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Key financial milestones for 35 to 50 year old Singaporeans

After the rat race of your 20s and early 30s, you may now be eager to settle down. If you’re like many Singaporeans, you may have already gotten married and had your first child. You may be ready to grow your family, or to find a place to call your own. On the other hand, perhaps you’re still preparing to have kids.

With starting a family comes large investments, including a house or a car. You need to plan ahead to make sure you can support your kids’ needs and education. You’ll also need to have a budget for all those doctors’ visits as well as health emergencies and other unexpected situations.

If there’s anything 2020 has taught us, it’s that you can make all the plans you want but one event can upend them all. So it’s important to include financial safeguards in your plans and think long-term.

Here are some ways to prepare for financial milestones during the second phase of your working life, from 35 to 50 years old.

You can settle down

As couples settle down and start their families, it is important to find a safe and spacious home. You’ll need to consider several factors, including availability of amenities in the neighbourhood, the home’s proximity to the workplace, and whether the property has the means to accommodate a larger family if you choose to have children.

With three-room build-to-order (BTO) flats starting at around S$150,000 in non-mature estates and skyrocketing to the millions for those looking at private homes, prudent financial decision-making is essential when buying your dream home.

First-time home buyers are sometimes put off by the price of resale flats, but one of the key advantages of investing in one is that their value tends to appreciate over time. What’s more, there is no two to three year wait time, unlike most BTO flats.

If you are like most Singaporeans, you will need a home loan to buy your own property. The Housing Development Board (HDB) loan is available for those looking to buy a public housing flat – although you may choose to take a bank loan, whereas those looking for private property can apply for bank loans, which may attract a lower interest rate than HDB loans depending on the prevailing interest rate environment.

| Related: HDB vs bank loans: 5 things you need to know |

There are several fees and charges involved when first buying a house. These include the initial down payment, property taxes, and home insurance. 19% – 21% of the Central Provident Fund (CPF) contribution of employed Singaporeans over 35 to 50 years of age goes into their Ordinary Account (OA). Funds from the OA can be used to make the downpayment for your home.

Property tax is calculated based on the annual value of your home. So the greater the value of your property, the more property tax you’ll have to pay. It’s a one-time payment every year, so budget for an additional expense in January, or you may even pay over 12 monthly installments through GIRO.

Home insurance is an oft-overlooked expense, but it is crucial to ensure the safety of your assets. Basic fire insurance is mandatory for HDB flats, but only covers building structures and fixtures/fittings built by HDB and not any damage to personal property. A comprehensive home insurance plan should cover your home and its contents, alternative accommodation in the event of an emergency, and personal liability. As always, premiums for landed properties and condominiums are higher as compared to HDB flats.

You can buy a car

For many young families, owning a car makes everyday tasks such as school drop-offs and work commutes easier. But the cost of car ownership deters many from taking the plunge.

There are a couple of hoops you have to jump through to buy a car in Singapore. You have to buy a Certificate of Entitlement (COE) which legally allows you to own and use a car. You’ll have to pay an Additional Registration Fee (ARF), which is proportional to your car’s Open-Market Value (OMV), and that’s not counting excise duty and Goods and Services Tax.

Then you have to think of vehicle maintenance, annual road tax, and parking fees. If you live in a HDB flat, you can expect to pay about S$100 a month for season parking. Depending on your travel patterns, parking (outside your residence), petrol and ERP can easily add a few hundred a month.

| Read more: Is buying a car worth it? We calculate the cost of owning one in Singapore |

If you do end up buying a car, it’s important to take out a comprehensive insurance plan for it. With over 7,000 road traffic accidents resulting in injuries reported in 2019, it is critical to protect your car against damage in case of an accident. A comprehensive car insurance plan should cover not just damage to your vehicle or others, but also legal representation if you are involved in a lawsuit.

Your CPF allocation rates will change

The allocation of funds to your OA, Special Account (SA), and Medisave Account (MA) will change six times from 35 – 50 years of age — just above 35, and just above 45.

The SA is intended to support Singaporeans after retirement. The account attracts an interest rate of 4%, and funds from the account can be used for approved investments in order to better your financial prospects following retirement. However, you cannot withdraw funds from your SA until after retirement.

Here’s a breakdown of how your CPF contributions change from 35 – 50 years of age.

Employee Age

OA (% of wage)

SA (% of wage)

MA (% of wage)

Before 35

23

6

8

Above 35 – 45

21

7

9

Above 45 – 50

19

8

10

Above 50 – 55

15

11.5

10.5

Source

Healthcare as you age

It’s no secret that ageing takes a toll on the body—a knee injury for a 20-year-old isn’t as incapacitating as for a 50-year-old.

Although Singaporeans have a safety net in the form of the CPF MA, which sets aside money for your personal or dependents’ medical fees, the account has withdrawal limits. This means that while you may be able to defray some of your medical expenses with funds from your MA, you may still incur out-of-pocket expenses such as medical imaging fees, medication, and ambulance transport.

| Related: MediShield Life: Premiums, benefits and 2020 review |

A comprehensive health insurance plan can cover other unprecedented expenses such as lab tests, medication, and other miscellaneous expenses. You don’t even need to take out a whole new plan — Integrated Shield Plans (IPs) offered by private insurers can provide additional enhanced coverage to Singaporeans and permanent residents on top of the mandatory Medishield Life. The world of health insurance can be pretty mind-boggling, so be sure to use a comparison platform to shop around for the best price and cover.

Plan for retirement early

A good retirement plan begins well before you reach your 60s – you should already have one in this life stage. Making the calculations for retirement savings should take into account things like inflation, potential investment returns, and an emergency expenses fund. Life insurance is also a great investment as it covers unforeseeable circumstances, such as a terminal illness diagnosis or death.

| See also: How to use CPF to retire: CPF Retirement Account, interest and payouts |

A single, elderly Singaporean needs more than S$1,300 to sustain a basic lifestyle, and that doesn’t include other miscellaneous expenses.If you’re looking to be a globetrotter after retiring, you’ll have to consider that in your retirement plan even at this phase.

Wiggle room and wealth accumulation

As you progress through your career, you’ll likely find yourself in a better financial position than when you were just starting out. After setting aside money for your essential expenses, you may have some left over for other expenses such as family vacations. You can also use spare cash to grow your wealth by making prudent investments in stocks, bonds, and other assets.

You may also consider starting your own business. Singapore’s economy is known to be friendly to businesses, and you can apply for several government grants and schemes that support small and medium enterprises.

Are you financially ready to live this phase of your life?

| Related: Key financial milestones for 18 to 30 year old Singaporeans |

Singaporeans are living longer than ever before, with life expectancy at birth estimated to be 83. Sound financial planning at an early age has a significant impact on quality of life in your twilight years, so take time to research all your options thoroughly before making a purchase or taking out a loan.

Find out more at Finder, where we help you find the best insurance policies, credit cards, and loans specific to your needs.

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