Syfe, a roboadvisor in Singapore, recently released a study that looks at whether Singaporeans are ready for retirement.
Dubbed the Syfe Retirement Readiness Index, the study showed a few findings after polling about 1000+ Singaporeans across all age groups.
Here’s what they found:
- 60% of Singaporeans feel that they are not adequately prepared for retirement
- 69% of Singaporeans don’t think they can retire comfortably
- 50% save less than 20% of their income
- 40% of Singaporeans are significantly behind on retirement planning
- Women are slightly more retirement ready than men
- Nearly 30% of homeowners saved less than 10% of their salary
What caught our attention is actually the low savings rate for the 35 – 44 age bracket – also most likely to be new homeowners and young parents.
Seeing that this will be Mr and Mrs Budget’s profile in the next few years, this worried us a bit too.
According to the study, for the 35 – 44 years old, only 52% save more than 20% of their salary, and nearly 30% of homeowners saved less than 10% of their salary.
With this in mind, we tried to do a forecast on our future expenses and see how much do we need to spend, and then we can work backwards from there to see how much we need to earn, in order to have excess money to save up for our retirement.
For the forecast, we will be calculating based on a young couple, with one kid as well as a maid to help with household chores, living in a private condo.
Currently, Mrs Budget and I spend about S$700 for groceries and meals, and we order in quite a fair bit.
With a child and a maid, we forecast the groceries and meal to be around S$1000 a month. For the home utilities, we calculated in the home utilities, mobile bills as well as the internet bill.
We estimate the cost of a maid to be about S$800. Other assumptions: mortgage payment will be S$3000 a month, and we are contributing a monthly stipend to our parents.
Hence the rough estimated household cost is at S$7,400 a month.
And wow that’s a lot.
We tried to see if our estimation is too far off, hence we compared this projection with another young family’s expense. We found that the figure is not too far off.
Here’s the real monthly expenses as shared by Dave and Kate:
From the above spending, you will see that the monthly average is S$7916.63 a month. Of course, they have two kids in the family so the expenses is slightly high.
So it will seem like the average household expenditure is around S$7000 – S$8000.
If we split that by two working adults, you will need to earn at least S$4,375 per person so that your take home pay is at least S$3500!
S$4375 per person can be quite high for some, and it is no wonder that young parents who are homeowners will struggle to save more than 10 or 20% of their salary every month. When the money comes in, all of it will have to be spent on household items, your child, your parents, and the hefty mortgage.
I’d imagine if a person is earning less than S$4,000 when he or she is older than 40 years old to feel as if he is living pay check to pay check. In my previous article, I have calculated that one have to earn at least S$2,600 a month before 30 years old.
Coupled with this new calculation, it seems like the ideal minimum salary range between 30 – 35 years old will have to be at least S$3,500 – S$4,500.
This way, he will be ready for all the mortgage and household expenses when he is 35 years old. This is also assuming the other partner has equal share in terms of household expenditure.
Which is why prudent spending during your younger age is extremely important, and once you have this habit, you will bring it along with you even as you grow older.
It is also equally important to make sure that you increase your income every year, so that you can catch up with new expenses as we grow older.
For Mrs Budget and I, we will be using S$8,000 of monthly household expenses as a baseline to do a cash flow forecast for the next few years, and to see if our income can support that household expenses requirement.
Otherwise, we will have to make certain lifestyle adjustment to bring down the monthly household expenses. And it certainly looks that way now.
For our readers, do share with us your household expenditure so that we know if our figures are too far off. 🙂
Disclaimer: Figures above are not adjusted to inflation, and are only used as a general estimation. Real life expenditure varies from individual to individual.
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