We attended the CPF “Ready for Life” Festival. Here’s what we learnt.

What happened?

How much of your income should you invest to meet your retirement needs?

This was a question we wanted to get answers to when we attended the CPF “Ready for Life” Festival, an event aimed at helping us to re-imagine retirement and gain insights into retirement and financial planning.

Held on a Saturday at the Marina Bays Sand Expo and Convention Centre, this year’s event is the Festival’s first-ever physical gathering since its inception in 2021. 

To our delight, we discovered that several members of the Beansprout community were at the Festival too. Some even asked if we’d be speaking at the event. 

No, not this time round, but “We’re here to upgrade ourselves!”

Here, we’ll share what we learned from the “Ready for Life” Festival. 

Spoiler alert: We managed to find the answer to how much we should be investing for our retirement. 

#1 - Start your retirement planning early

As the “Ready for Life” Festival was centred around helping Singaporeans prepare for a meaningful and financially secure retirement, many of the attendees had one key question in mind – what is one practical tip to make sure I am adequately prepared for retirement?

The answer – Start your retirement planning early.

While this seems obvious enough, as we learnt during the Fireside Chat with Minister for Health, Mr. Ong Ye Kung, it appears that not many people have got around to doing it as yet.

Moderator Yvonne Chan noted a startling statistic from the 2021 MoneySense National Financial Capability Survey (NFCS): over half of Singaporean respondents haven’t even begun crafting a retirement plan. Many say they lack the time, money, or know-how to get started.

Fortunately, Mr. Ong highlighted that there are active efforts underway to bolster the financial well-being of Singaporeans, and make financial and retirement planning more accessible. 

For those that are just starting out on your financial journey, the Monetary Authority of Singapore (MAS) and MoneySense, in collaboration with CPF Board and finance industry associations, recently launched the Basic Financial Planning Guide, which provides practical guidelines for improving savings, insurance coverage, and investment strategies:

• Save at least 3 to 6 months’ of expenses for emergency needs
• Spend at most 15% of your income on insurance protection, including obtaining insurance protection of
  • 9 times annual income for death and total and permanent disability
  • 4 times annual income for critical illness
• Invest at least 10% of income for retirement and other financial goals 
• Plan your will and CPF nomination

As for retirement planning, Ms. Ong Woei Jiin, Director (Retirement Savings) of CPF Board shared that CPF has developed tools and resources to guide you in figuring out just how much you’ll need for your golden years. 

One of them is the CPF planner – retirement income, which can crunch the numbers and automatically project your estimated CPF payouts and suggest ways you can make the most of CPF to meet your retirement income goals.

Ultimately, the goal of planning ahead is so that you can give yourself the freedom and flexibility to do what you want in your time as you age.

As Mr. Alfred Chia, CEO of SingCapital Pte Ltd puts it, planning and preparing for your retirement gives you a lot more choices, so you work by choice instead of having no choice. 

#2 – Spend less than you earn

Mr. Gregory Chia, Group Director of CPF Board, also emphasized how proper financial habits paves the way for a comfortable retirement. He introduced his L.E.S.S approach: Learn, Earn, Save, and Spend. This method advocates learning to enhance your earning potential, saving a portion of your income, and spending the remainder.

But here's the thing: Even though we all know that having good financial habits is crucial, many of us still stumble. Mr. Alfred Chia pointed out that a major roadblock to retirement success is our spending habits. 

During the panel discussion, we heard the recurring advice to "spend less than you earn". He specifically drew attention to the fact that many people slide into credit card debt due to lifestyle spending, despite this well-known advice.

One solution to this issue is financial education. For parents, teaching financial literacy to kids when they’re still young can help nurture good money habits earlier in life, says Minister Ong. 

#3 – Focus on fundamentals when investing

Aside from credit card debt, Mr. David Ang from Bank of Singapore, who is also a CPF volunteer, warned that many investors make the mistake of being greedy and investing with leverage, which puts them in a dangerous position when a market crash inevitably happens. 

This is a good personal finance principle to follow in general, but is particularly pertinent in today’s high interest rate environment. 

Panellist Mr. Thomas Chua of Steady Compounding chimed in, “The biggest mistake we can make as an investor is to become a bit too aggressive, a bit too confident with our position. When it comes to investing, we always want to take care of the downside first”.

For both novice and seasoned investors, Chua also shared his framework to making investing decisions. He says that, to filter out the noise when investing, pay attention to what’s important and what’s knowable, which are business results, and asset allocation.

Instead of trying to predict macroeconomic events such as interest rate movements, our time and attention as investors is better spent looking into the fundamentals of the businesses we invest in.

#4  - Make use of CPF LIFE

The panellists also shared how CPF LIFE can be used as the foundation for retirement planning.

When you turn 55, your CPF savings will be transferred to your Retirement Account (RA) up to the Full Retirement Sum (FRS). This will provide you with monthly payouts in your retirement from age 65.

For those who turn 55 in 2023, the FRS is S$198,800. With this amount in your RA at age 55, you will receive an estimated payout of between S$1,510 and S$1,620 per month from the age of 65 based on the CPF LIFE Standard Plan. 

If you wish to receive higher payouts, you may choose to set aside more money to top up your RA, up to the prevailing Enhanced Retirement Sum (ERS). 

You will be automatically included in CPF LIFE if you are:

• A Singapore Citizen or Permanent Resident
• Born in 1958 or after; and
• Have at least $60,000 in your retirement savings when you start your monthly payouts

What would Beansprout do?

At Beansprout, we’re always on the lookout for ways to share valuable insights to help our fellow Singaporeans in their retirement planning journey. 

The “Ready for Life” Festival provided a wealth of information that served as a valuable reminder not to overlook the fundamentals of sound personal finance habits. 

We would build a strong foundation for our retirement with the following guidelines:

• Save at least 3 to 6 months’ of expenses for emergency needs
• Spend at most 15% of your income on insurance protection, including obtaining insurance protection of
  • 9 times annual income for death and total and permanent disability
  • 4 times annual income for critical illness
• Invest at least 10% of income for retirement and other financial goals 
• Plan your will and CPF nomination

If you are keen to learn more from the panel of experts, you can watch the video recordings from the “Ready for Life” Festival here.