The key to retirement is financial independence. As long as your expenses are covered by your savings or your passive income, then you are financially independent and hence able to retire. Some people who are not investment savvy just save as much as they can and when it reaches a certain amount, they will retire. The more savvy people will invest to generate regular dividends as passive income.

Ever wondered how old men and women sitting under your HDB blocks can retire? Most of them would have sufficient savings in addition to income from their children. Most important, they keep their expenses low. Many spend less than $500 pm per person or $1000 pm as a couple. Their HDB mortgage is paid and they are debt free. The ones that usually have problems financially are those who gamble, smoke and drink. These are sins which puts oneself on the path of financial and health destruction.

Keeping expenses low is important. Even if your income is $10k pm, if you spend $20k pm, you will not have enough to last a long retirement. You can retire long if your income is $3k pm but your expenses is $2k pm. In fact you will save $1k pm. How do you keep expenses low during retirement? You have to cut certain items which are considered as wasteful and unnecessary. These are some items:

1. Car. Cars are expensive to own and maintain. If you are retired, you don't really need a car as you no longer need to rush to work in the morning. You can save $2k pm by not owning a car.

2. Maid. Employing a maid is not cheap. When you are retired, you have a lot of free time. You can cook your own meals, do your own laundry and wash your own toilet. Don't be lazy. You will save $1k pm by not employing a maid.

3. Eat at hawker centers instead of restaurants. Or cook your own meals. These are cheaper options.

4. Plan your holidays. Go during non peak seasons as costs are much lower.

If you plan well, you can cut down as much as $4k or more per month from your current expenses. Currently, a retired couple can live comfortably with $3k pm provided they have no debt and lead a healthy life without smoking, drinking or gambling. If you are retiring in 10 years time, taking into account inflation, $4k pm would be ok for a retired couple.

Some sources of retirement income:

1. CPF Life. Gives you $3500 pm as a retired couple.
2. Lease buy back of your HDB flat.
3. Dividends from blue chips.
4. Room rental off your HDB flat rooms. $800 per room.
5. Cash savings.
6. Allowance from children. $500 from each child.

Just by CPF Life and renting out two rooms, you can get $5100 pm. This is more than enough for a retired couple today who live a modest life.