How much savings do you need NOW to retire with basic living in Singapore?

In my previous post, I estimated that the basic no frail cost of living in Singapore as of now for an old couple = S$1348 per month. 

So, how much does a couple need to retire for 30 years from now if they just need S$1348 per month for living expenses and assuming investment return of 3% per year/annum (p.a.) on their capital and inflation of 2% per year?  Note that my assumption has 2% p.a. increase in expenses built-in year after year (and not a flat S$1348 pm). 

According to my calculation, the couple just requires a lump sum of S$420,000 to be able to retire now for 30 years! 

Question 1: Is average investment return of 3% p.a. realistic?
A: Yes, 3% is already considered low. Don't forget Singapore Government gives 4% for your CPF Special Account and Medisave.

Question 2: Is average inflation 2% p.a. realistic?
A: This will depends on global economic situation and more importantly government's economic and monetary policy, especially when Singapore uses exchange as a tool to control inflation.  Also, Singapore government has great control over medical costs via their economy of scale in operating all gov hospitals and polyclinics.  

Estimated cost of basic living in Singapore for a retiree

Below is my estimated cost of basic living per month for a retired couple (no frails) as of now:
* Food (cook at home, with occasional eat out) = $400.00
* Transport (bus and trains only, should be much less for retirees) = $150.00
* Utilities (electricity, water, gas, sewage) = $100.00
Communications (mobile phones subscriptions & internet) = $98.00
* Clothings and footwear = $200.00
* Medical insurance & expenses (assume the rest covered by insurance) = $400.00
* Some frails and luxury = $0.00
* Rental costs = $0.00       
Total per month per couple = $1,348.00
Or: $674 per person.
Note: Rental costs is $0 because I assume the couple has a fully paid property.                            

So, it seems that the basic cost of living in Singapore for an old retired couple is indeed very close to the CPF Life payout of just 1 single individual (as of now)!

Is $1M enough to retire for 20 years? - Review-2

After I posted the first post on whether "Is $1M enough for a person to retire for 20 years?", I received comments that my assumptions and figures are not correct because of the following reasons:

1) How many people in Singapore can accumulate $1M a year by the age of 62 years old?

2) My figure does not include property costs (be it rental or money sunk into property and should be deducted from the $1M I mentioned).

3) My costs of living figures are just too low!  They ask me to inflate the figures and see what will happen in the new scenarios!

Ok ok, valid points raised!  Let me try to recalculate the figures again, using new assumptions.  This time, I would use household incomes and household expenses for a couple (2 persons, husband and wife) and then divide by 2 as it is easier to get the hard figures for these and also to include property because it is usually owned by a couple (especially for HDB flats in Singapore)... 

Let's first review comments (1)-(3):  
(1A) Based on Singapore's household income statistics for the year of 2013, about 80% of households earn more than $3,000 per month in Singapore (inclusive of CPF contributions)(excluding retirees households which consist of 6.1%). 

If these couple saves half of their income and spend the other half, from age 25 years old to 62 years old (for 37 years), they would have $666,000 in total - This does not include returns on capital nor their property. 
Now, assuming that the couple spent $250,000 on a 4-room HDB flat, payable by instalments from 25 years old to 37 years old at $877 per month for a mortgage rate of 2.6%, and if remaining cash earns return of 4% (CPF Special account rate) from 25 years old to 37 years old, he would have fully paid for a property and still have cash/liquid assets of $632,000 at the end of 62 years old. 

Again, the above indicates that Singapore's government policy of including property as an asset is a very important policy measure!  It helps the low income a lot!  Furthermore, with the property fully paid off, the couple can engage in "Lease Buyback" to get more cash to spend and can also earn extra cash by renting out 1 or 2 of their 3 bedrooms of their 4-room HDB flats! 
However, in order to be able to rent out these retirees' rooms, the government need to allow more foreigners to come to work in Singapore (otherwise there will be nobody to rent these retirees' rooms for them to earn extra income)! 

The above also indicates that helping the low income group to invest to get higher return is another very important aspect the Singapore government needs to look into! 

(2A) See "(1A)" above.

(3A) Ok, I will inflate the figure a little, but still has to be realistic for ordinary folks, not including luxuries...

Let's calculate the Cost of living per month for a person (average figure):
(Note: Most of below figure are based on reasonable figures from Singapore's cost of living calculator at this URL...)

* Food (cook at home, with occasional eat out)                            $400.00
[cook at home : $200 - $400 monthly]
* Transport (bus and trains only, should be much less for retiree)        $180.00[taking public transport (buses and trains) : $170 - $190 monthly]
* Utilities (electricity, water, gas, sewage)                            $90.00
[This is based on national average of $180 per household per month for 4-room flat with gas usage and hence $90 per person per month]
* Communications (mobile phones subscriptions & internet) =             $62.90
[Internet access : $24.90 (25mbps) - $39.90 (100mbps) monthly (assumes home broadband services from StarHub)]
[Mobile phone plan : $38 - $205 monthly (assumes mobile services from StarHub)]
* Clothings and footwear =                                                 $100.00
[What kinds of brands do you spend on for new clothing and footwear? Budget/house brands  : $80 - $100 monthly]
* Medical insurance & expenses (assume the rest covered by insurance) = $200.00

* Some frails and luxury =                                                 $200.00

* Rental costs =                                                         $0.00

Total per month per person =                                             $1,232.90
Note: Rental costs is $0 because the person has a fully paid property.

