Why singapore graduates earning $40k per year will not get to retire early!

[makapaaa]

[h=1]WHY SINGAPORE GRADUATES EARNING $40K PER YEAR WILL NOT GET TO RETIRE EARLY![/h]
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15 Oct 2014 - 11:23am





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Here’s a question more than 95% of Singaporeans cannot answer.
Do you know exactly how much you will need to retire comfortably at 65?
Let’s work out the sums together shall we? Let’s assume you want to have a retirement income of $4000 a month.
Some would say…
“That’s too little! I want to travel the world and enjoy my retirement.”
“I don’t need that much, I won’t be spending so much after I retire.”
Of course, being comfortable is a very subjective concept as everyone has their own levels of comfort. For the sake of having a constructive discussion, let’s make a few general assumptions based on averages (If not we will never be able to calculate anything).
Assuming…

• You just finished school and started working at age 25
• You live the life of a regular Singaporean lifestyle that requires $4000 per month during retirement
• You have a car to maintain
• You aim to take 1 vacation a year during your retirement
• You retire at the age of 65 (Current Retirement Age)
• You live till the ripe old age of 85
  (Average Life Expectancy in Singapore is 80 for Men and 85 for Women)

That means you would need…
$4,000 x 12month = $48,000 a year
$48,000 x 20 years = $960,000 (Approx. $1 Million)
Can you imagine? You would need almost a million dollars to retire! How long would it take for you to save a million dollars? If you are earning $40,000 per annum, that is 25 full years! Don’t forget you are only working for 40 years (from 25 to 65), and you still have to pay for your house, provide for your family and spend on daily expenses. How are you ever going to save a million dollars just by working? It is honestly a rather impossible task, which is why you definitely have to find other sources of income. Now, even if you manage to scrimp and save to obtain your one million dollars worth of savings, I have another piece of bad news for you…
You mustn’t forget to add in the effects of inflation.
Remember how you always have to put up with your grandfather stories about how coffee used to cost only 10 cents and a bowl of noodles was only 30 cents? By the time you retire, you would be in those grandfather shoes!
Instead of citing boring figures like increase of 2.1% in 2007 and 6.5% in 2008, let’s compare the price of daily lifestyle items we use.

Item	In 2004	In 2014	Price Increase
Cup of Kopi	$0.60	$1.20	+100%
Chicken Rice	$2	$3.50	+75%
Long John Silver’s (2pc Chicken Meal)	$3.60	$4.50	+25%
Starting Cab Fare	$2.40	$3.20	+33.33%
University Tuition Fee per Semester * (NUS Faculty of Arts & Social Science)	$6110	$7850	+28.48%

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*In 2007
These were prices of necessities just 10 years ago (except for university tuition fees which only had information up till 2007).
So what?



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Your one million dollars is probably not going to be enough 40 years down the road!
Do you think those prices would double or triple in 40 year’s time? Of course they will… I personally think there might even be a possibility of it quadrupling! However, let’s just take a very conservative approach for this calculation. I don’t want to scare you off with my estimates. Let’s assume prices will only double once.
So if I were to adjust the calculations for inflation…
$960,000 x 2(Adjusted for Inflation) = $1,920,000 (Approx $2 Million)
You will need about two million dollars to retire in 40 years time! There’s absolutely no way you can achieve that target just by working at your day jobs. That is why I’m so convinced that everyone needs to pick up some financial literacy classes to learn how to invest. Unfortunately, these are classes that are not normally taught in your schools or universities.
Entering the stock market without the proper investment education is like driving a car without first earning your driver’s license – it is a disaster waiting to happen. Which is why over here at Wealthmastery, we aim to provide each of you with bite-sized values in each of our articles. We hope that each piece would guide you towards achieving financial freedom… one idea at a time.
[h=4]Shocked at the cost of retirement? Share it with your friends to warn them![/h][h=4]Any thoughts? Do share them with us in the comments below![/h]
[h=3]Zachary Young[/h]Zachary Young is a modern day explorer who invests actively to fund his next adventure. Previously a financial planner, he left to sell ideas instead products – because ideas are bulletproof. He currently writes at WealthMastery.sg to promote financial freedom.
Article first appeared on http://www.wealthmastery.sg

 

[Leongsam]

$2 million is chickenshit nowadays.

I've always recommended aiming for a figure of $5 million (in today's money) for a comfortable retirement.

http://www.sammyboy.com/showthread.php?151153-The-RETIREMENT-thread&p=1515996#post1515996

 

[laksaboy]

and you still have to pay for your house, provide for your family

Both are optional.

 

[chootchiew]

This article is nonsense. I live comfortably with $650 per mth surfing SBF, la kopi with friends, watch movie off the internet, free fuck with lau kway bu, saving 80% of my paycheck. I can live like a king at 65

 

[Cerebral]

Actually that's a typical scare tactic lar. I am not a maths genius, but i would point out various things for consideration.

1) your nest eggs accumulated across 40 working years earn x% returns
2) CPF for the current generation (those turning 21) should have more than the minimum sum. That is another 150k to 200k.
3) at retirement, total sum in bank will yield annual interest. If your annual interest is 20k, then you need 20k from your principal
4) assuming you don't intend to leave anything for children, when your nest eggs kaput, can sell hdb and buy a tiny studio. That will release another 200 to 300k.

