Should you right-size your home when you retire?

During your retirement, you will likely continue to spend a similar amount each month as what you are currently used to, even though you would no longer have your regular income from work. For many, this will mean a significant change in the way they need to manage their money, as the salary from their job forms the bulk of their monthly income.

With the retirement age set to increase to 65 by about 2030, Singaporeans will now be able to work till the retirement age, before commencing their CPF LIFE monthly payouts at age 65. However, what CPF LIFE provides may be just a fraction of your monthly expenses will be. For example, a 55-year old today with the Full Retirement Sum (FRS) saved in their CPF Retirement Account (RA) stands to receive a CPF LIFE monthly payout of between $1,391 and $1,533 when they turn 65.

This sum is about one-third of the median income in Singapore today, which does not even account for inflation for the 10-year period until they retire. This sum, when multiplied by two persons – to account for husband and wife – is also close to the average monthly household expenditure among resident households where the age group of the main income earner is 65 and above.

What this means is that you will likely have to complement your CPF LIFE monthly payouts with other sources of supplementary income in your retirement. In Singapore, one popular method would be to monetise your property.

One common question for those who are retiring is whether or not they need to right-size their home – which means moving into a place that is of an appropriate size (usually smaller) for your household, especially since you will likely have adult children who have moved out.

The main point of this is to monetise an asset that you are not fully utilising and to use it for your retirement. Additionally, you can tap on the Silver Housing Bonus (SHB) to receive up to $20,000 in Cash Bonus, if you are right-sizing from a larger flat to a 3-room or smaller flat.

However, right-sizing your home is not the only way to unlock the value of your property. Often, after living in your home for a long time, there may be resistance to selling it either for sentimental purposes, or because you are already very comfortable with where you are living.

You can continue living in your home and sell the tail-end of your flat’s lease to HDB through the Lease Buyback Scheme (LBS). To enjoy this scheme, you need to ensure the remaining lease on your HDB flat is able to cover the youngest property owner till at least age 95. You can also enjoy an LBS bonus of up to $20,000 in cash.

Do note that you cannot sell your flat on the open market once you have participated in LBS.

Being government schemes, the Silver Housing Bonus and Lease Buyback Scheme are only available to HDB flat owners. For private property owners and also HDB owners, you can choose to monetise your home through rentals.

Rather than sell your home, you can rent out the extra rooms that you no longer need after your adult children have vacated. Even better, renting your spare rooms also gives you a recurring monthly income, rather than a lump sum amount that you may have to top-up into your CPF account.

A common problem with renting out rooms is having to live with strangers in your own home. While that’s not a bad thing, if you’re uncomfortable, you can always opt to rent out your entire flat, and move into a smaller rental apartment or with your children. The rent can then be used to afford your retirement expenses.

Planning for retirement is not something you should think about when you are on the cusp of entering your golden years. Rather you should start growing a retirement nest egg from as early as your first paycheck!

One way to ensure you are diligently saving and growing a healthy pot is to take a hands-on approach by investing in stocks and bonds. When you are young and have a longer-term horizon, you can ride out market volatility in the short-term.

If you prefer to take a hands-off approach, you can lean on CPF by consistently topping-up your Special Account, or Retirement Account after you turn 55, and earn an interest of at least 4.0% per annum. You can also use a policy such as the AIA Pro Lifetime Protector to invest in guided portfolios that suit your risk appetites.

At the same time, you receive all-round protection for your loved ones and shield your retirement funds in the event of death, disability or multi-stage critical illnesses.

As Singaporeans are living longer lives, retirement planning is critical. However, you should not neglect planning for today’s uncertainties.

With AIA HealthShield Gold Max, you can safeguard yourself against costly hospital bills with the option to access treatment in private hospitals or at various ward classes at public hospitals to suit your medical needs and budget.

Going further, AIA provides our customers with comprehensive healthcare solutions to value-added services. These include AIA Quality Healthcare Partner (AQHP), giving you easy access to a curated list of over 400 specialists with pre-negotiated outpatient consultation fees, WhiteCoat, offering you on-demand telemedicine services with Singapore-registered doctors via video consultations, and Medix Personal Case Management, enabling you to enjoy personalised support from diagnosis to recovery for serious medical conditions with leading specialists around the world.

AIA Power Critical Cover is a comprehensive standalone critical illness plan that enables you to protect your spouse’s retirement as well as the living expenses of your loved ones in the event you are diagnosed with a critical illness. The plan provides you with wide coverage for 175 conditions and gives you a Power Reset Benefit, which fully restore your coverage amount after 12 months from your last claim, up to 500% in coverage amount. You also enjoy a Power Relapse Benefit that provides up to 200% coverage for five critical illnesses, including a re-diagnosed major cancer coverage.