Who doesn’t dream of retiring early? Many of us can’t wait for the day we say goodbye to working full-time and finally welcome a new, relaxed lifestyle, with plenty of overseas holidays and more time to spend on ourselves and with our loved ones.
As a single person, that dream may be within easier reach if you have no dependents or family members to support. But if you want to retire at, say, 50, you’ll want to start planning for it as soon as possible. The more time you have to save and invest your money, the more wealth you’ll be able to build and the sooner you can bring your retirement goals to life.
We asked Ow Tai Zhi, the co-founder and chief investment officer for AutoWealth, for advice on what to do now so that you can retire early.
Q: At what age would it be considered “early” to retire?
Tai Zhi: Everyone has different opinions when it comes to this, depending on what they plan to do after leaving their careers, but it’s safe to say that most people think 50 is a good early retirement age.
Q. What are some financial benefits to being single?
Tai Zhi: When you’re single, you have complete control over your finances. And if you’re not supporting anyone financially, you probably don’t have to think twice before spending money on yourself. For instance, you can buy what you want, when you want, without worrying that you’d be taking precious financial resources away from your family or dependents. Being single also means that you have more time to focus on your career. This may help you move up the career ladder more quickly, increasing your income-generating ability.
Q: If you’re single with nobody but yourself to support, can you build wealth faster if you take the right steps from a young age?
Tai Zhi: Saving, investing and planning for your retirement as early as possible is the best way to build your wealth. The cost of raising a family is significant, especially in Singapore, so if you don’t have kids or a family to support, you can save a substantial sum every year.
Read more about how to start your investment journey here.
Q: Can you share some wealth-building tips for single people?
Tai Zhi: First, start saving and investing early. That way, your nest egg has more time to grow and generate interest.
You should also be clear about your retirement goals. At what age do you intend to retire and what kind of lifestyle do you plan to have? Clear goals will guide you to take action.
Finally, work towards your goals using these tips:
- Budget your income. You may have heard of the 50/30/20 rule – that is, use 50% of your income for your needs, 30% for your wants and 20% for savings and investments. If you want to boost your savings, you need to adjust this ratio by reducing your wants and increasing your savings.
- Find a side hustle. Single people usually have more free time, so you may want to use yours doing something that’ll earn you extra money.
- Invest early and regularly. If you’re new to investing, consider robo-advisors which are low-cost and hassle-free. Robo-advisors are online investing platforms that employ software algorithms to create and manage investment portfolios.
- Get health and life insurance early, as premiums increase with age.
Here are more tips on how to cultivate good habits to attain financial fitness.
Q: How can single people with no dependents calculate how much they’ll need in order to retire early?
Tai Zhi: First, think about your aspirations and retirement lifestyle, taking into consideration other factors like gender and life expectancy (81 for males and 86 for females, according to the Singapore Department of Statistics). If you have 15 minutes, you can calculate how much you’d need using the CPF Retirement Calculator.
Generally, we advise singles to set aside a monthly retirement spend that’s twice what you currently spend per month. For instance, if you currently spend $1,000 a month, you’ll want to set aside $2,000 for each retirement month. This takes into account the effects of inflation and the basic principle that it’s better to have more money than less.
A single person who usually spends $1,000 per month today and plans to retire at 50 years old, would then need to have set aside $864,000 by the age of 50. Assuming that this person lives until they’re 86, this would give them $24,000 to spend every year (or $2,000 every month) for the next 36 years. Part of this amount will be offset by the CPF Life pay-out of between $370 and $2,110 a month, starting from the prevailing official retirement age of 65.
Q: What are some financial “don’ts” if you’re young, single and planning to retire early?
Tai Zhi: Don’t procrastinate when it comes to saving, investing and planning for your retirement. When you’re young, it’s easy to take such matters for granted or not even think about them at all.
Also, be mindful of what you spend your money on, especially if it’s a big-ticket item like a condominium or a luxury car. You can have a flashy car today or a memorable holiday every year after you retire at 50 – it’s about what you’re willing to trade today for a more financially secure tomorrow.
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