These should last 20 to 25 years lar

 

[Froggy]

Get to retire early? So what is early? 65? 65 is 26 years lesser than 91, surely its too early to retire.

 

[The_Hypocrite]

Retire to a cheaper place like indonland

 

[winnipegjets]

Actually that's a typical scare tactic lar. I am not a maths genius, but i would point out various things for consideration.

1) your nest eggs accumulated across 40 working years earn x% returns
2) CPF for the current generation (those turning 21) should have more than the minimum sum. That is another 150k to 200k.
3) at retirement, total sum in bank will yield annual interest. If your annual interest is 20k, then you need 20k from your principal
4) assuming you don't intend to leave anything for children, when your nest eggs kaput, can sell hdb and buy a tiny studio. That will release another 200 to 300k.

These should last 20 to 25 years lar

You are too optimistic!

The assumption that you have a work career of 40 years is wrong. At age 40, your job is likely to be taken over by a foreigner. From $4k income, you end up with $2k at best.

 

[Cerebral]

You are too optimistic!

The assumption that you have a work career of 40 years is wrong. At age 40, your job is likely to be taken over by a foreigner. From $4k income, you end up with $2k at best.

You may be right...sigh.....

 

[frenchbriefs]

um im living on less than 1k a month right now,am i considered retired already?

 

[eatshitndie]

if they live in the same hdb flat with parents, $40k a year is just scraping the barrel. and they need to watch their expenses, such as no clubbing, few overseas vacations, no dining and boozing at upscale eateries. and occasional starbucks or coffee bean. the workday routine would be commute on mrt to work, have modest breakfast at hawker center, work, modest lunch (hopefully company provides), work, go home, share dinner with parents and siblings, watch tv, play video games, surf sbf. very cheap. and save money to start on your own by 30. and retire at 40 if you succeed. sinkies cannot rely on a "job" for retirement. it's not workable.

 

[frenchbriefs]

if they live in the same hdb flat with parents, $40k a year is just scraping the barrel. and they need to watch their expenses, such as no clubbing, few overseas vacations, no dining and boozing at upscale eateries. and occasional starbucks or coffee bean. the workday routine would be commute on mrt to work, have modest breakfast at hawker center, work, modest lunch (hopefully company provides), work, go home, share dinner with parents and siblings, watch tv, play video games, surf sbf. very cheap. and save money to start on your own by 30. and retire at 40 if you succeed. sinkies cannot rely on a "job" for retirement. it's not workable.

obviously u suck at managing ur finance.....according to cpf statistics 65% of sinkies take home less than 3.5k pay a month....many deft and dextrous sinkies have managed to manipulate their 3.5k monthly pay into supporting a 5 room hdb flat loan,a modest jap car,a wife and even one or two kids and still manage to squeeze out a meal or two at ding tai feng on the weekends.

 

[OverTheCounter]

You are too optimistic!

The assumption that you have a work career of 40 years is wrong. At age 40, your job is likely to be taken over by a foreigner. From $4k income, you end up with $2k at best.

Be your own boss.

 

[eatshitndie]

obviously u suck at managing ur finance.....according to cpf statistics 65% of sinkies take home less than 3.5k pay a month....many deft and dextrous sinkies have managed to manipulate their 3.5k monthly pay into supporting a 5 room hdb flat loan,a modest jap car,a wife and even one or two kids and still manage to squeeze out a meal or two at ding tai feng on the weekends.

yes, but the sinkie employable window is between 25 and 35. during the window of employability, they need to maximize savings and invest those savings in either a business or instruments that build equity and give a good roi. maintaining that "job" after 35 is a pipe dream, unless one works for the bureaucracy. even that is no guarantee of an iron rice bowl in today's terms. living in sg with parents is not expensive at all if parents are already retired and financially comfortable. for young sinkies, best is not to marry. must heed laksaboy's advice.

 

[winnipegjets]

Be your own boss.

Not easy in sinkapore. Be a hawker, also need at least $20k in capital and monthly overheads. In mudland, you just set up a stall anywhere you like.

 

[winnipegjets]

yes, but the sinkie employable window is between 25 and 35. during the window of employability, they need to maximize savings and invest those savings in either a business or instruments that build equity and give a good roi. maintaining that "job" after 35 is a pipe dream, unless one works for the bureaucracy. even that is no guarantee of an iron rice bowl in today's terms. living in sg with parents is not expensive at all if parents are already retired and financially comfortable. for young sinkies, best is not to marry. must heed laksaboy's advice.

I 100 percent agree with you.

 

[ginfreely]

obviously u suck at managing ur finance.....according to cpf statistics 65% of sinkies take home less than 3.5k pay a month....many deft and dextrous sinkies have managed to manipulate their 3.5k monthly pay into supporting a 5 room hdb flat loan,a modest jap car,a wife and even one or two kids and still manage to squeeze out a meal or two at ding tai feng on the weekends.

That is becos the wife works too so it is $3500 times by 2 at least. If wife is housewife, i think difficult to have 5 room, car, and maintain wife and kids etc.

 

[johnny333]

You better stay healthy otherwise a visit to the hospital could financially cost your savings.