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How Much Is Enough For Retirement?

by Lawrence Lee on March 6, 2009

This question always flashes in the mind of people who are ready to save for retirement. Unless you are financially savvy and could punch some numbers on the calculator to get your retirement figures, it is really tough for the man on the street to know what is enough for them?

To know how much is enough for retirement all you need is to follow these steps:

  1. Find out what is your nett annual income after deduction of any provident funds contribution. In Singapore, the amount is 20%. E.g $50,000 x 80% = $40,000
  2. Establish your retirement age. Is it 55 or 62 years old?
  3. Minus your retirement age with your current age
  4. The figure you get is the number if working years you have to work towards your retirement. E.g. 62-30 = 32
  5. Assuming no increment of pay for 32 years, use your annual pay and multiply by 66% (assume two third of your last drawn pay is sufficent to satisfy your lifestyle during retirement) E.g. $40,000 x 66% = $26,400.
  6. Assume you live till 80 years old, you will have to spend the money annually for  18 years. (80-62)
  7. Multiply 18 years by $26,400  you will get $475,200. This is the amount you need to see yourself through retirement for 18 years.

*Figures above assume no pay increment and interest

This is a simple excercise to know roughly how much you will need upon retirement. If you need to know more about how to plan your retirement with your exisiting resources, do look for a financial consultant to assist you.

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