How Much Do You Really Need For Retirement?

How do you calculate how much you need for your own retirement? I share with you 3 methods how.This is probably one of the most common questions in everyone’s mind, so I’d like to answer it in this post.

Unfortunately, I’m unable to give you a specific number as everybody’s desired retirement age, lifestyle and financial situation is different.

Thus, I figured that it’ll be wiser to teach you how to do the calculations yourself for your own situation.

Use this as a guide and make the necessary tweaks for your own situation and your desired retirement lifestyle.

How to calculate the amount you need for retirement?

You’ll need the following information:

  1. Desired retirement age
  2. Income needed during retirement
  3. Years to retirement
  4. Average Inflation rate
  5. Duration of retirement

For a simpler calculation, we will leave out your other sources of income such as your CPF and investment income.Let’s take for example:

1. Desired retirement age: 55 years old

Based on a survey conducted by Aviva, 54% of respondents would like to retire before they turn 60 years old.

With housing and children’s education just paid up or almost paid up, 55 years old is a golden number for most Singaporeans.

2. Income needed during retirement: $2,400/mth

In the Financial Services Industry, there’s a rule of thumb that suggests you’ll need about 60% to 70% of your current income to sustain your retirement lifestyle.

The median gross monthly income of Singapore is about $4,000 based on Ministry of Manpower’s website. This includes Employer’s CPF’s Contribution.

So if we implement this rule, you’ll need about $2,400 a month (60%*$4,000).

3. Years to retirement: 25 years

Let’s assume you are 30 years old now. If you intend to retire at age 55, you’ll have 25 years to prepare for retirement.

4. Average Inflation rate: 3%

The average inflation rate of Singapore is between 1 to 3%. Let’s take 3% to be conservative.

5. Duration of retirement: 30 years

The average lifespan of a Singaporean is about 80 to 85 years old according to Singstat. Let’s take 85 just to be conservative, you don’t want to outlive your savings.

Once you’ve gotten all these variables, there are 3 methods which you can go about calculating how much money you need to save at age 55.

  1. Time Value of Money Calculator
  2. Retirement Calculator
  3. Retirement Rules

1. Time Value of Money Calculator

The Time Value of Money Calculator is what most Financial Planners use.

If you’re new to the concept of time value of money, this can be quite complex to understand. 

​I won’t explain it here, but I’ll teach you how to use the calculator and how you can calculate the amount you require at retirement.

Just plug the information into an online time value of money calculator which you can find here.

  1. Desired retirement age: 55 years
  2. Income needed during retirement: $2400/mth, $28,800/yr
  3. Years to retirement: 25 years
  4. Average Inflation rate: 3%
  5. Duration of retirement: 30 years

First, ensure that your calculator is in Beginning Mode and Compounding Annually.

That means if you are 30 years old with the above assumptions, you’ll need about $556,584.36.

Oh wait, so I don’t need a million dollars to retire?

Yes, unlike what everybody says that you need a million to retire, truth is you don’t if you manage your money well!

Of course, these assumptions exclude the inflation rate of your future expenses. But they also exclude the extra income you will earn from your CPF and other sources of income.

So I would say it’s a pretty good guide for someone of that profile.

Note that this is just a simplified way of calculating your own retirement income, please seek advice from a retirement planner if you want a more comprehensive calculation!

2. Retirement Calculator

If you find it troublesome to meddle with a time value of money calculator, you can use an online retirement calculator instead.

For a more comprehensive calculation, you can use CPF’s retirement calculator.

It will give you a more accurate figure unique to your financial situation.

The only drawback is that it isn’t clear how they calculate the amount that you need.

You can use any of the following retirement calculators:

3. Retirement Rules 

Multiply by 25 rule

This guide estimates how much money you’ll need in retirement by multiplying your desired annual income by 25.

For example, if you want to withdraw $28,800 a year from your nest egg, you’ll need $720,000($28,800 x 25) for retirement.

This rule estimates the amount that you can withdraw from your nest egg and does not factor in other sources of retirement income.

This rule assumes the following:

  • that your money will be able to generate at 7% per year if you invested it in the stock market,
  • and 3% inflation.

That leaves us with 4% (7%-4%) per year.

That means you can withdraw 4% of your nest egg ($720,000) a year every year for 25 years.

4% Rule

Source: Youtube

This rule is slightly different from the rule above.

This rule guides how much you should withdraw annually once you are retired and not how much you should have saved before retirement.

It says that you should withdraw 4%only in the first year.

This is how it works.

If you have a nest egg of $720,000, you should withdraw $28,800 ($$720,000 x 4% = $28,800) only in the first year of your retirement.

The following year, you withdraw the same amount adjusted for inflation.

Assuming inflation is 3%, so in the second year, you should withdraw $29,664 ($28,800 x 1.03 = $29,664).

Continue withdrawing the amount adjusted for inflation every year after that. 

That means on the 3rd year, you should withdraw $30,553 ($29,664 x 1.03).

Thus, your nest egg of $720,000 will last you a lot shorter than the previous rule.


These methods are just some ways you can use to plan for retirement by yourself.

They give you an estimate of how much you need during your retirement and should only be used as a guide.

If you want a more comprehensive retirement planning that is unique to your financial situation, it is advisable to seek help from a professional Financial Advisor/Planner.Image Source:

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