Mailbox: Explore more ways to fund retirement needs

Mailbox: Explore more ways to fund retirement needs
A CPF member, who is collecting his package, at CPF Inquiry Counters at the CPF Building.

Singaporeans have a life expectancy of about 82 years. If they retire at age 62 and live for another 20 years on, say, S$2,000 a month, a hefty sum of almost half a million dollars would be needed - and this does not even factor in inflation and other expenses such as medical bills.

What can employees do to better prepare themselves for retirement?

CPF Life is certainly a good source of retirement income, but it should not be the only source as it aims to provide for only life's basic needs.

Employees and the authorities need to actively explore other viable sources of income to fund a sustainable retirement. These would include monetisation of existing properties by downsizing, maturity payouts from endowment or savings plans, investment returns from various financial instruments, and withdrawals from the Supplementary Retirement Scheme (SRS).

The authorities could also consider allowing employees to contribute more to their Central Provident Fund accounts, especially for those aged 50 and older since their contribution rates are significantly lower.

Of course, increasing the rates of return on CPF savings is another way to grow CPF savings, though higher returns would mean higher risk, which not many can stomach.

The money accumulated under the SRS is a good source of retirement income. The current annual contribution cap of S$12,750 can be tweaked to match rising living costs.

The scheme can be made more appealing by reducing the tax rate on the amounts withdrawn. The withdrawal period can also be extended from the current 10 years to, say, 20 years.

If health permits, let us not discard the notion of working beyond the retirement age, since this provides another source of income.

The onus is on employees to prepare for a sound and secure retirement. It is never too early to think about it.

- Lim Lih Mei (Ms)

This article was first published on July 25, 2014.
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