How freelancers in Singapore can save for retirement, Money News

Saving for retirement can often be a fear-inducing issue. With 14 percent of the Singapore workforce registered as self-employed in 2020 (World Bank), the question of how to save for retirement as a freelancer might not be more relevant than it is now.

While the most obvious answer to the above question is to put money aside, there are many ways you can do it. You can simply choose to set aside a percentage of your monthly income, invest it, or put it in a savings account.

However, each option largely depends on your income, retirement age, and current financial situation.

Set up a retirement plan

To set up a retirement plan, you need to answer the following questions:

  • How old are you now?
  • When are you planning to retire?
  • What’s your monthly income?
  • What are your monthly expenses?
  • How much does your income vary from month to month?

After answering these questions, you will get an idea of ​​how much you need to save. The current retirement age in Singapore is 62 and will increase to 63 in 2022.

While this may not affect your retirement age as a freelancer, we use the official retirement age for retirement planning.

Current age Years to retirement Total Retired Spending Monthly storage required
25 years 37 years 451,836 USD $ 1,017
30 years 32 years 451,836 USD $ 1,176
35 i 27 years 451,836 USD $ 1,394
40 years old 22 years 451,836 USD $ 1,711

The table above assumes the individual monthly cost at retirement to be $ 1,793 (Singstat). The total retirement expenses are also based on a life expectancy of 83 years. Another factor that we need to consider is health care spending.

All Singapore self-employed nationals and permanent residents must make mandatory contributions to their Medisave account if they earn more than $ 6,000.

Annual net income Under 35 years 35-45 45-50 50+
$ 6,000 to $ 12,000 Four percent 4.5 percent Five percent 5.25 percent
$ 12,000 to $ 18,000 Four to eight percent 4.5 percent – nine percent Five percent – 10 percent 5.25 percent – 10.5 percent
Over $ 18,000 Four percent Nine percent 10 percent 10.5 percent
Maximum $ 5,760 $ 6,480 $ 7,200 $ 7,560

In addition to making mandatory contributions to your Medisave account, you can also make voluntary contributions. The great advantage of voluntary contributions is that you can apply for tax breaks for these contributions in order to reduce your overall tax expense.

Set a goal and save

The easiest way to start saving for retirement is to calculate your monthly income and expenses, and set a realistic amount that you can reserve monthly for retirement. This should usually be a percentage of your monthly income and not a fixed amount.


Calculate when you would like to retire and how much you would spend on average each month after you retire.

The average monthly household cost in Singapore is $ 3,586 (Singstat), assuming the household size is two people. This implies an individual monthly spending of $ 1,793.

It’s also important to keep in mind that there will be multiple expenses that you won’t have to worry about in retirement, such as: For example, your tax expenses, your Medisave account contributions, health insurance, child tuition fees, work-related expenses, and possibly even life insurance premiums.

This method of saving for retirement has many disadvantages: you don’t earn interest on your savings to offset inflation, and you don’t get tax breaks on your savings.

CPF contribution

The Central Provident Fund is a social security savings plan that provides Singaporeans with a safe retirement plan. While contributions to your Medisave account are mandatory, you can also make voluntary contributions to your CPF Ordinary Account (OA), Special Account (SA) and Medisave Account (MA).

Ordinary account contributions can be used for housing, insurance, investment, and educational needs. The special account can be used for retirement income and pension-related investments.

As mentioned earlier, the Medisave account is intended to be used for hospital expenses, approved outpatient medical care, and approved health insurance.


While CPF contributions are usually made by both the employer and the employee, as a freelancer you only need to contribute to your Medisave account.

There are many benefits to making voluntary contributions to your special CPF account to save for your retirement. First, the interest you get is higher than the rate of inflation.

The current interest rate on SA contributions is four percent per year and is reviewed quarterly.

Second, your contributions can be used to invest in the future. Finally, your investment is safe compared to other investments linked to indices that fluctuate with the markets.

Medisave and Special Account interest rates are calculated based on the 12 month 10 year average return on Singapore government securities plus one percent. In addition, this investment is guaranteed by the Singapore government, which makes it safer than investing in the stock market.

Fixed deposit & savings account

2010520_atm_st How freelancers in Singapore can save for retirement, Money News

Two great ways to save for retirement are with a fixed deposit or a savings account. A fixed deposit is a type of investment that gives you a higher interest rate than a regular savings account.

At the time of opening an account, you agree to deposit money with a financial institution for a specified period and interest rate.

Unlike a savings account, you cannot withdraw a fixed deposit before the due date. In return, however, you get a higher interest rate on a fixed deposit than on your savings account.

If you’re looking for more flexibility with your investment, a savings account might be the right choice for you.


Both fixed-term deposits and savings accounts are low-risk investments with guaranteed returns.

A key feature of both investments that you need to consider is the interest rate offered on your deposit.

To ensure you don’t lose any money, the interest rate on your deposit shouldn’t be lower than the current rate of inflation.

Therefore, in order to make money, the interest rate has to be higher than the inflation rate.

According to Statista, the current inflation rate in Singapore is 0.34 percent. This explains why so many commercial banks offer interest rates for savings and fixed-term deposits below one percent pa, with most offering around 0.5 percent. Banks usually pay higher interest rates on deposits with longer terms.

For example, periods of 24 and 36 months result in higher interest rates on average, regardless of the amount deposited. Maybank currently offers one of the best interest rates for fixed-term deposits, namely 0.6 percent with a term of 36 months with a minimum deposit of USD 5,000.

Final verdict

While there are many ways to save for your freelance retirement, the best way is to combine the options above. Ideally, you should invest part of your income in a fixed-term deposit account.

Since the longer the tenure, the higher the interest, this investment can be tied for several years. Hence, you also need to set aside some money to access in an emergency. This would be a savings account.

This would also be a liquid asset as you can easily access it unlike a fixed deposit.

This article was first published in ValueChampion.

May 23, 2021