Important Ages in Singapore
In Singapore, employees should be aware of the 3 major ages which could impact them on retirement planning, namely: CPF Payout Eligibility Age, Retirement age and Re-employment age.
The most commonly known age is the CPF payout eligibility age. It is currently set at age 65, which is the earliest age where CPF members could start collecting their monthly CPF Life payments.
Most people would think that retirement age in Singapore is at age 65, because this is the age which they start collecting income from CPF Life.
The fact is – Retirement Age is the statutory minimum age which is set up by the Ministry of Manpower (MOM). Currently, retirement age is 62. This means your employer is not allowed to dismiss you because of your age. This age will be adjusted to become age 63 on 01-July-2022 and eventually to age 65 by 2030.
Re-employment Age is another statutory age set by MOM. This means for employees who have reached their retirement age, and should they wish to continue working, their employers must offer suitable jobs to keep the employees, though the job scope and salary might not be the same as before. If there is no job to be offered by the existing employer, he can transfer this obligation to another employer, with the employee’s agreement, or offer the employee a one-off Employment Assistance Payment Scheme (EAP).
The EAP is a one-time payment to employee with a minimum amount of $5,500, up to 3.5 times the monthly salary, cap at $7,500. This scheme is to help employees to look for other employment after leaving the company.
With these 3 ages to consider, what should you do to plan ahead? Here’s what I think you should do:
1) Always keep yourself healthy as you gracefully age. If you are not healthy, it is difficult to stay on the current job, and it will be even more challenging when you reach re-employment age.
2) Upgrade your skills while on the job. Stay relevant and stay ahead of times, make yourself an asset to your organisation.
3) Plan for your retirement and exit plan as early as possible, and monitor your retirement programs, and manage your liabilities. As you age, you should exercise prudence to reduce any liabilities which you have and at the same time reduce your risk profile.
4) Invest if you have never done so. Investment is a must in today’s low interest rate environment and most importantly it provides liquidity and flexibility if you need to either top up or partially withdraw the sums.
If you have already invested in some programs, you should look at the portfolio performance and review it if necessary. Do not let emotions rule your investment decisions.
You will realise that Point (1) and (2) are talking about your ability to earn an income. They are your Plan “A” which supposed to keep you working to accumulate your wealth. Point (3) and (4) are talking about your back-up plans. They are your Plan “B” which you supposed to design programs today to have them work for you now and beyond your working years. Most people do not realise that Plan “B” are so important and only started to work on them when they are near to their retirement ages.
As a general rule, aim to deploy at least 20 percent of your monthly income each month to work on your Plan “B”, and review the programs periodically.
Engaging and working with a professional financial adviser is thus important. While you put in your heart and soul to your organisation to keep your jobs intact, aka your Plan “A”, your financial adviser constructs and manages your back-up plans, aka Plan “B” together with you. Remember, plan “A” will stop one day and plan “B” then starts working thereafter, and beyond.
