or allows for some growth, and is suitable for the objectives you have in mind.
See also: Get started with investing
You may have retired, but if you're still healthy and able, why not stay engaged in the workforce, if the opportunity is there? You could consider part-time or temporary positions, or turn a hobby into gainful employment.