Retirement Woes
Hi all, how's it going?
I came across this from the Straits Times Forum:
------
ST Forum
I came across this from the Straits Times Forum:
------
ST Forum
Jan 30, 2010
Housing prices: Worry over impact
on retirement savings
WITH prices of new three- and four-room flats reaching between $250,000
and $330,000 in some areas, I wonder how much a buyer will have in his
CPF retirement account after paying for the flat in 20 to 30 years.
I took a loan of $80,000 some 20 years back and the interest came up to $70,000
when I had finished paying for my flat.
The Government should look into this or Singapore may end up with many
retirees with little in their CPF account, assuming an average household income
of $3,000 to $4,000. Since HDB flat buyers may use 30 per cent of household
income, they may be able to service their loans, but little is left for retirement.
Besides, along the way, husband or wife may lose their jobs.
Buyers are allowed to take up to a 30-year loan. By then, their earning power
may also diminish when they reach 60, assuming they bought their flat in the
early 30s.
Since there are many in this income bracket, I hope some financial experts will
be able give their take on this important issue or Singapore may end up with
many retirees with little to live on. Many buyers are not aware of the final price
of their flat, including the interest over 30 years.
Kang Choon Tian
------
What this reader pointed out made perfect sense, and has been
what I've been sharing with my clients all the time.
Whenever I ask people how they are saving for their retirement,
the answer will be "Oh, I've got CPF".
Then when I ask them how they are saving to buy their dream
homes, the same answer "I'm using my CPF" springs out.
Do you see a problem here?
Last week, during one of my client appointments, I worked out the
amount of CPF funds (Ordinary Account only) that one typically
accumulates over his/her working life. And guess what? It is not
enough for both retirement and housing!
Which means one thing - we must save cash!
Assuming someone who's 30 years old starts accumulating for
retirement. He'll work until 65 years old and leave this world at 85.
(Note, these are just examples for illustration purposes only.) And
let's assume he/she only needs $1,000 per month to cover for living expenses.
That'll work out to be:
$1,000 × 12 months × 20 years of retirement = $240,000
This means he'll need $240,000 by the age of 65.
He/she has 35 years to accumulate this amount, so...
$240,000 ÷ 35 = $6,857$6,857 ÷ 12 months = $571
He/she needs to save $571 per month, minimum!
Seems achievable? Remember one more important thing that we
have not factored in our simple calculation - INFLATION!
35 years down the road, things aren't going to be of the same price
as it is today! Which means we'll need MORE retirement funds, and
we need to save MORE in cash today.
So, consult a qualified financial consultant today to work out how
much you need to save every month, or contact me at
cjhfinance@gmail.com .
Cheers!
Jan 30, 2010
Housing prices: Worry over impact
on retirement savings
WITH prices of new three- and four-room flats reaching between $250,000
and $330,000 in some areas, I wonder how much a buyer will have in his
CPF retirement account after paying for the flat in 20 to 30 years.
and $330,000 in some areas, I wonder how much a buyer will have in his
CPF retirement account after paying for the flat in 20 to 30 years.
I took a loan of $80,000 some 20 years back and the interest came up to $70,000
when I had finished paying for my flat.
when I had finished paying for my flat.
The Government should look into this or Singapore may end up with many
retirees with little in their CPF account, assuming an average household income
of $3,000 to $4,000. Since HDB flat buyers may use 30 per cent of household
income, they may be able to service their loans, but little is left for retirement.
Besides, along the way, husband or wife may lose their jobs.
retirees with little in their CPF account, assuming an average household income
of $3,000 to $4,000. Since HDB flat buyers may use 30 per cent of household
income, they may be able to service their loans, but little is left for retirement.
Besides, along the way, husband or wife may lose their jobs.
Buyers are allowed to take up to a 30-year loan. By then, their earning power
may also diminish when they reach 60, assuming they bought their flat in the
early 30s.
may also diminish when they reach 60, assuming they bought their flat in the
early 30s.
Since there are many in this income bracket, I hope some financial experts will
be able give their take on this important issue or Singapore may end up with
many retirees with little to live on. Many buyers are not aware of the final price
of their flat, including the interest over 30 years.
be able give their take on this important issue or Singapore may end up with
many retirees with little to live on. Many buyers are not aware of the final price
of their flat, including the interest over 30 years.
Kang Choon Tian
------
What this reader pointed out made perfect sense, and has been
what I've been sharing with my clients all the time.
what I've been sharing with my clients all the time.
Whenever I ask people how they are saving for their retirement,
the answer will be "Oh, I've got CPF".
the answer will be "Oh, I've got CPF".
Then when I ask them how they are saving to buy their dream
homes, the same answer "I'm using my CPF" springs out.
homes, the same answer "I'm using my CPF" springs out.
Do you see a problem here?
Last week, during one of my client appointments, I worked out the
amount of CPF funds (Ordinary Account only) that one typically
accumulates over his/her working life. And guess what? It is not
enough for both retirement and housing!
amount of CPF funds (Ordinary Account only) that one typically
accumulates over his/her working life. And guess what? It is not
enough for both retirement and housing!
Which means one thing - we must save cash!
Assuming someone who's 30 years old starts accumulating for
retirement. He'll work until 65 years old and leave this world at 85.
(Note, these are just examples for illustration purposes only.) And
let's assume he/she only needs $1,000 per month to cover for living expenses.
retirement. He'll work until 65 years old and leave this world at 85.
(Note, these are just examples for illustration purposes only.) And
let's assume he/she only needs $1,000 per month to cover for living expenses.
That'll work out to be:
$1,000 × 12 months × 20 years of retirement = $240,000
This means he'll need $240,000 by the age of 65.
He/she has 35 years to accumulate this amount, so...
$240,000 ÷ 35 = $6,857
$6,857 ÷ 12 months = $571
He/she needs to save $571 per month, minimum!
Seems achievable? Remember one more important thing that we
have not factored in our simple calculation - INFLATION!
have not factored in our simple calculation - INFLATION!
35 years down the road, things aren't going to be of the same price
as it is today! Which means we'll need MORE retirement funds, and
we need to save MORE in cash today.
as it is today! Which means we'll need MORE retirement funds, and
we need to save MORE in cash today.
So, consult a qualified financial consultant today to work out how
much you need to save every month, or contact me at
cjhfinance@gmail.com .
much you need to save every month, or contact me at
cjhfinance@gmail.com .
Cheers!
yups factor in tvm too
ReplyDeleteYou're right. Folks, TVM = Time Value of Money. It is the simple principle that $1 today may not be worth $1 in the future. Therefore money loses value over time.
ReplyDelete