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Planning for Early Retirement: A Singaporean’s Journey

At just 26 years old and in her first year of full-time employment, Cheng Kaishi is already charting an ambitious path to retire by age 45. She’s not alone in her aspirations—according to a MoneyMind survey, 30% of Gen Z in Singapore aim to retire within the next 20 years, and two-thirds plan to do so within 30 years or less. But is Kaishi’s goal of early retirement realistic, and what will it take to achieve it? To find out, she consulted a financial planner to crunch the numbers and devise a strategy.

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Setting the Retirement Goal

Kaishi’s target is to retire at 45, giving her 20 years to build her financial foundation. Her financial planner estimated that she would need approximately S$2 million by age 45 to sustain a modest retirement, assuming she has already secured housing. This figure is based on a desired annual retirement income of S$24,000 (or S$2,000 monthly) in today’s dollars, adjusted for a 2% inflation rate, which aligns with Singapore’s historical average. Over a 40-year retirement period, this translates to a total of S$2.1 million, equivalent to about S$35,000 annually by 2045 after inflation adjustments.

Savings and Investment Strategy

To reach her S$2.1 million goal, Kaishi’s financial planner suggested a 7% annual return on investments, a moderate assumption. Starting from scratch, she would need an initial investment of S$172,000 or a monthly contribution of S$1,321. However, Kaishi can start with an initial investment of S$20,000 and commit to saving S$1,168 monthly, which exceeds the recommended 20% savings rate. Living at home allows her to allocate more toward savings, giving her a head start.

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Balancing Multiple Goals

Kaishi also aims to purchase a home, which complicates her financial planning. Her advisor recommended splitting her savings into two portfolios: a balanced portfolio (60% equities, 40% fixed income) for her housing goal (targeted within 5–7 years) and a more aggressive, equity-focused portfolio for her retirement. Additionally, she should maximize her Central Provident Fund (CPF) contributions, as CPF savings can be used for both housing and retirement. For instance, she can calculate the down payment needed for a house and determine how much CPF can cover, then work backward to set savings targets.

Building a Strong Foundation

Before diving into investments, Kaishi was advised to establish an emergency fund covering 6 months of expenses to cushion against unexpected events. She already has a head start here, which allows her to focus on her dual goals of housing and retirement. Her financial planner also shared a personal strategy of “bucketing” money:

• Short-term liquidity: Conservative investments like money market funds.

• Medium-term housing goal: A balanced portfolio (60% equities, 40% fixed income).

• Long-term goals (retirement and education): An aggressive, pure equities portfolio.

This approach emphasizes taking calculated risks to achieve higher returns while aligning investments with specific time horizons.

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Practical Steps for Success

To stay on track, Kaishi’s financial planner offered several key recommendations:

1. Maximize CPF Contributions: CPF is a significant part of Singaporeans’ income, and topping up or investing CPF funds can boost long-term savings.

2. Automate Investments: Set up automatic transfers from her savings account to an investment portfolio to ensure consistent contributions and benefit from dollar-cost averaging.

3. Avoid Holding Only Cash: Cash loses value due to inflation (e.g., S$1,000 today will have less purchasing power in 10 years). Investing is essential to outpace inflation.

4. Annual Portfolio Reviews: Reassess her portfolio yearly to ensure it aligns with her goals, risk tolerance, and any changes in personal circumstances.

Milestones and Next Steps

To monitor progress, Kaishi should set milestones and review her investments annually. This ensures her portfolio remains suitable for her goals and adapts to life changes. With a clear plan in place—starting with her S$20,000 initial investment, saving S$1,168 monthly, and strategically allocating funds between housing and retirement—Kaishi is ready to take the next step: making her money work harder through diversified investments.

Kaishi’s journey reflects a growing trend among Singapore’s Gen Z to prioritize financial independence and early retirement. With discipline, strategic planning, and a willingness to take calculated risks, her dream of retiring at 45 is within reach.