Projected Retirement Budget – Comfortable Scenario. Someone worked this out.
How much would a retiree truly need?
Let us imagine another hypothetical 54 year old, whom we call Mr Yeo, who hopes to retire next year when he hits 55. If he is fairly healthy, lives comfortably, drives, and has no outstanding home or vehicle loans, his projected living costs may look like this:
Car – $1,500 to $2,000 per month (for a modest Japanese sedan and includes vehicle loan payments, Road Tax, parking,
ERP, fuel, insurance, repairs, and other costs). See Money Smart’s article here for the estimate.
Restaurant/Cafe – $600 per month (assuming 20 meals/drinks of about $30 each per month at restaurants, cafes, and bars)
Groceries – $300 per month (this is for all home-cooked meals)
Telco, Utilities and Conservancy Fees – $150 to $200 per month (broad band, mobile, electricity, water, conservancy fees)
Clothes and Accessories Shopping – $300 per month
Domestic Helper – $700 to $800 per month (includes levy and other living and sundry expenses like food, etc).
Healthcare and Medical – approx $80 to $100 per month (supplements, visits to GP, medicine, Chinese herbs, etc).
Personal Grooming – $50 to $100 per month (hair, facial, toiletries, creams etc)
Holiday Expenses – $500 per month (assuming $6,000 per year for one long haul trip of about $4,000, two short haul trips of about $1,000 each)
Gifts and Donations – $200 per month (assuming about $2,400 per year for Christmas/CNY/Hari Raya/Deepavali gifts, donations to charities, and offerings to religious institutions)
This works out to an estimated monthly budget of approximately $4,750 or so, excluding other miscellaneous expenses. If we assume that Mr Yeo lives till an average age of 85 years (Singapore’s life expectancy), the total amount needed could look like this:
Annual expenses (first year): $57,000
Expenses over 30 years: approx $1.71 million
Hang on a minute. We forgot to add something very important. Inflation!
If we assume a modest annual inflation rate of 1.8% (based on Singapore’s historical inflation rate of 1.83% over the past 30 years), the total would look like this:
Annual expenses (first year): $57,000
Expenses over 30 years (incl 1.8% annual inflation): approx $2.36 million
If we are talking about a retired couple (who share the car and domestic helper), their cumulative expenses over 30 years could easily rise to $3.5 million or more!
Bear in mind that while comfortable, the projections above are still fairly conservative. Mr Yeo’s vehicle expenses are based on a Corolla Altis and not a Mercedes, and his restaurant bills are on the low side.