Retirement planning isn't just about having more money. It's about getting the basics right

When we talk about making mistakes when saving for retirement, most people probably imagine something dramatic.

Getting scammed out of your life savings. Losing money in a stock market crash. Signing up for something you did not fully understand because a salesperson dressed in a smart-looking suit told you it was "safe".

But in my view, some of the biggest retirement planning mistakes usually start small and go unnoticed.

I’ve seen this happen to many of my older peers whom I used to think were set for a comfortable retirement because they were earning more than me, but are now in their fifties and fretting about not having enough.

Their missteps are not uncommon. Today, many Singaporeans still make the same mistakes – starting too late, chasing unrealistic returns, neglecting their Central Provident Fund (CPF) in retirement planning, or over-relying for financial advice on someone who is selling them products.

By the time the consequences show up, it may already be 10, 20 or 30 years later, when your working years are behind you and there is no way to undo your mistakes.

Just last month, a commentary by Christopher Tan, the chief executive officer of wealth advisory firm Providend, struck a nerve with many people, myself included.

In his May 22 commentary, he highlighted a worrying trend of Singaporeans being encouraged to meet the Basic Retirement Sum in their CPF accounts and invest the balance that could otherwise have gone towards the Full Retirement Sum into an investment-linked policy (ILP).

The sales pitch was that the combination of CPF Life payouts and the ILP would ultimately provide a higher level of retirement income.

As this practice came to light, the issue drew wider scrutiny after some advisers were found to be marketing ILPs as "capital guaranteed upon death".

The Monetary Authority of Singapore (MAS) and the Life Insurance Association Singapore subsequently said such descriptions were misleading because ILPs are not capital-guaranteed products.

This incident, along with watching the friends around me fret about their impending retirements, shows how many Singaporeans remain uncertain about how to prepare for their retirement

So, what does it actually mean to prepare well for one's senior years?

THE DANGERS OF NOT PREPARING FOR RETIREMENT EARLY

When we first start working, it's easy to forget about retirement because it seems like a distant prospect.

Some may also assume that when they've worked for more years, they can easily save enough for their retirement because of their increasing salary.

However, waiting too long to start saving and investing for retirement is, in my opinion, the most expensive mistake anyone can make.

When you start late, you give the benefits of compound interest less time to work. A person who invests S$500 (US$387) a month from age 30 to 65 would have contributed S$210,000 in capital.

At a 5 per cent annual return over 35 years, that could grow to more than S$560,000 before fees and taxes.

Now compare this with someone who starts investing at age 45 and invests the same S$500 a month until age 65. In total, they would have invested S$120,000. However, at the same annual return rate, they end up with about S$206,000.

Essentially, your money has less time to grow.

Of course, not all investments promise fixed annual interest rates with no risks.

The stock market can be a powerful wealth-building tool over long periods. But it does not move in a straight line. If you start investing late, you have less time to recover from downturns, less room to correct mistakes, and less flexibility if markets fall just as you retire.

WANTING UNREALISTIC RETURNS

Starting late is just the tip of the iceberg.

Late starters are often more vulnerable to aggressive sales pitches because if you realise you have not saved enough, a product projecting 8 to 12 per cent annual returns suddenly looks very tempting – even though these returns can often be unrealistic.

It's not just late starters who are tempted. It can be someone who compares their low-risk portfolio to a friend who made money from AI stocks or crypto, for example, or a retiree who simply feels their CPF Life payouts are not enough.

Ultimately, the need or want for larger returns clouds people's judgment – and this hunger for more sometimes causes them to forget what risks they're taking to try to get them.

This is how scammers exploit people's hope for a shortcut to grow their retirement savings. In 2025 alone, victims in Singapore lost about S$913.1 million, with investment scams accounting for the largest share of losses.

And it is not just outright scams that could jeopardise our retirement.

There are also legal, regulated products that may still be unsuitable if they are sold to the wrong person for the wrong purpose.

For example, a high-cost investment product can still hurt your retirement plan, even if it is not a scam, with hidden withdrawal fees and no guaranteed returns. A market-linked investment product can also still disappoint even if the brochure was produced in full compliance with MAS guidance.

With the clutter of information available, deciding how best to handle your retirement can be a challenge. While turning to a good financial adviser can be valuable, they are no substitute for your own understanding.

OVERLOOKING YOUR CPF

It is also important to know what you already have for retirement – especially your CPF, which should form the bedrock of your financial plans.

Admittedly, Singaporeans have a strange relationship with CPF.

Some neglect it. Some resent it. Some treat it as "not real money", while others compare it unfairly with investments that have completely different risks.

But the truth is, CPF is one of the most important pillars in retirement planning for Singaporeans.

That's because CPF Life is designed to provide monthly payouts no matter how long we live, even after our CPF savings are depleted, and takes into account the "longevity risk" that we often forget about.

Many people underestimate the risk of living longer than their money lasts. They plan as if retirement is merely a designated period after they stop work, until they reach the life expectancy of about 84 years. But what happens if you live longer than that?

CPF Life was never designed to make us rich. It is designed to make sure we do not completely run out of income in old age.

For those turning 55 this year, having the Full Retirement Sum of S$220,400 in your CPF Retirement Account means receiving S$1,780 a month from age 65 until death. If you need more, the current Enhanced Retirement Sum of S$440,800 provides a monthly payout of S$4,580.

These CPF sums are not random numbers to be dismissed casually, as they determine the CPF Life income floor you can build for your older self.

Of course, relying on our CPF alone may not be enough for everyone. If you want overseas holidays, restaurant meals, private healthcare options, gifts for grandchildren or the ability to support ageing parents, you will likely need additional savings and investments.

CPF Life should usually form the basic retirement floor. Other investments should sit on top of it, not recklessly substitute it.

And if your financial adviser is asking you to reduce your CPF funds in favour of another more expensive investment product, you should think twice.

PUTTING THE PIECES IN THE RIGHT ORDER

The biggest lesson I've learnt is that retirement planning is not just about how much you make or save. It's also about putting the pieces in a specific, sequential order.

Before chasing returns, I made sure I started building emergency funds. Then, I secured insurance for risks such as hospitalisation, disability, death and critical illness, especially with dependants relying on my income.

Next, I assessed CPF Life retirement income before planning additional income sources.

Only after these steps did I take more investment risks for growth, lifestyle upgrades and legacy planning.

But many people get this sequence wrong. They start with investments and try to chase returns. Then they buy products, only to realise too late that their savings foundation was weak to begin with.

The difficult thing about retirement planning is that we are making decisions today for a version of ourselves we have not yet met, and for a life we know little about. We have no idea whether we will be in good health or how much higher prices will be in the future due to inflation.

But if we start early, there's still time to prepare to retire right.

Dawn Cher, also known as SG Budget Babe, is the bestselling author of Take Back Control of Your Money. She has been running a popular blog on personal finance for the last 12 years.

Source: CNA/lo/ay