How can SAF retirees navigate the awkward years between leaving their careers and Singapore’s official retirement age?
In case you didn’t know, SAF personnel face the unique challenge of grappling with early retirement. Depending on your rank and vocation, you’ll be expected to leave the service as early as age 50.
As you can imagine, this presents some problems for our uniformed men and women leaving the service. Unless one is fortunate enough to have the means to comfortably retire at 50 (or even 55 or 60), the only realistic option is to transition to a second career.
However, that is not always possible. Knowing how to organise for war while cranking out a hundred pushups is not a skill set sought after in the commercial world.
The SAF recognises this to an extent, and practices a salary and retirement benefits top-up scheme. This helps furnish a pension-of-sorts for uniformed men and women leaving the service.
Named the SAVER scheme, SAF personnel receive additional amounts based on their salary They are also allowed, after a point, to withdraw a portion of their SAVER contributions to meet other financial needs.
Therefore, depending on how your SAF career went, it is entirely possible that you find yourself handed a not-modest fortune at the end of your career. Here’re some ideas on what to do with all that money.
Top Up Your CPF
First, check that you’ve hit the maximum contribution to your CPF account, so that you can get the maximum payout for CPF Life when you hit 65 years old. (With the SAF’s SAVER scheme, it’s very likely that you will have achieved this.)
Why CPF Life? Short answer - it’s the highest-return annuity plan in Singapore at the moment, and will likely remain so.
Add An Annuity Plan
So your CPF account is filled to the brim, and all that’s left to do is to wait for the payouts to start coming your way. Right?
Nope. Depending on your lifestyle and personal preferences, your CPF Life payouts might not be enough to fund the swanky retirement you want.
You should consider using a portion of your money to purchase an annuity plan, which will help you solve 2 problems. Firstly, your annuity plan - combined with the payouts your CPF Life - should be enough to fund a respectable standard of living during your retirement years.
Secondly, your annuity plan should also allow you to add all-important riders that cover you against death, total and permanent disability and critical illnesses.
While you’re at it, you may also want to look at beefing up insurance coverage for your dependents, just in case anything goes awry. Even a simple and affordable Medishield plan can save you from high hospital fees.
Moderation is the name of the game here. You don’t need to buy an extravagant annuity plan or overspend on insurance. You just need enough to make your golden years comfortable.
Work Out A Semi-Retirement Plan
At this point, you should still have a tidy sum left over, but it may not be enough for you to fully retire. You may still need to pay for your children’s tertiary education, for example, or have aged parents to look after.
What you need now is a plan to fund your living expenses until age 65, when your annuity plan and CPF Life payout start*. There are a number of ways you can do so.
You could take a part-time, or lower paying job, but one that caters to your interests. As we noted above, a second career might not come easy.
But think about it this way: Since you only need to earn enough to supplement your existing money - and are not looking to match your last drawn pay - the number and type of jobs available to you are dramatically increased.
You could also consider moving to or working in a cheaper country, - especially if you have a flat or property that you can rent out, and can use the proceeds to pay for your living expenses overseas.
You could also choose to invest your money in the market, and attempt to live off the returns. As an example, S$500,000 invested at 8% per annum will give you S$40,000 a year.
However, you may face the temptation to chase high returns, which could cause you to lose money and put yourself in financial jeopardy.
Alternatively, you may find yourself looking for a business or two to invest in - be they the ‘life-long dream’ of your good friend, or ‘hottest new idea’ dreamt up by your children. Just remember that investing in a new business is inherently risky, even for the best of us.
If you believe strongly in enterprise, joining a venture capitalist or angel investor network may be a better bet.
(*Note: You can always opt for your annuity plan to start earlier or later, but pegging it to coincide with the start of your CPF Life payout simplifies things.)
Turn 65 And Retire
One day, you’ll find yourself reaching the all-important age of 65, and you can finally, for real, kick back and take it easy. Whatever extra monies you managed to produce during the preceding 15 (or so) years can now be gathered up and added as icing on the cake.
And that’s all there is to it.
You see, the mission is to navigate the awkward gap between leaving your career at a time when other Singaporeans are at the peak of their careers, and true retirement at 65 years old.
The challenge is to set yourself up for adequate retirement on par with the rest of the nation, and topping up your CPF, and starting an annuity plan early enough for it to mature is the key to doing so.
After that, it is a matter of soldiering on for the remaining years. It doesn’t matter how you reach the goal, the important thing is to reach it.
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By Alevin Chan
A Certified Financial Planner with a curiosity about what makes people tick, Alevin's mission is to help readers understand the psychology of money. He's also on an ongoing quest to optimise happiness and enjoyment in his life.