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How Freelancers in Singapore Can Save for Retirement

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Saving for retirement can often be an anxiety-inducing topic. With 14% of Singapore’s labor force reported to be self-employed in 2020 (World Bank), the question about how to save for retirement as a freelancer could not be more relevant than it is now. While the most obvious answer to the above question is to put money aside, there are many ways of doing it. You can simply decide to set aside a percentage of your monthly income, to invest it, or to put it in a savings account. Each option, however, largely depends on your income, retirement age, and current financial situation. Set Up a Retirement Plan In order to set up a retirement plan, you need to answer the following questions: After answering these questions, you will get an idea as to how much you need to save. The current retirement age in Singapore is 62 years, and will increase to 63 years in 2022. While this may not affect your retirement age as a freelancer, for the sake of retirement planning we will use the official retirement age. The table above assumes individual monthly expenses in retirement to be S$1,793 (Singstat). Overall spend in retirement is also based on a life expectancy of 83 years. An additional factor we need to consider are healthcare expenses. All self-employed Singapore citizens and permanent residents need to make compulsory contributions to their Medisave Account if they are making more than S$6,000. In addition to making compulsory contributions to your Medisave Account, you can choose to make voluntary contributions. The great benefit of voluntary contributions is that you can claim tax reliefs for those contributions to lower your overall tax expense. Set a Goal and Save The simplest way to save for retirement is to calculate your monthly income and monthly expenses and decide on a realistic amount you can set aside for retirement monthly. This should typically be a certain percentage of your monthly income rather than a fixed amount. Calculate when you want to retire and how much you would spend on average monthly after you retire. Average household monthly expenses in Singapore are S$3,586 (Singstat), assuming the household size is two people. This implies individual monthly expenses of S$1,793. It is also important to remember that there will be several expenses you will no longer have to worry about in retirement, such as your tax expense, your Medisave Account contributions, health insurance, children’s tuition costs, work-related expenses and possibly even life insurance premiums. This method of saving for retirement has many downsides: you are not earning interest on your savings to offset inflation, you’re not getting tax breaks on your savings. CPF Contribution Central Provident Fund is a social security savings plan providing Singaporeans with a plan for a secure retirement. While making contributions to your Medisave Account is mandatory, you can also make voluntary contributions to your CPF Ordinary Account (OA), Special Account (SA) and Medisave Account (MA). Ordinary Account contributions can be used for housing, insurance, […]

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