Retire now?

How much do you need for retirement? The answer varies from person to person. It depends on 1) the inflation rate 

2) the standard of living you want upon retirement

3) your health conditions

4)) how old you are now and how much time you have left on earth

Inflation...

I am sure we all realize that the purchasing power of our $ is dropping across time. So if we need $1 today to retire, we may need $2 upon real retirement. 

Standard of living..

Broadly speaking, you will need almost the same amount of $ you spend now, adjusted for inflation, to maintain your lifestyle. Some experts claim that you can cut your expenses by half. But from my estimate, there is often very little room for reduction. A 20 - 30% reduction is typically the best you can do without experiencing a material cut in standard of living.

Some people underestimate the amount needed because they just calculate the amount based off their daily expenses (eg. food/drink/transport). What they forget is that there are many one-off expenses that need to be taken into account of. For instance, your TV will spoil and you will need to replace that. Your nephew just got married and you need to give ang pow. What about the holidays you want to take before you are six feet under?

Healthcare...

What some people also don't factor in is the cost of healthcare. These are one-off and impossible to estimate precisely. But it being difficult does not mean it is not real. IT IS REAL. 

To cover the cost of healthcare, you need either insurance or a large pot of money to fund the potential liabiilty. And that should go into your estimate of how much you need. You can check the cost of healthcare here for different conditions (www.moh.gov). Broadly speaking, you may need a few hundred thousands, in current dollars. So again, a lot more upon retirement.

A more deadly scenario is one where you need to be housed in a nursing home. A check with one near my house indicates that it cost approximately S$3k/mth. 5yrs ago, it was only $2k+. So add that into your estimate.

Age...

Of course, it will depend on how old you are now and how long more you have to go. The good news is that if you are older, you will need less $. You can do the math here on how much you need using the excel spreadsheet attached below.

By my estimate, a 25 year old will need over S$4mn to retire comfortably at age 60. This assumes he leads a simple lifestyle that cost $2k+/mth to cover daily expenses & other one-off expenses. And assuming he is generally healthy and has a low level of healthcare expenses, he will probably has a running cost of $3k+/mth.

A 60 year old today, will probably need S$1+mn to last him well to his grave.

Conclusion

So either way, you need to be a multi-millionaire to retire. If you are a highly paid professional and if you are prudent with your expenses, you may be able to save your way there. But most likely than not, you will need to invest your money.

The alternative is really to not retire at all.

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