Retirement Savings + CPF Life (+ Inflation + Bequest) Calculator Online

In my previous post, I had made demonstrated how to use my online calculator, which you can find it here:
    http://make-money-secrets.blogspot.sg/p/retirement-savings-online-calculator.html
to calculate how much you need to have saved by the time you retire.

I had illustrated for this example using my online calculator, where you need to key in the following:

Amount you would like to withdraw each month in retirement ($):  6000
Annual Interest Rate you expect to earn on savings (in dec., eg 0.03 for 3%):  0.01
Number of years you would like to make monthly withdrawals:  35 

Then, you can click on “Calculate” and the online calculator will give you the output as:
This is how much you need to have saved by the time you retire ($):   $2,125,506.18

I had concluded that: “So in conclusion, if a couple is able to accumulate $2.12 Millions dollars, they would be able to retire at 50 years old with pretty comfortable life-style!
Note that I have not taken CPF Life payout (starting at 65 years old) into account, so in practise a couple need less than $2.12M to retire comfortably if you take into consideration that they will be receiving $1300 pm for man and $1200 pm for women starting from the age of 65 years old!”

Ok, so the issue here is now regarding CPF Life payout.
I have friends enquiring about whether I can also factor CPF Life payout into account in my retirement savings calculator, since CPF Life (which is a form of life-time annuity scheme) is now part and parcel of every retirees in Singapore!

I am glad to say that I had managed to include not only CPF Life payout but also effect of inflation and also considering bequest (i.e. the amount you want to leave to your heirs) into my Retirement Savings online calculator!  You can access my Retirement Savings + CPF Life (+ Inflation + Bequest) Online Calculator here:
    https://make-money-secrets.blogspot.sg/p/retirement-savingscpf-life-calculator.html

Let’s just try my Retirement Savings + CPF Life (+ Inflation + Bequest) Online Calculator by keying in the following parameters:


Amount you would like to withdraw each month in retirement ($): 6,000.00
Annual Interest Rate you expect to earn on your savings (eg key in "3" for 3%): 1.0
Age you would like to retire (Years Old): 50
Amount you want to leave to your heirs (bequest) ($): 0.00
Annual living Inflation Rate you expect (eg key in "2" for 2%): 1.0
CPF Life Payout Amount per mth ($): 2,500.00
CPF Life Payout starting Age (Years Old): 65
Age you expect to live until (Years Old): 85

Then, you can click on “Calculate” and the online calculator will give you the output as:

This is how much you need to have saved by the time you retire (before inflation) ($): Calc.  
$1,525,506.18
This is how much you need to have saved by the time you retire (inflation-adjusted) ($): Calc.  
$2,064,000.00

So, we can see that in order for a couple to retire at 50 years old and to have $6000 per month for retirement (for both’s expenses), you need to save $1.525M (before inflation) and if you factor in inflation (assuming just 1%), you would need to save $1.920M!

Note that I had made following assumptions:
• Assume that both the couple retiring at 50 years old will live only till 85 years old.
• Assume that CPF Life payout for the couple is $2500 per month (being $1300 pm for men and $1200 pm for women if both have the Full Retirement Sum of $161,000 at 55 years old) and that these figures (hopefully) will not be lowered in future.
• Assume that inflation is only 1% (which is on the low side, a more realistic figure should be 2% as used in CPF Escalating Payout plan).
• Assume that the interest/return you would get for your pot of savings to have an average of 1% (which is also on the low side, and I think a more realistic figure can be 2% and above if you have >$1M to invest).

You can play around and change the parameters to those values that suit your situation and you can then plan your own retirement!

With my Retirement Savings + CPF Life (+ Inflation + Bequest) Online Calculator, now you can plan your own finances independently without needing the help of financial planners! (Beware of financial planners! – because some are all out to sell their products rather than to help you plan your finances and advise you appropriately for your retirement!)

Again, you can access all the online calculators that I have developed from this web link URL:
    https://make-money-secrets.blogspot.sg/p/my-online-calculators.html

Retirement Savings Calculator Online - How much do you need to save before you can retire?

Ever thought of retiring early? (Yes, early, like at 50 years old, and not at 65 years old!)

Ever wonder how much you need to have before you can retire?

Have you started planning and figuring out what is the total amount of savings you will need before you can retire?

As a general guide, in order to calculate how much total amount of savings you will need before you can retire, you need to have an idea of how much you need to spend per month during retirement. Also, you would need to estimate how many years you will spend in retirement before you pass away and how much your accumulated capital can still grow while they are being draw-down.

In my previous post, as can be seen here,

http://make-money-secrets.blogspot.sg/2014/11/estimated-cost-of-basic-living-in.html

I estimated that a very basic no frail cost of living in Singapore for a couple would be about $1,348.00 per month, or $674 per person per month (I assume rental costs to be $0 because I assume the couple has a fully paid property).  

I have made available a “Retirement Savings Online Calculator“ here:

http://make-money-secrets.blogspot.sg/p/retirement-savings-online-calculator.html

where you can calculate how much total amount of savings you will need before you can afford to retire.

