7 Common Retirement Income Streams in Singapore

For many people, retirement planning seems complex and thus difficult to even think about. In some cases, they are also unsure of the amount they will need at retirement. For those who had worked out a number, they might think that the amount could be inflated.

For others, in lieu of accumulating for a lump-sum retirement fund, they are looking at creating multiple sources of passive income instead. I started my retirement planning using this approach.

Here are the 7 common retirement income stream in Singapore. To start thinking about your retirement planning, you can consider these for reference.

01

Investment Property

Collecting rental income from an investment property or multiple properties are the dreams for many. Properties provide leverage, and in a land-scarce Singapore, there will always be demand for property. However, rental income from properties in Singapore are taxable. Also as landlords, you may also need to consider property maintenance and repair costs, taxes, and getting the right type of tenants in.

Read more at:
https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/What-is-Taxable-What-is-Not/Rental-Income-and-Expenses/

02

CPF Life Plan

By default, all salaried workers contribute to CPF and part of this will become the retirement income for them. In fact, this will be the most common form of retirement income. You set aside the Full Retirement Sum at age 55 in the Retirement Account (RA), allowing it to accumulate at up to 6% p.a. At age 65, this will be converted to CPF Life and a Monthly Payout is disbursed based on the amount accumulated and the type of plan chosen.

As you might have already realised, the amount of monthly payout depends on the Retirement Sum you set aside at age 55. The benefit of the CPF Life Plan is that if you choose either the Standard or Escalating Plan, the payout will be for life, no matter what age you live to.

Read more at:
https://www.cpf.gov.sg/members/schemes/schemes/retirement/cpf-life

03

Dividends from Stocks / Unit Trusts

Other than having an investment property, dividends from stocks or Unit Trusts can also be a good source of passive income. Moreover, it is easy to start as you only need a relatively small sum of capital (as compared to getting an investment property). The dividends received can also be reinvested to earn compounded returns. However, there is no capital protection due to market movements. Hence, people can be resistant to this approach to build an income stream.

04

Monthly / Yearly Income from Endowment / Annuity Plans

For the risk adverse, this might be the better option. With part of the capital set aside with an Insurer guaranteed, you can also profit from the returns of their Participating (Par) Funds. However, to be able to benefit from the good returns / yields in the form of bonuses and dividends, the contractual lock-in period can be long.

05

Coupon Payout from Bonds

There was a period when bonds pay 6% to 7% coupons. With such rates, this used to be the preferred income stream. Today, even though interest rates are low, bonds are still viewed as a relatively safe instrument for income stream.

06

Shareholders’ Profits from Businesses

In some cases, you can also earn an income if you become a shareholder of a friend’s, or family member’s business. Or you can be an entrepreneur and build businesses. This does not seemed common, but it could still provide a steady source of income stream.

07

Active Income

If you were to remain fit and healthy, even at retirement age, staying active and gainfully employed not only help you pass time productively, but also provide a continuous stream of income. It may or may not be a full-time job.

As you can see, there are several ways to reach your retirement goals. Whether you choose to build a retirement fund, or to create multiple income sources stream, these take time. For income streams (1) to (6), you will need time to build up the capital required, and/or to source for a good vehicle. No matter which method you choose, it only make sense to plan and start early.

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