In the previous articles, we looked at “Are We Ready For Retirement?“. Hopefully, it triggers us to plan for our retirement and questions our readiness. Let’s explore what all these means in terms of numbers and address “How Much Do I Need To Retire?”.

Impact Of The Shrinking Dollar

Before we look at how much we need to retire, let us also recognize the impact of the shrinking dollar.  This means the value of $1 today will be much smaller in years to come due to inflation.  This is evident in the CPF Retirement Sum Scheme.

CPF Minimum Retirement Sum Scheme Table


We can see from the table above that the Full Retirement Sum required in 2003 was only $80,000. By 2020, the Full Retirement Sum required will be raised $181,000. In other words, $80,000 in 2003 will be worth an equivalent of $181,000 in 2020 due to inflation. Our good government has already factored all these in their planning.

So How Much Do We Need To Retire?

With that, let’s look at how much we need to save for retirement. The life expectancy for average Singaporeans according to WHO is 83.1 years. Let’s assume that we plan to stop work at age 65 and will need $4K a month to live comfortably with a nice short vacation nearby annually. Based on today’s value of $4K monthly, we will need a total retirement savings of ($4K * 12 * 18) = $864K.

Depending on how old we are now, the equivalent of $864K when we turned 65 will be much higher (assuming an average inflation rate of 3% per annum). As a result, the table below shows the time value of $864K.

Time Value Of Money Chart For Retirement - How Much Do I Need To Retire

We did not take into consideration the passive income from the CPF Life which we as Singaporeans will receive. Anything over and above what we calculated above is a bonus.

Out of curiosity I also double-checked these numbers using the CPF Retirement Calculator with similar parameters/assumptions we used above (age: 45 and retirement age: 65):

CPF Retirement Calculator - How Much Do I Need To Retire

As we can see, the numbers are very close using the above 2 methods: a 45-year-old person planning for retirement at age 65 must have $1.5M savings to last till age 83. To simplify the numbers even further, in order to save $1.5M from age 45 means a monthly savings of $6.25K to enjoy a monthly expense of $4K from age 65 to 83.

Is this number outrageously large for many of us? Is it even achievable for some of us through conventional savings plans?

Therefore, to live a retirement life doing the things we love and at the same time have enough money to enjoy our passions can be achieved only if we:

  1. Start a savings plan early in life,
  2. Ensure that our savings & investment yields outgrow inflation.