How Inflation Impacts Your Retirement Planning

Most Singaporeans recognize the importance of saving for retirement, but other financial priorities can often take precedence. Starting retirement planning early allows more time to grow retirement funds. While other expenses may feel urgent, prioritizing retirement helps ensure a secure future.

For example, if you’re 27 now and aim to retire at 62, applying Singapore’s long-term inflation rate of 2.7% p.a. means that the S$16,548 needed today would require S$42,045 by retirement. Inflation keeps increasing the required amount, so you may need around S$1.3m to fund a basic retirement lifestyle at 62, not forgetting the below factors too!

Increasing Life Expectancy:
Singaporeans now have the longest life expectancy globally, at nearly 85 years. If you retire at 62, you could spend 23 years in retirement. Longer life expectancies mean longer retirement periods, which require a larger nest egg.

Rising Medical Costs:
The average Singaporean spends 10 years in ill health before passing, with a health span of 74 years. Medical cost inflation has risen significantly, with healthcare costs increasing by 57.5% from 2003 to 2023. Essential retirement insurance includes adequate hospitalization and long-term care coverage to manage healthcare risks.

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There’s no quick solution, but taking small steps in the right direction can better prepare you for retirement.