Hi ,

Good day!

Lately, I’ve been having some insightful conversations about retirement readiness, and a common question that comes up is: How do we quickly assess if we're on track for retirement?

I thought I'd share a few useful tips that can help you evaluate your financial preparedness from time to time.

These are quick and simple calculations that can give you a snapshot of your progress:

1. The 80% Rule

A general guideline suggests that you’ll need about 80% of your pre-retirement income once you retire. For example, if your household income is $100,000, you’ll need $80,000 in retirement income.

Subtract any expected CPF LIFE payouts (let’s say $36,000), and the difference is what you’ll need to generate from investments — in this case, $44,000 per year. To calculate how much you’ll need for retirement, multiply this amount by 25. This means you’ll need $1.1 million in retirement savings.

2. “X” Times of Salary

This method helps you gauge how well you're progressing towards your retirement goal based on your age and savings.

For instance, by age 30, you should have saved 1x your annual salary; at 40, 3x your salary; 50, 6x; 60, 8x; and by retirement age (67), about 10x your annual income.

3. The Savings Rate

Another useful approach is determining the savings rate you need to meet your retirement income goals. To replace 50% of your pre-retirement income (with CPF LIFE covering the rest), someone starting at age 20 with a 40-year work horizon should aim to save around 9% of their income annually. This method assumes a moderately aggressive portfolio of 60% stocks and 40% bonds.

For someone starting later, say with 30 years to go, the required savings rate increases to 17% per year, a clear reminder of why starting early pays off with compound interest!

If you would like a more detailed and accurate way to calculate your retirement needs, including planning for long-term medical expenses, I would be happy to help.

Feel free to reach out for a chat!

I hope these tips give you some useful food for thought as you continue planning for your financial future.

Best Regards,

Zest Chia

Executive Wealth Consultant | Associate Estate Planning Practitioner |

Licensed General Insurance Advisory

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