06 October 2014

The Good News About Retirement - How much do we need to retire on?

Just how much do we need to retire on? Some rule of thumbs I've seen suggested 60-75% of last earned income as a reasonable estimate. Others I've seen have highlighted the need to provision more for medical expenses as one ages. In general, there is also the factor of inflation that has to be considered.

In some illustrations on investment returns, the term "real returns" is used. This refers to the return after deducting off inflation. Hence, a real return of 3% against a backdrop of 2% inflation would actually a mean an absolute return of 5%.

In a post on The Good News About Retirement by Darrow Kirkpatrick from US perspective, it was actually suggested that expenses are likely to decline with age, and highlighted health care support from ObamaCare, the enduring US Social Security system, availability of part-time work and bonus cushioning from inheritance. Darrow concluded that a prudent lifestyle and a reasonable effort to save would be pleasantly rewarded by the realities of retirement. Quite a significantly different point of view.

Taking our Singapore context, our equivalent would probably be our Medishield plans and Medisave for health care, pension contribution from CPF Life based on the CPF minimum sum contribution in CPF-RA/SA, and as a bonus, any inheritance comes tax free. We seem in pretty good shape.

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