In a couple of weeks’ time, we will be celebrating our nation’s 49th birthday.
I feel a little sad for the organisers (yes, that high-flying but not-so-high-flying SAF officer) because all eyes are really on the next one. Besides the Jubilee Baby Gifts given to babies born in 2015, SPH has also invited renowned artist Stephen Wiltshire to draw Singapore’s landscape as a gift to the nation for its 50th birthday, a year earlier in advance. Furthermore, there’s no National Day Song this year, breaking a tradition that goes back to >16 years.
At this rate, I am wondering if they might just cancel this year’s parade. =p
All right, I digress. Over at at this blog, the focus here is on money issues. Or to be more specific, early financial independence, which many also equate to early retirement. And although I have rarely mentioned it, I am indeed lucky and grateful that I live in a country where the elimination of a 40 hour work week is possible.
So as a tribute to our nation’s upcoming 50th birthday, I have listed 5 reasons below why I feel it might be easier to retire early in Singapore, as compared to other countries (eg. Denmark or Zimbabwe)
1. Low unemployment, high income
Our unemployment rate traditionally hovers at around the 2% mark, which is the envy of most other countries. The economy is vibrant and new jobs are constantly being created to absorb new labour market participants. Compared to their peers from other developed countries, our newly minted graduates do not face as much difficulty landing their first job.
Because of a generally tight labour market, wages aren’t compressed too. Based on IRAS’s latest annual report, the median annual income of resident tax payers is about $53,000, which is a pretty decent figure. But as I have mentioned here, it’s really not that difficult to rise above the average. Why not aim at being in the top 30 percent, where you will be getting an attractive annual remuneration of at least $80,000.
With a job providing high wages, all it takes is a little frugality and investment know-how before early retirement in the forties.
2. Low taxes
And the next great thing about high income in Singapore is one gets to keep most of it.
If you earn $80,000 bucks a year, you pay $3,350 in taxes, which is an effective tax rate of only about 4%. And if you earn $120,000, the $7,950 in taxes still constitute only about 6.5% of your annual income. These effective rates are easily 1/3 of those in European countries and 1/2 that of America’s.
Moreover, our mandatory CPF contributions attract tax reliefs, reducing our tax bill further.
3. Affordable and Quality Public Housing
Ok, before you start hurling insults at me for being a crony of the government, I understand that some of your consider the 20% mandatory CPF contributions a form of tax, since it’s not available as disposable income.
However, I prefer to look at it from another angle.
Up till the age of 50, all if not most (a reduced 19% from age 45-50) of your CPF contributions are allocated to the Ordinary Account, which can be used to purchase a house, which includes a quality and affordable HDB flat.
In one of the latest BTO launches, a 3-room flat in Sembawang can be bought for around $150,000. It comes with dependable and direct access to water and electricity, something most of us have already taken for granted. A neighbourhood park and convenient access to amenities like supermarkets and food centres is very likely part of the package too. And if your bigger family requires more space, a 4-room BTO flat in most new towns would cost <$300,000.
The 99 year lease will almost certainly cover your lifetime and one wouldn’t have to worry about monthly mortgages or rent during early retirement since the loan of that BTO flat will likely be paid off within 20 years.
4. Availability of Cheap Meals
Having stayed in a foreign country for almost half a year with negligible cooking skills, I really appreciate hawker centres in Singapore. $5 today can get you a good entree and a drink. But since a sugary drink is really unnecessary and may be even harmful, I would argue that $4 for a meal is more than enough.
Therefore, one probably needs less than $10 a day to cover his food expenses.
And although we don’t grow most of the ingredients in our dishes, we source for them globally. Coupled with our appreciating currency, this helps to keep costs for our groceries low. If one is able to whip up tasty food, the cost of a meal is even lower in Singapore.
This is comforting information for an early retiree wannabe. =)
5. Stable and rich government
The People’s Action Party (PAP) has been in power for the entire period of Singapore’s existence as a nation-state. This stability has garnered much international confidence in this tiny island with little natural resources. The first generation of leaders were able to leverage on our limited geographical advantage to attract much needed foreign investments to develop this country.
From third-world to first world, all within a short span of 50 years. Unprecedented.
And our state wealth keeps on growing, with our national reserves managed by the government. By most estimates, I would believe that the country has at least 500 billion dollars in total reserves. To better appreciate this insane amount, everybody would receive $100,000 if it was divided by a population of 5 million,
Besides enabling the government to guarantee our bank deposits to boost public confidence in our local financial system during the recent Great Financial Crisis, this financial strength has also funded goodies like the Pioneer Generation Package, U Save vouchers for utility bills and especially new schemes like MediShield Life.
Citizens, including early retirees, have benefited and will continue to do so from such a government.
Basically, in Singapore, we have the opportunity to earn a good employment income with low taxes. Together with low housing and food expenses plus government subsidies, this enables us to set aside a sum of money to invest to create a stream of passive income to finance an early retirement lifestyle.