Retirement Planning

How to Retire if You Start Planning in Your 40s

byElena Owyong
  • Sep 14, 2022
  • 4 mins

In your 40s but don’t have enough savings in your bank account to retire? You are not alone.

In fact, more than half of Singaporeans over 45 have not made sufficient provision for retirement, according to a survey from St James’s Place (SJP) Asia. 

While late retirement planning means that you lose out on the accumulated interest earlier on, there are still some ways to make your money work for you. We will show you how in this article.

Assuming that you are 40 years old now and that you want to retire at 67 years old, you still have 27 years to catch up. However, you need to know exactly how much to prepare for retirement.

The Central Provident Fund (CPF) has a retirement calculator that helps you determine the amount of savings you need based on your expected retirement age and lifestyle. Alternatively, you can also use Income’s retirement calculator.

While you are planning, think of your health status as well. This is an often-neglected consideration which will determine if you need to buy additional health policies to supplement your existing one.

Invest in financial products with lower risk 

Financial products with lower risks help you to build up your nest egg for retirement. Image credit: Pexels
Given that your savings are insufficient, you need to increase them by investing in lower risk financial products that still provide reasonable returns, such as endowment plans.
An endowment plan is a type of insurance that provides basic insurance coverage, helps you to save over a specific period of time and possibly provide a lump sum benefit upon maturity of the policy.  

Gro Cash Flex Pro is a flexible insurance savings plan that has a wide selection of policy terms and premium terms that allows you to save and enjoy yearly cash payouts1 after the end of the second policy year, while still protecting you. It also provides guaranteed acceptance which means that your policy will be accepted regardless of your health condition.

You can also consider enhancing your plan with the Cancer Premium Waiver (GIO). This rider will kick in and waives your policy's future premiums if you're diagnosed with a major cancer during the rider term2. You can refer to the website here for the relevant terms and conditions.

You can also consider enhancing your plan with the Cancer Premium Waiver (GIO). This rider will kick in and waives your policy's future premiums if you're diagnosed with a specified major cancer during the rider term. You can refer to the website here for the relevant terms and conditions.

Although it is tempting to make up for lost time by investing in products with higher returns, these products also come with a correspondingly high risk. Should the investment fail, you will may lose your capital and even incur a debt.

Downsize your house, upsize your savings

As you age and your children get married in the future, it may be tough to clean and maintain a large house. Thus, it may make sense to consider downsizing your house so that you can use the profits from the property sale for investment. An advantage of downsizing your house is that you pay lesser property tax and enjoy higher government rebates.

In Singapore, property tax is determined by the Annual Value (AV) of your property. You can use the following formula to calculate your property tax.

Annual Value (AV) X Property Tax Rate = Property Tax Payable

Property Tax by Property Type and Annual Value

Annual Value ($) Effective 1 Jan 2023 Property Tax Payable
First $8000 0% $0
Next $22,000 4% $880
First $30,000 - $880
Next $10,000 5% $500
First $40,000 - $1380
Next $15,000 7% $1050
First $55,000 - $2430
Next $15,000 10% $1500

Full table on IRAS website. Credit: IRAS

As shown from IRAS’ property tax details above, owners of smaller flats pay less property tax and this could lead to greater savings for your retirement years.

Top-up CPF for additional interest

There are multiple benefits when you top up your Central Provident Fund (CPF). Firstly, if you use cash to top-up for yourself, you get to enjoy tax relief equivalent to the amount of your cash top-up, for up to $7,000 for each calendar year. Moreover, the savings in your Special Account and Retirement Account can earn an interest rate of up to 6% per annum.  


Reduce your spending

This may sound daunting if you are used to spending what you earn but you can start small by saving $100 every month. Every little bit counts. Your $100 savings per month will amount to $1,200 a year (or an additional $32,400 over 27 years till you reach your retirement age at 67 years old). You could be getting even more from accumulated interest if you put your money in an insurance savings plan or from the returns of an investment product.  

There is still hope even if you start retirement planning late. The key is to be discerning in selecting your financial products and save diligently. Start today by speaking to an Income advisor for advice on what insurance savings plans can best suit your needs.    


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