Step 1: Define retirement goals
When do you plan to retire?
How much do you need to retire?
i. Income replacement ratio method
Example:
John
30 years old and wants to work out his retirement income.
Current monthly income*
4,500
(based on the 2021's median gross monthly income for ages between 30 and 34 years old, excluding employer's CPF contributions)
Expected retirement age
65 years old
Expected years in retirement
19
(based on the male life expectancy at 65 i.e. 84 years - expected retirement age of 65)
| Current annual income | 54,000 | |
|---|---|---|
| Annual retirement income (50% to 70% of current annual income) | 27,000 to 37,800 | |
| Total retirement income needed (for 19 years) without adjusting for inflation | 513,000 to 718,200 | |
*Note: While current income is used in this example, an alternative is to use pre-retirement income in computing your income replacement ratio.
513,000 to 718,200
ii. Adjusted expense method
Example:
John
30 years old and wants to work out his retirement income.
Monthly pre-retirement expenses
1,800
(based on the average monthly retiree household expenses per member in 2017/2018)
Inflation rate
1.3%
(based on the average MAS Core Inflation changes in % from 2011 to 2021)
Expected retirement age
65 years old
Expected years in retirement
19
(based on the male life expectancy at 65 i.e. 84 years - expected retirement age of 65)
| Annual expenses at age 65 | 21,600 | |
|---|---|---|
| Total retirement income needed (for 19 years) | 462,100 | |
462,100
Create a retirement target
After estimating how much you need for retirement, create a target and work towards it.
