Investing for Retirement Newsletter 1

There is a recent survey by the Straits Times: Keeping retirement planning on track can be a struggle, say Singapore residents in the survey.

Cash is still King for retirement planning. Most people keep their cash in savings accounts in banks or their wallets. However is this the best way to go with the high inflation rate we experience today?

Singapore’s core inflation – which excludes private transport and accommodation costs – was at 5 per cent year-on-year in March. The Monetary Authority of Singapore expects core inflation to stay elevated in the next few months, before easing more discernibly in the second half of 2023.

So what should we do in the high-interest rate environment we find ourselves in today?

First, we can invest in high quality government bonds that will give a good rate of return. This can be found in the Singapore Savings Bonds or the MAS T-Bills. The benefits of such bonds is that they can be withdrawn at any time without penalty and that there is almost no default unless the Singapore government itself defaults. The cons is that the rate of return might not beat the prevailing inflation rate.

Second, we can invest in Index funds like the Singapore Straits Times Index or STI or we can consider overseas markets like the S&P500 Index which is the basket of 500 biggest companies in the United States. These indices give 4-10% rate of return per annum and are considered to be highly diversified investments. However for the best results, you should consider holding them for a period of 10-20 years.

Third, we can consider high interest savings accounts like the CIMB FastSaver or the Trust Savings account. There is no risk of default for these banks savings accounts as they are fully insured by SDIC for 75k even if the bank goes under. The cons however, is that bank savings accounts almost never beat the prevailing inflation rate.

So those are 3 ways you can help to ease the inflation on your savings rate. We hope you enjoyed it and found it helpful. Stay tuned for the next email.