Most young people like to be out in the world having fun, socialising with friends and enjoying life. For many, retirement isn’t really a concern; it’s so far away! 

But believe us when we say: now is a good time to start thinking about saving for your retirement. In fact, you may be sitting on a pot of gold—your home—and you don’t even realise it.

You may be wondering why and how, but trust us—we ourselves were there once (oh how we miss our youth)! So, why should you save up now, and how should you maximise your retirement savings? 

 

Why should I think about my retirement now?

It’s no secret that Singapore’s cost of living is high, and with the pandemic it’s not getting any lower.

On top of that, if you think you’re spending too much now, you’ll be spending even more when you’re retired! Retirement means spending more on hobbies and passions to fill your time, as well as footing medical bills because you’re getting old. Once you retire, you probably don’t have any active income since you’ve stopped working.

This means that having passive income is very important, so that you still have money coming in even in retirement!

This also means that it’s imperative to start early—after all, establishing passive income streams and accumulating wealth takes time.

You could read more about what The Strait Times has to say regarding how many don’t know the cost of retirement in Singapore, which would be detrimental towards planning ahead. We have included the link to the article found at the end of this blog.

 

How can I build passive income streams?

Besides your day job, there are many other sources of income. Examples include stocks, government bonds, private annuities, savings in CPF and property investment.

Out of these options, investing in property is probably the most sustainable method and beneficial choice.

For one, property investment provides the most consistent and regular returns. Income sources like stocks, bonds and fixed deposits don’t pay out regularly. It can turn to zero dollar value if it isn’t managed well, but property is of a different category. As a retiree with bills to pay, these streams are insufficient to fund your lifestyle.

Another thing: property investment is the most straightforward way to build wealth. The very home you live in can become part of your long term investment strategy! But how?

 

When you buy a home, choose a property with a good chance of appreciating in value.

The people might think of buying homes as very straightforward. You just need a place to set up and grow your nest. But you would miss out on a convenient approach towards investing. Turning your home into your long term investment strategy can be achieved by taking advantage of its potential appreciation.

Basically, when you buy and live in a home, the goal is to foresee that the market value of your home keeps increasing over the next 3-5 years. Essentially, you’re sitting on a growing “pot of gold” simply by living in it! When you resell your home, you end up with profits when your strategy works, increasing income.  These profits can then be reinvested into other things like stocks and bonds to generate even more income, but the rule of being careful still applies.

Of course, it’s hard to determine if and how much the value of your home will appreciate. This depends on factors like timing and market conditions which are often difficult to follow without help from experienced people who know the market well enough to advise.

However, here are some factors that might be within your control—namely, the choice of home! Factors like location, proximity to MRT stations, schools and amenities are huge determinants of potential appreciation. So if you want your home to be part of your strategy, you must choose it wisely with great advice and research—an attractive home commands higher resale prices. Of course, it still boils down to individual affordability. Houses that are near to the above-mentioned are more costly in majority. 

 

A case study: why property investment is the smartest choice for your retirement

To the average Singaporean, working a regular job doesn’t grow your wealth significantly in a short period of time. Here are some things to get you thinking why it would be good to start property investing.

For a start to this section, there had been a survey conducted by researchers of different institutions, who gathered individuals and married elderlies above the age of 55, on their presumed everyday necessities. This information was then calculated to obtain an average monthly expenditure. An individual elderly aged 65 and above had an estimated amount of $1379 monthly, while a couple needed an average of $2351 when the survey was conducted back in 2019. However, do not forget that different generations would mean differences in lifestyle. You can say that there would be a difference in these calculations when the time comes for us to retire due to our acclimated habits on what we presume is an everyday necessity.

The article on this conducted survey by The Straits Times then concluded that it would be a concern for future generations to solely rely on family income as a primary source for elderlies. Since Singapore’s household sizes are already shrinking. 

Another factor to consider would be drawing attention to the appreciation of Singapore private condos from 1995 till 2021 shown on the following graph. 

It clearly is evident that Singapore’s property prices are gradually increasing. A growth rate of 146%, if you divide it into 26 years, this would give you the average growth rate of 5.615% per year. To have invested into private condominiums at an earlier point in time results in beneficial profits in the present market and possibly in the future as well. Here are some references regarding this statement.

If you take a look at the statistics from squarefoot website, you can see that Rainforest Executive Condominium sellers who held on to their units since 2012 have made a surmountable amount of profit in 9 years. At the very least, it would be a profit of $233k.

Also, taking a look at the case of owners of the Sims Urban Oasis Condominium, they had profited after holding within 5 to 6 years as well. Just imagine, living in the unit and requiring just a few years to gain this amount of extra income through investing.

To reiterate our previous point, this is strategizing your next house purchase and living in it (sitting on a pot of gold). Once retirement age comes eventually, you could choose to cash out the profit and move to a smaller house.

Furthermore, It was reported that students are to be given personal learning devices this year. There has been a recent news article which draws attention to government efforts in encouraging saving and financial planning with youths. These youths tried on an application which simulates adult life decisions by teaching them key financial literacy concepts and ways that their CPF could be utilized. They are able to build dream homes, plan budgets for their next move while observing different outcomes from their simulated plans. All these exposure would benefit in effort to kick start good saving and planning behavior from young, well equipping them in the long run for better retirement as an end goal. (You may find the link to the article at the end of this blog as it is indeed an interesting read.)

One last example would be rare cases of properties which were bought through a BTO and achieving MOP. If you were to obtain a BTO 5 years back way before the pandemic happened, given the recent market conditions which has escalated the resale market, it has made it possible that you are likely able to make a great profit from the sale alone! Could you earn that much from simply working a regular job? It would take ages to hit that figure!

What we’re trying to illustrate is that property investment is the safer and popular approach to accumulate wealth in a short period of time, when it plays out well for you through your specific strategy!

And of course, this too has long term benefits: as we mentioned earlier, reinvesting these profits grows your wealth even further.

 

Conclusion

We hope that you are convinced of the importance of saving up for your future after reading this article!

But we also understand that this is a lot to digest. Weighing your options, committing to a home and keeping an eye on market trends and big numbers are very stressful things.

Our resources and experience can ease your journey and help you with your decision-making.

If you ever need help, we’re just a call away, with no obligations.

 

Here are some useful links to properly equip you in your retirement planning, or find out more about it.

https://www.straitstimes.com/business/invest/many-dont-know-the-costs-of-retirement

https://www.straitstimes.com/singapore/study-finds-1379-a-month-needed-to-meet-basic-living-standard-for-single-elderly

https://www.google.com/amp/www.asiaone.com/money/new-studies-show-large-retirement-savings-gap-singapore-and-why-most-regret-not-saving%3famp

https://www.channelnewsasia.com/news/commentary/retirement-planning-saving-cpf-life-minimum-basic-retirement-sum-10557226 

https://www.straitstimes.com/singapore/parenting-education/cpf-introduces-mobile-game-app-for-secondary-school-students