How much to save for $2-3 m by age 50?

Reader: I am a graduate in my mid-30s, and earn about $5,000 a month. My wife is of the same age, a graduate and also earning the same income.

We don’t have children and we live in a HDB flat, don’t own a car, and are conservative in our lifestyle.

We hardly invest in stocks, and accumulate savings in the bank’s fixed deposit accounts.

We hope to retire at 50 on savings of $2-3 million. We believe we can based on some back-of-the-envelope calculations that we have done.

We don’t plan to stop working completely after 50, but will work two or three days a week.

Is it possble to achieve $2-3 million by 50? Is this enough to last us for the rest of our lives?

Leong Sze Hian

Dear Reader: Let’s assume that you are:

* aged 35,
* want to have $6,000 a month (60% of your combined income now) when you retire at age 50;
* the $6,000 should increase at 2% per annum to adjust for inflation;
* you want this sum until age 88.

Under the above assumptions, the capital you require at age 50 is $1,913,304, assuming your savings can achieve a 6% rate of return a year along the way.

If I assume that you have $300,000 of assets now (CPF + cash), you will need to save $4,027 monthly from now to age 50.

As the assumption is a 6% rate of return, you may have to consider investing your cash and CPF – after setting aside about 6 months of your expenses in cash, and the first $50,000 of your CPF OA/SA that cannot be invested.

If you plan to work for 2 or 3 days a week when you retire, the amount you need to save may be less, as the inflation-adjusted equivalent of $6,000 today is $8,075 in 15 years’ time