 Let’s start again with the couple who can survive with very basic no frail cost of living in Singapore for just $1,348.00 per month, so how much would the couple need if they wish to retire at 50 years old?

Ok, using my online calculator, you need to key in the following:

Amount you would like to withdraw each month in retirement ($):  1348

Annual Interest Rate you expect to earn on savings (in dec., eg 0.03 for 3%):  0.01

Number of years you would like to make monthly withdrawals:    35 

 

Then, you can click on “Calculate” and the online calculator will give you the output as:

This is how much you need to have saved by the time you retire ($):   $477,530.39 

So in conclusion, the couple would need about $477 Thousand dollars to be able to retire at 50 years old for a basic no frail cost of living!

Note that in the above, for erring on the safe side, I assume:

(a)    The interest rate you would expect to earn on your savings to be just 1% (something like just fixed deposit interest rate).

(b)    The age by which the last of the couple can live till passing away to be 85 years old (since average age of man is only 80 while average age of woman is 85), so the “Number of years you would like to make monthly withdrawals” = 85 – 50 = 35.

Next, let’s calculate for another scenario, this is the one which most Singaporeans would like to have, a comfortable retirement (not luxury) life-style which most Singaporeans would deem to be pretty good enough for them!

According to Singapore’s household income statistics 2014 (from http://www.singstat.gov.sg/), your household would be top 20% earners if your household income is about $14500 and above.

Also, according to Singapore’s household expenditure statistics 2013, household with that kind of income spends on average about $7000 per month. However, this $7000 pm figure includes spendings on kids and/or parents, so I would say a figure of $6000 per month for the couple’s retirement would allow them to maintain their comfortable life-style.

Ok, using my online calculator again, you need to key in the following:

Amount you would like to withdraw each month in retirement ($):  6000

Annual Interest Rate you expect to earn on savings (in dec., eg 0.03 for 3%):  0.01

Number of years you would like to make monthly withdrawals:  35 

 

Then, you can click on “Calculate” and the online calculator will give you the output as:

This is how much you need to have saved by the time you retire ($):   $2,125,506.18

So in conclusion, if a couple is able to accumulate $2.12 Millions dollars, they would be able to retire at 50 years old with pretty comfortable life-style!

Note that I have not taken CPF Life payout (starting at 65 years old) into account, so in practise a couple need less than $2.12M to retire comfortably if you take into consideration that they will be receiving $1300 pm for man and $1200 pm for women starting from the age of 65 years old!

Also, for somebody who has $2.12M, they can afford to invest diversely and probably can get much better return than 1% from fixed deposit!

I have also made available some other online calculators which you may find them useful, and you can access them at this webpage:

http://make-money-secrets.blogspot.sg/p/my-online-calculators.html

How much does a person really need to have a comfortable retirement in Singapore?

“How much does a person really need to have a comfortable retirement in Singapore?” – I believe this is something that most Singaporeans would like to know and to have, a comfortable retirement (not luxury) life-style which most Singaporeans would deem to be pretty good enough for them!

According to Singapore’s household income statistics 2014 (from http://www.singstat.gov.sg/), your household would be in top 20% household earnings if your household income is about $14500 and above.

Also, according to Singapore’s household expenditure statistics 2013, household with that kind of income spends on average about $7000 per month. However, this $7000 pm figure includes spendings on kids and/or parents, so I would say a figure of $6000 per month for the couple’s retirement would allow them to maintain their comfortable life-style.  However, this is not to say that you can simply imply $3000 pm to be sufficient for 1 single individual for a comfortable life-style because the pooling of resources for 2 actually makes many things cheaper, hence to achieve a comfortable life-style for a single individual should be higher than $3000 pm (in contrast to a couple just needing $6000 pm).  Note that the $6000 pm should exclude costs of lodging (which should be $0 if the couple own their property they are living in and have fully paid up for the property with no property loan debt).

Moderation and thrift count in retirement

Another interesting article on typical Singapore's retirees expenditures can be read at this URL...
   
To summarize, some interesting facts are:

* Retirees spend a few thousand dollars at the most each month; more typically, the amount is a moderate $1,000. Perhaps, needs are simpler when one is older. The statistics debunk a fashionable assertion that "even $1 million is not enough to retire on" or that you must target to have retirement income which is 70 per cent of your last drawn income.

* Even for the wealthiest who spend $2,000 a month, they do not need millions in the money pot - just a $600,000 blue-chip and bond portfolio giving a 4 per cent yield, for example.

* Whether future retirees can spend as little as the current batch is a question mark.

* In absolute terms, the typical retired person spends little, but is buffeted by considerable inflation.

* According to the report, individuals in typical retiree households spending $720 a month experienced a 5.3 per cent inflation rate in the last 10 years.

* CPF Life, assuming a full 2015 Minimum Sum of $161,000, provides a monthly income of about $1,300 a month for life from age 65.  But at a 5.3 per cent inflation rate, a typical retiree's spending will balloon beyond $1,300 a month after just 12 years.

