Budgeting For Retirement? Here are 6 Ways Your Spending Habits Will Change When You Retire

Budgeting For Retirement? Here are 6 Ways Your Spending Habits Will Change When You Retire

How much money do you need to retire? Estimates vary wildly. The Straits Times says you need $1 million.

But in reality, just as some of us drive around in Ferraris and others can’t even afford to Uber their way out of an MRT breakdown, how much you need in retirement depends a great deal on your current lifestyle.

(Which, by the way, is why avoiding lifestyle inflation can actually help you retire earlier, not just because you’ll save more, but also because you’ll need less when you stop working)

The Employee Benefit Research Institute in the US has estimated that retirees are likely to spend 20% to 30% less than they did in working life.

Now, that’s not a huge reduction. So if you’re currently going on overseas holidays every month and dining at restaurants seven times a week, don’t think you can suddenly downgrade to a life of sipping kopi at HDB coffee shops and watching Channel 8 dramas the instant you retire.

When trying to figure out how your expenditure will change in retirement, here are some changes you should anticipate.


You will spend more on healthcare

You might have won your workplace’s annual 100% attendance award. But guess what—you, too, are human.

No matter how much of a health freak you are now, you are probably going to have more health problems as you get older.

And even if you are immortal, your health insurance premiums will rise all the same as you get older.

Getting rid of health insurance may not be the answer, however (at least, not until you’re close enough to death for it to make financial sense), as the older you are, the more likely you are to get hospitalised and need to make a claim.

So when budgeting for retirement, you’ll want to give yourself a buffer for increased healthcare costs.


No work and more free time

Assuming you retire completely and do not take up part-time work, you’re going to have a lot more free time than you do now.

That could actually lower your cost of living somewhat. No more rushing to work in a Grab or Uber, no more being forced to have lunch out on weekdays. You’ll have more time, so you might be less likely to resort to food delivery or other services targeted at those who are pressed for time.

And if you drive because your work demands it or you live too far from your workplace, giving up your car when you retire can significantly lower your financial needs.

Some of you might even choose to retire in a foreign land with a lower cost of living, such as Thailand or Malaysia. If that’s the case, you should be able to lower your cost of living considerably.


The kids will be grown up

If you are currently a parent, a large proportion of your monthly spending no doubt goes into keeping your kids alive and happy.

When you retire, your kids will hopefully be grown up and able to support themselves. That means you won’t need to factor kid-related spending into your retirement budget.

Beware, however, of thinking of your kids as a source of retirement income. Young Singaporeans are becoming increasingly pressed financially, and you cannot assume your children will be able to afford to support you.


Changing entertainment needs

The things you like to do right now as a strapping youngling might change significantly when you’re older.

Right now, you might be blowing all your cash on alcohol and clothes. But when your liver has failed and you’re carrying a poop bag around with you, such costly forms of entertainment might seem less attractive than an evening watching soccer on the TV screen at your local kopitiam.

On the other hand, if you spend most of your youth slogging away and want to use your retirement years to travel and finally see the world, you could well end up spending more, at least in the first years after you retire.


Paying someone to take care of you when you can no longer do so yourself

At some point in your life, you might be too frail to look after yourself. Yes, it’s a scary thought, but a very real possibility, given the fact that Singaporeans spend an average of 8 years in ill health. We’re living longer but not enjoying a corresponding quality of life.

So you want to think seriously about what kind of caregiving you can afford when you reach that point. Right now, most nursing homes in Singapore leave much to be desired and you might feel like you’ve gone back in time to your NS days as you lie in your dormitory and are forced to follow a strict timetable. Hopefully that will change by the time it’s your turn.

What are the alternatives? Either follow the growing trend of hiring a foreign live-in caregiver or head to an overseas nursing home in, say, JB, where you get more privacy for less.

Once again, it is important not to assume your children can and will want to take care of you. Not only will they presumably have their own careers and families to contend with or possibly be residing overseas, they might also not be qualified to give you the kind of specialised or medical attention you’ll need.



Look at the figures you’ve gotten after considering all the above factors. Now, consider that that figure could double or triple by the time you retire thanks to inflation.

We’re not fortune tellers or fengshui masters, so we can’t predict the inflation rate. But assuming an inflation rate of about 3% per annum and budgeting for 4% to 5% instead is a safe bet.

How much do you think you need to retire? Tell us in the comments!