How much do you think you'll need every month to get by? $800? $1000? $1500?
The folks at The Fifth Person ran a calculation on estimated living costs 30 years from now, and I thought it'll make for a fun exercise to tweak it to something closer to us 90s kids.
Let's work out the numbers.
To keep our calculations simple, we will assume that the overall rate of inflation is 3% (in line with existing data over the past decade, and what TFP referenced).
I'm not far from hitting 30, so let's use that as a gauge.
In 35 years, we'll be 65 years old, and getting $1,300 every month from my CPF payouts - assuming the full retirement sum remains constant at $166,000.
|Source : CPF|
Essential living expenses
Food & Groceries
Current cost: $50/week, or $200 a month
Projected cost in 2052: $563
Current cost: $100 per month (in our 3-room flat)
Projected cost in 2052: $281
Current cost: $120 a month (based on my recent ez-link top-up statements), but let's account for the likelihood that I probably won't have to travel as much once I cross my 60s, and that I'll also most likely be purchasing the $40 off-peak pass then
Projected cost in 2052: $113
|Source: Transit Link|
Mobile phone plan
Current cost: $65 a month
Projected cost in 2052: $183
Current cost: $45 a month (includes herbal drinks or one visit to the doctor each month)
Projected cost in 2052: $127
I will also assume that my house and insurance premiums will be fully paid off by then.
Total for basic living expenses in 2052: $1,267
You didn't expect me to NOT have a fun life after retirement, did you?
Movie once a month
Current cost: $40 a month. You guys already know how much I love my regular cinema visits!
Projected cost in 2052: $113
Food or drinks with friends once a week
Current cost: $15 a week, or the occasional cafe for $30. I don't even know if our hawker centres will still be around in 35 years, so let's just take an estimate of $80 a month.
Projected cost in 2052: $225
Current cost: $100 a month
Projected cost in 2052: $281
Total for leisure expenses in 2052: $619
Monthly expenses in the year 2052: $1,886
And this is just for my basic living expenses and the occasional leisure, which far exceeds the $1,300 I'll be getting from my CPF LIFE payouts, and assuming I continue to live an extremely frugal lifestyle even in my later years.
In fact, I would think that once I'm older and retired, I would want to enjoy and spend more time out with my friends, so the estimates I've used here are already pretty conservative in my scenario?!
We haven't factored in healthcare costs or any other emergencies that might pop up, not to mention having money to give ang paos to my future kids and grandchildren for their weddings and every Chinese New Year. With more time on my hands, I would also want to go travelling with my spouse in our golden years and enjoy life together.
Some rough estimates in a year:
A 2-week vacation to Europe: $3,000 --> $8,441 in 2052
A 1 week vacation in Asia: $500 --> $1,406
2 hotel staycations in Singapore: $500 --> $1,406
Ang paos for 2 children and 4 grandchildren every CNY and birthday: $50 x 6 people x 2 occasions = $600 --> $1,688 in 2052
Total sum needed in 2052: $35,573 excluding healthcare or medical costs
Total sum realistically needed each month in 2052: $2,965
Still think your CPF savings are enough to cover you in your retirement years?
As you can clearly see, it would be foolish to rely completely on your CPF savings for your retirement, because the monthly payouts obviously won't be enough.
Other than your CPF, what are you doing to save up for your retirement years, when you might no longer have a job or be physically fit enough to work for an income?
Even if you save up cash, the value of your money will be eroded over time due to inflation. Remember how 20 cents used to be able to buy us a meal, but we now need at least $2.50 even for one at the hawker centre?
Unless you invest, your money may not be able to keep up with the increasing costs of living, and I'm sure the last thing you'll want is to find yourself running out of money in your golden years. Let's not talk about having financial support from your children yet, since not every couple today opts to have kids anyway, and even if you do, there's no guarantee how much they'll be giving you.
How to invest?
While there are retirement saving plans or endowment policies offered in the market, they're not my cup of tea (often because the returns are too low for me), and neither are investment-linked plans (read about why I cancelled mine here). Presently, I'm investing in bonds and stocks, and may look at adding in property investments when I'm older and have a larger pool of capital.
But if you're not careful, you could end up getting burnt and losing your cash savings in the stock market. To avoid this, make sure you equip yourself with the necessary skills and tactics to succeed in investing.
This will then serve as a compass and guide you whenever you enter the stock markets. You can get an insight into my personal investment approach in this post, but if you've always wished to have a step-by-step guide with formulas and strategies for investing, here's a course which will teach you exactly that for just a few hundred dollars. I'll also be attending this same course next month.
It is never too early / too late to learn how to invest safely.
Note: This post was originally published on May 19, 2017 by The Fifth Person - a local financial education services provider - and I found the idea so intriguing that I asked to reproduce this with some tweaks of my own after seeking their permission. Lest it isn't already obvious by now, this is NOT a sponsored post.