* The inflation rate of 5.3 per cent is also more than what most conventional insurance instruments can match, or even what the CPF itself provides.

* On average, retiree households in four-room flats spend $1,500 a month, but get $1,230. Those in five-room flats spend $2,000 a month, but get $1,800.  Those in three-room flats, condominiums and landed properties spend less than what they get.

* Another interesting tidbit is that retirees living in three-, four- and five-room flats are earning about $200-300 a month in investment income.

* Thus, for the current batch of Singaporean retirees, the picture does not look grim by any means. They are likely to have some resources, in the form of their flat or investments. They are thrifty and do not spend much.

* Still, a large proportion of retiree households' support comes from relatives and friends not living with them, presumably their children; the social fabric is still strong.  Contributions from relatives and friends not living in the same household amount to $300-700 a month for most retiree households.
   

Most Retirees Manage by Adjusting Lifestyle to Reduced Income

Forget about those preaches about needing to have enough retirement fund to cover pre-retirement expenses during retirement!  Latest findings, as reported in this following article on "Most Retirees Manage by Adjusting Lifestyle to Reduced Income" at this URL...

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Despite Curve Balls, Most Retirees Manage
The Key: Adjusting Lifestyle to Reduced Income

By TOM LAURICELLA CONNECT
Sept. 6, 2014 8:18 p.m. ET

Rob Shepperson
And now for a little good news.

Most of the stories we read about retirement planning tend to be dominated by "unpleasant realities" and savings goals that can seem like Mount Everest. And then … the brakes go out on the car again.

Indeed, many people head into retirement with little money and little planning. And life has a way of throwing financial or health-related curve balls even when we have planned ahead or think everything is under control.

But the reality is that most people simply find a way to adjust.

Roger Burdette, a married 67-year-old living in Great Falls, Va., is a retiree who didn't let planning go by the wayside. In his mid-50s, he started tracking how much he would need to live the lifestyle he wanted once he could walk away from the office.

But his investments took a beating during the financial crisis and have been slow to recover. When he retired a year ago from a job as a computer-systems engineer, he realized that if he wants to make his savings last, he needs to live on a tighter budget than he had hoped.

"You think back to when you go to college and you don't have a lot of money, so you've got to find ways to make it go farther," he says. "It's the same approach for retirement."

Mr. Burdette's views found their way into a recent sampling of retirees published by T. Rowe Price Group, TROW -0.28%  the mutual-fund company. The survey focused on individuals who had stopped working in the past one to five years and who had a 401(k) plan or an individual retirement account that had been rolled over from a 401(k).

Fewer than one in five said their postretirement income matched their pre-retirement paycheck. Instead, on average, their retirement income was just 66% of what they had been making. "There's a focus on whether you should target 80% or 85% of your pre-retirement income," says Anne Coveney, a vice president at T. Rowe Price. But she says it was a "reality check" to see 52% of respondents say they were getting only 41% to 80% of pre-retirement income.

Along the way, 40% said they have discovered that they can adjust their lifestyle to match their income by a "great deal," and 37% agreed that the same term applied to the statement: "I don't need to spend as much as I did before I retired to be satisfied."

David Hartness, chief client officer at Iron Gate Partners in Wilmington, N.C., says that when clients have to make adjustments, he urges them to consider a big-picture question: "Take a step back and ask, 'What are the most important things in this new season of life?'

Usually, the biggest drain on retirement budgets is housing. Mr. Hartness suggests to some clients that they look beyond just selling a big house and buying a smaller one, and consider renting.

"There are a lot of places where you can rent and have full amenities like a country club," he says, without having to be responsible for the upkeep of a house.

He also has found that many clients can drop the hefty bills that come with golf-club memberships and still get in plenty of tee time. He tells of one client who dropped her membership and has ended up playing more golf since, as friends have invited her to join them.

In the background, current retirees don't have to be as reliant on their savings as will likely be the case in years to come. Vanguard Group released a similar survey of retirees with investment accounts this year and found that 20% of household incomes in its sample were coming from pensions and 28% from Social Security.

"Everyone is talking about the new retirement," where retirees have to fund their lifestyles out of savings, "but it's not here yet," says Steve Utkus, director of Vanguard's Center for Retirement Research.

Mr. Burdette uses Social Security income as the base for his budgeting and has tried to adjust his fixed expenses down to match what he gets from the government.

Downsizing to a small house is central to his revised plan. "We're going to have to live a little more modestly," Mr. Burdette says.

He's also looking at holding on to his current car longer than might have otherwise been the case.

But all told, Mr. Burdette counts himself as satisfied in retirement, having turned a hobby of numismatic research into an area to which he can devote more time.

In the T. Rowe Price survey, some 90% of respondents said they are "very satisfied" or "somewhat satisfied" with their retirement. Of course, many people do struggle, especially when retirement is forced on them earlier than expected for health reasons. And the T. Rowe Price survey found that unmarried women among respondents tended to have a harder time making ends meet.

But for the most part, says Ms. Coveney, "retirees are making it work and being flexible with their spending in the early years of their retirement."
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