Is $600,000 Enough to Retire in Singapore?

Healthcare costs are a critical component that often gets overlooked when planning retirement finances. As people age, their need for healthcare increases, and the associated costs can skyrocket. Singapore's healthcare system, though of high quality, still leaves retirees with significant out-of-pocket expenses. Even with subsidies through schemes like MediShield Life, expenses such as specialist consultations, long-term care, or emergency medical situations can quickly deplete one’s retirement fund. Healthcare costs in Singapore are rising year on year. According to the Singapore Ministry of Health, the total health expenditure in 2022 was about $13.9 billion, with an expected increase in future years. Without adequate health insurance or a dedicated healthcare fund, retirees could face financial strain, making it difficult to rely solely on CPF payouts and savings. In fact, a study by the Health Promotion Board indicated that healthcare spending for individuals aged 60-69 was about $2,000 annually in 2020, but it is expected to increase substantially as individuals age, especially for those above 70. Therefore, relying on a $600,000 nest egg without factoring in rising healthcare costs would be unwise.

The key to ensuring that retirement savings hold up against inflation is to invest wisely during one’s working years. However, many retirees may not have the financial knowledge or access to investment opportunities that could generate returns above the inflation rate. Consequently, relying on a lump sum like $600,000 without factoring in inflation could leave retirees with inadequate funds, especially as their life expectancy increases and healthcare expenses rise. In a low-interest-rate environment, inflation poses an even more significant challenge to retirement savings. According to a 2024 study by the Monetary Authority of Singapore (MAS), the average savings account interest rate is less than 1% per annum, far below the inflation rate. This means that unless retirees invest in assets with returns exceeding inflation—such as stocks, bonds, or real estate—their savings will lose value over time. To protect against inflation, retirees should aim to accumulate a larger nest egg, ideally above $600,000, and invest in assets that can outpace inflation, such as stocks, real estate, or even certain types of bonds. To preserve the purchasing power of their nest egg, retirees will likely need upwards of $1 million to achieve a similar lifestyle in 20 years as they would today.

As of 2024, the average monthly CPF LIFE payout for individuals who have set aside the Full Retirement Sum (FRS) is just over $1,500 for those who opt for the standard payout plan. While this amount covers some living expenses, it may not suffice for those who want to travel, eat out, or enjoy activities that are more costly. For example, based on the latest data from the Singapore Tourism Board, an average retiree who plans to travel once a year might need an additional $10,000 annually, considering travel, accommodation, and expenses. This extra cost can quickly add up, and the CPF LIFE payout is simply not enough to cover such discretionary expenses. Furthermore, the payout amount does not increase to match inflation, which means retirees may struggle to maintain their standard of living as the cost of goods and services increases. According to the latest statistics from the CPF Board, about 60% of CPF members at the age of 55 are not on track to meet the Full Retirement Sum, meaning they will have to rely on external savings, such as their personal investments or additional savings, to ensure a comfortable retirement. To bridge the gap, many retirees are forced to dip into their personal savings or rely on supplementary investments. This is where the $600,000 figure starts to become inadequate, as it may not be enough to provide both the desired lifestyle and the necessary buffer against unforeseen costs such as medical emergencies or property maintenance.

Further complicating matters, many retirees may live beyond the age of 85, with life expectancy in Singapore now averaging 83 years, and the growing number of centenarians suggests that this figure is likely to increase. Assuming a retiree lives to 90, their total expenses over 25 years would rise to $900,000, and factoring in a 2% inflation rate, the total amount needed could surpass $1 million. Even with a lump sum of $600,000 invested at an average return of 4% annually, the annual withdrawals of $3,000 per month will erode the principal significantly within 20 years, and additional medical expenses or emergencies could further deplete the savings. Therefore, relying solely on CPF LIFE payouts or a fixed sum like $600,000 is a risky strategy that could leave retirees struggling financially. A more realistic figure for most retirees would be closer to $1 million, especially when considering the possibility of living well into their 80s or 90s.