Let's assume inflation of cost of living is 2% per year.
Let's assume this single person put all his cash of S$316,000 (half of $632,000 for a couple) into annuity earning 2% per year at the age of 62 years old.
Based on my calculations, this person would have enough to last till 83 years old, and this is without touching his property or engaging in "Lease Buyback" for his property or even rent out a room or 2 for his 4-room HDB flat to get more cash to spend! 

So, in conclusion: 80% of the people in Singapore has sufficient money to retire if they have been prudent with their expenses and able to manage their savings to earn decent return!! 

Cost of Living Calculator

Recently, I came across this Singapore's cost of living calculator at this URL... 

I found it very interesting because it will help me in my calculation of whether $1M is enough for a person to retire for 20 years? 

Some useful information on Singapore's cost of living from this website is as follow:

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* What will be your regular mode of transport?

I will be taking public transport (buses and trains)
$170 - $190 monthly

I will be taking taxis
$700 monthly (assume two 20-minute taxi rides per day at peak period over 20 days)

I will buy and drive a car
$1,000 - $2,000 monthly (low-range or middle-range vehicle)

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Where do you plan to have your meals daily?

I will eat out at budget joints
$10- $15 daily

I will eat out at mid-priced restaurants
$35 - $50 daily

I will eat out at fine dining establishments
$80 - $150 daily

I will cook at home
$200 - $400 monthly

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What kinds of brands do you spend on for new clothing and footwear?

Budget/house brands
$80 - $100 monthly

Mid range brands
$120 - $200 monthly

Luxury brands
$240 - $470 monthly

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What communications and home entertainment services will you require? (select all that apply)

Home phone rental
$29.43 every quarter

Internet access
$24.90 (25mbps) - $39.90 (100mbps) monthly (assumes home broadband services from StarHub)

Mobile phone plan
$38 - $205 monthly (assumes mobile services from StarHub)

Cable TV
$33.17 - $50.29 (assumes cable TV from StarHub)

$53.50 one-time activation charge applies for a new home phone line

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Which of the following recreational activities do you enjoy? (select all that apply)

Movies
$12 per visit

Clubbing
$100 per visit

Art exhibitions/Museums
$5 - $30 per entry

Plays and musicals
$25 - $300 per ticket

Theme parks
$74 per entry (Assuming one-day pass for adults aged 13-64 to Universal Studios Singapore)

Club memberships
Varies for monthly subscription fee, entrance fee and deposit

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Education
If you have children, you may wish to add education fees to your budget.

Here's the estimated monthly cost per child

Kindergarten $400 - $1,500    Public School $246 - $772
International School $1,000 - $3,000    University $1,900 - $3,840

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Cost of living

According to the following website by Singapore's campus of James Cook University (JCU),
The Cost of Living in Singapore is estimated to be $10,200 - $23,400 per year, broken down as follow:

Accommodation    $400 - $1,000
Meals    $200 - $400
Travel Expenses on Public Transport    $100 - $150
Personal Expenses    $150 - $400
TOTAL PER MONTH    $850 - $1,950
TOTAL PER YEAR    $10,200 - $23,400

Please note that the living costs above are an estimate and serve as a guide only. Living costs will depend on type of accommodation chosen, lifestyle needs etc and vary from person to person.

Is $1M enough for a person to retire for 20 years?

Is $1M enough for a person to retire for 20 years (assuming the person retire at 62 years old and live till 82 years old)? 

Recently, there are many people who are starting to complain that cost of living in Singapore has gone too high, and $1M is not even enough for a person to retire!  Is this a fact or a myth (just belief and misconception)? 

To be realistic, we have to take the cost of living of basic necessities, no frails - because cost of living for frails and luxuries are not necessities and are just WANTs, not NEEDs... 

Ok, why not we put a hard figure to it once and for all to prove or disprove it?  Here we go!...

Costs of living per month per person (average figure):

- Food = $330 (cook at home, with occasional eat out)
- Transport = $150 (bus and trains only, should be much less for retirees)
- Utilities (electricity, water, gas, sewage) = $120
- Communications (mobile phones subscriptions & internet) = $80
- Clothings and footwear = $100
- Medical insurance & expenses = $200 (assume the rest covered by insurance)

Total per month = $980 per month per person. 

Let's assume inflation of cost of living is 2% per year.
Let's assume this person put his $1M into annuity earning 2% per year at the age of 62 years old.

At the end of 82 years old, he would still have about S$1,153,000 !!
So, $1M is more than enough for a person to retire!!