Saving up for retirement: How much time do I have to save up?
PHOTO: Pixabay
PUBLISHED ONMay 05, 2020 5:05 AMByMing Feng
Put aside all the “propaganda” you see online today on investing, trading and fanciful financial products. The first step towards financial freedom should always start with savings.
- If you are someone with a great level discipline to save, great! Kick off your savings routine today!
- If you are someone who lacks the discipline to save, set up your own system to set aside a portion of your money before it reaches the “leaky bucket”.
How much savings should you have accumulated?
To answer this question, allow us to visualise your life in front of you.
Instead of coming out with an absolute amount of savings, we base the savings amount on your individual yearly expense. This amount varies for each individual depending on the lifestyle which one chooses to lead.
To give a good projection of how much one needs to save, we took into account these factors:
- Singaporean male to go through 2 years of National Service (NS)
- The lower savings rate for an early stage in life (lower pay, higher financial commitments such as student loan, marriage and housing loan)
- Higher savings rate closer to retirement
- Retirement is at age 62
- The life expectancy of Singaporean male is 80 and female at 85 years old
| The age that one starts working | Years to save up for retirement (retire at 62) |
Years to enjoy retirement | |
|---|---|---|---|
| Male Diploma Graduate (after NS) |
22 | 40 | 18 |
| Male Fresh Graduate | 26 | 36 | 18 |
| Female Diploma Graduate | 20 | 42 | 23 |
| Female Fresh Graduate | 24 | 38 | 23 |
The savings rate of a male fresh graduate
Using a male fresh graduate as an example. A male fresh graduate will have the least time to save (36 years to save up 18 years worth of expense).
From there, we work backwards to give a projection of how much you should have saved by a certain age.
To get an exact number, simply use:
(How much you need to survive per year) X (Number of years)
| Age (Male Fresh Graduate) |
Savings Rate | Annual Expenses Saved |
|---|---|---|
| 26-30 | Low Salary Clearing Loans (Very Low) |
At least 6 Months |
| 31-35 | Marriage Housing Loan (Low) |
At least 1 Year |
| 36-40 | Kids Education Housing Loan (Low) |
3-6 Years |
| 41-45 | Kids Education (Low) |
4-8 Years |
| 46-50 | Realised you need to SAVE for retirement! (High) |
6-10 Years |
| 51-55 | Debt free (High) |
7-12 Years |
| 56-62 | Retirement Planning (High) |
At least 18 Years |
| Target at age 62: | At least 18 | |
The savings rate of a female fresh graduate
Taking life expectancy into account, females tend to live longer than their male counterparts.
With this, female face a steeper saving slope due to the need to save an additional 5 more years worth of expense.
| Age (Female Fresh Graduate) |
Savings Rate | Annual Expenses Saved |
|---|---|---|
| 22-25 | Low Salary Student Loans (Very Low) |
At least 6 Months |
| 26-30 | Low Salary Student Loans (Very Low) |
At least 2 Years |
| 31-35 | Marriage Housing Loan (Low) |
At least 6 Years |
| 36-40 | Kids Education Housing Loan (Low) |
8-11 Years |
| 41-45 | Kids Education (Low) |
9-13 Years |
| 46-50 | Realised you need to SAVE for retirement! (High) |
11-15 Years |
| 51-55 | Debt free (High) |
12-17 Years |
| 56-62 | Retirement Planning (High) |
At least 23 Years |
| Target at age 62: | At least 23 | |
Further reading: Are you saving more than an average singaporean?
Do take note if you fall within the below demographic:
- Monthly income of $4,056 (inclusive of employer CPF contributions) and above
- 25 years old and above
97per cent of middle to high-income earners above the age of 25 years old are saving between 30per cent to up to 49per cent of their salary. How much of your salary are you saving?
Seedly’s tips: How to determine my best savings rate?
Assuming your determination to save up brought you down so “far” this article, here’s a simple exercise to determine your saving rates.
Taking into account that different individual has different
- Salary
- Financial commitments (housing loans, student loans)
A good exercise to determine your best saving rate is
This article was first published in Seedly. All content is displayed for general information purposes only and does not constitute professional financial advice.