Thursday, November 22, 2007

Minimum income for retirement

What is the monthly income that is needed for a couple to live on during retirement?

I discussed this question with several people above age 50 from the low income sector. We arrived at a sum of $700 a month, comprising of.

Food ($15 a day): $450
Utilities: $70
Medical: $50
Transport: $50
Telephone: $30
Miscellaneous: $50
Total: $700

A female needs a capital sum of $160,000 at age 65 to buy a life annuity that pays $700 a month. A male needs $150,000.

Most of the participants did not have this capital sum. They cannot afford to retire and will have to continue to work beyond 65 years.

7 comments:

Cherlek said...

this is good info because I think the "financial experts" out there always scare people with some ridiculous numbers.

Gregory said...

$700 is too low, most suitable range: $1500-$2000 a mth..

Anonymous said...

Ya, $700 is really too low for a couple. They have to eat only home cooked cheap vegetables and rice, bread and drink plain water every day. This is pathetic for a retirement couple in First world Singapore. Are things really this bad at the other end?

Priyadi said...

i think it is better to have increasing life annuity to account for inflation. $700/mo is probably enough for these people in the first years, but probably won't be enough in the coming years.

Anonymous said...

Got a toothache, even the national dental centre charge more than a thousand dollars to do root canal treatment. Any medical treatment even at subsidised rates will cost hundreds before you get cured. Just diagnostic fees already more than 70 dollars. This is from my recent experience, once for myself and once for my daughter.

Focus said...

What if you have $5 million at age 55..
do you still need the annuity?
I'm at this junction..coz i just sold my a biz property and i have no mortgage or liabilities..

Anonymous said...

Mr. Focus, it depends on the kind of lifestyle and what you WANT to do with your money. If you like the lifestyle before you sold your property $5mil.is absolutely more than enough and you can even leave a legacy. But if you want to enhance your lifestyle, give to charities , a legacy , a million to every of your children it may not be enough.SO IT DEPENDS on your goals.You have to see a financial planner who can help you with retirement planning and estate planning.
You don't need an annuity. Just invest in safe instrument that PRESERVES your purchasing power and draw down on the 5 mils if you don't think of growth any more.It will last your life time.Of course no gambling or any speculative stuff, you will still have a wonderful retirement even you lose a bit on your 5 mils.
You are very fortunate. I advise you see an expert but please NOT AN
INSURANCE SALESMAN. They know nothing about planning .

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