How much does an average investor need to save for retirement?
I did a quick calculation and found out that the average investor in Singapore would need to save about 78% of their monthly pay to retire comfortably at age of 62!
I am not kidding you! Here is the assumption I have made:
1) A 40 yr old male is able to work till age of 62 (even though I doubt the company will want him till 62).
2) Have a current monthly income of $5000. That is slightly above national average income. And he is happy to have 70% of his currently pay at retirement.
3) Have a $100K investment savings earning about 4% yield. Yield is based on return based on our SA account. So if the investor is able to increase his yield, the % of saving from monthly income will drop.
4) Average inflation of 3%. That is the average of the past 10 years.
From the above assumptions and with the stubbornly high inflation rate, the average investor will have have a hard time accumulating enough savings for retirement. The only strategy out is to put his investment money harder at work. Bump up the yield to 10% and his % of savings drops to a more manageable 28%.
Go ahead, feel free to download this tool and see how much you have to save for your retirement! Enjoy!
