Last Updated on by Tree of Wealth
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Have rising prices caused you to reconsider your grocery shopping habits? The overall inflation rate in June reached 6.7% year on year, the highest it has been since September 2008. This means that the cost of everyday goods is increasing. Prices are expected to continue rising in the near future due to factors such as pandemic-related labor shortages, supply chain disruptions, and global inflation. As an average consumer, how are these factors affecting your purchasing decisions?
One way to maximize your savings for retirement is to anticipate and plan for potential inflation. While it may be difficult to predict exactly what inflation will look like in the future, taking steps to protect your savings from erosion can help ensure your financial security. This may involve diversifying your investment portfolio and being strategic about the types of assets you hold. Another way to maximize your savings is to be mindful of your spending and work towards saving as much as possible. This can include setting a budget, cutting unnecessary expenses, and finding ways to increase your income. By taking proactive steps now, you can help maximize your retirement savings and ensure that you are financially secure in the future.
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Take advantage of your CPF as a financial safety net
The markets can be unpredictable, but your CPF can help protect you against inflation. It is important to save and grow your money through CPF so that you have a strong foundation to withstand inflation. Here are some ways to increase your retirement income through your CPF:
Consider making regular top-ups to your Special Account (SA) or Retirement Account (RA) to take advantage of compound interest and help your savings grow over time. The earlier you start, the more time your money has to accrue interest.
Accelerate your savings and earn more by making early top-ups to your CPF accounts. This allows you to take advantage of compound interest and grow your savings faster
Additionally, you can receive tax relief of up to $8,000 per calendar year when you make top-ups to your own SA/RA. Keep in mind that CPF top-ups are irreversible.
It’s important to consider the increasing retirement sum and other factors such as inflation, the rising cost of living, and longer life expectancy when planning for your future financial needs. By ensuring that all your retirement income streams, including your CPF savings, are sufficient, you can better prepare for uncertainty in the future.
Select a CPF LIFE plan that aligns with your desired retirement lifestyle
When planning for your retirement, consider your desired lifestyle when choosing a CPF LIFE plan. CPF LIFE is a national insurance program that provides monthly payouts for the rest of your life so that you don’t run out of savings. If you are worried about the increasing cost of living and longer life expectancy, you may want to consider the CPF LIFE Escalating Plan. This plan offers lower payouts initially, but they increase every year as long as you live. For example, a monthly payout that starts at $1,000 when you are 65 could reach around $1,500 when you are 85. This can help protect you against rising prices and maintain your standard of living.
If you don’t have an immediate need for your CPF savings when you reach age 55, consider leaving them to grow and continue building your retirement nest egg instead of making a lump sum withdrawal. This can help ensure that you have enough savings as you get older.
You have the option to start receiving your payouts from your CPF savings anytime between ages 65 and 70, and it is not mandatory to start at age 65. If you have the flexibility to wait, you may want to consider giving your savings more time to grow. For each year you defer your payouts, they will increase by up to 7%.
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Utilize government assistance
To combat inflation and alleviate the impact of the rising cost of living, 1.5 million Singaporeans have received up to $700 in GST Vouchers (GSTV) in cash in August 2022. Eligible HDB households in Singapore will also receive additional rebates to help cover their utilities and Service and Conservancy Charges (S&CC) bills.
In July 2022, seniors from the Pioneer and Merdeka generations received MediSave top-ups ranging from $200 to $900. Singaporeans aged 53 and above who did not receive Pioneer and Merdeka generation benefits will receive a 5-Year MediSave Top-up of $100 in August.
Seniors aged 65 and above will also receive up to $450 in GSTV – MediSave in their CPF MediSave Account.
Providing increased assistance
Singaporeans can also anticipate additional support through the following measures like the $6.6B Assurance Package, which was implemented to help alleviate the impact of rising costs of living and the upcoming GST increase. Also with the $1.5B package, announced in June 2022, which will offer targeted assistance to lower-income and vulnerable groups.
Although we may not be able to control inflation, we can still manage our finances to minimize its impact in the future. Begin planning early to ensure that your income is able to keep up with inflation.
Regardless of whether there is high or low inflation in the future, having a solid financial plan can assist you in achieving your desired retirement goals.
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