How to inflation-proof your retirement savings

Do you know how much savings you need for a comfortable retirement?

In general, there are two ways to calculate your retirement needs, as suggested by MoneySense, Singapore's national financial education programme.

The first way, called the Income Replacement Ratio Method, involves taking a percentage of your current income (as a guide, aim for two-thirds to three-quarters of your income) and multiplying it by the estimated number of years that you will be in retirement.

For example:

• Your current annual income, at age 43 is $60,000
• You aim to retire 20 years later at the age of 63.
• You use 75% of your current income as a guide
• Annual retirement income needed: 75% x $60,000 = $45,000
• Years in retirement (average life expectancy - retirement age): Men: 83 - 63 = 20
• Total retirement savings needed: 20 x $45,000 = $900,000

Another way you can estimate your retirement needs is the Adjusted Expense Method, which involves benchmarking the expected monthly retiree household expenses during retirement in Singapore and adjusting for inflation.

To illustrate, taking the same example as above:

• The average monthly expenditure of households comprising solely non-employed persons aged 65 years and over was $2,349 in 2023.
• Annual expenses: $2,349 x 12 = $28,188
• Total retirement savings needed (before adjusting for inflation): 20 x $28,188 = $563,760

Inflation – the "silent thief"

Under the Adjusted Expense Method, the total estimated retirement savings you may need could rise to around $857,648, after factoring in inflation.

We calculated this based on the average annual inflation rate in Singapore over the last 20 years, 2.12%. Between 2004 and 2024, the overall costs of goods and services in Singapore has risen by 52.13%, according to data compiled by the Singapore Department of Statistics.

As can be seen in the example, inflation can greatly change how much money you will need for your retirement. It’s no wonder that inflation is commonly referred to as a “silent thief” because it stealthily and slowly erodes the purchasing power of your money over time.

So, how can you inflation-proof your retirement nest egg to ensure it lasts for decades? Here's a practical guide to help you grow, protect, and stretch your savings well into your golden years.

1. Supercharge your CPF

Your CPF isn’t just a mandatory savings plan—it’s one of the most reliable tools for inflation protection in Singapore.

The CPF Special Account (SA) and Retirement Account (RA) earn a handsome 4% interest per annum, compounded and virtually risk-free. That’s already higher than Singapore’s average inflation rate.

Top up your SA (if you are below age 55) or your RA (if you are above age 55) via the Retirement Sum Topping-Up Scheme. The earlier you start, the more you benefit from compounding and tax relief. Top-ups to your SA or RA will go towards increasing your payouts in retirement. They are irreversible and cannot be used for other purposes (e.g. housing, healthcare, investment or withdrawn in a lump-sum).

Additionally, you can use the money in your SA for investments under the CPF Investment Scheme (CPFIS). Savings in your CPF Ordinary Account (OA), which earn you a guaranteed return of 2.5% per annum, can also be used for such investments.

Find out more: Why you should invest your CPF savings

2. Don't just save with SRS, invest it

The Supplementary Retirement Scheme (SRS) is another powerful yet underused retirement planning tool. While it provides up to $15,300/year in tax relief (if you make the maximum annual contribution), the real magic comes when you invest your SRS funds instead of letting them sit idle at 0.05% interest per annum offered at banks.

With your SRS, you can invest in:

• Global ETFs (e.g., S&P 500 or MSCI World)
• REITs for regular income
• Unit trusts and managed portfolios that align with your goals

These investments have the potential to deliver annual returns that help you beat inflation and grow your capital tax-efficiently.

Find out more: Invest with your SRS funds, GREAT Wealth Multipler 3, GREAT Invest Advantage

3. Growth assets are your best friend (when time Is on your side)

As you plan for a retirement that may last 20–30 years or more, relying on fixed deposits or cash won’t cut it. Inflation will quietly erode your purchasing power.

What you may need are growth-oriented assets:

• Global equities provide long-term capital growth.
• REITs generate steady income and appreciate with rising property values.
• Balanced or target-date funds help you adjust risk as you near retirement.

If you’re younger or still have 10+ years before retirement, you may consider leaning into equities. As you get closer to retirement, slowly shift into more income-producing and conservative assets.

4. Add real assets to your portfolio

Looking for a solid hedge against inflation? Tangible assets like property, gold, and commodities often shine during inflationary periods.

• Property: If you own a rental unit, rental income often rises over time.
• Gold: Long considered a safe haven, it preserves value during economic turbulence.
• Commodity ETFs: These track prices of essential goods (like oil, agriculture, or metals) that typically rise with inflation.

Read more: Using diversification to protect your retirement

5. Plan for income, not just accumulation

Once you retire, the question changes from “how much have I saved?” to “how can I make this last?”

You’ll want diverse income streams:

• CPF LIFE payouts as your core, inflation-sensitive income
• Dividends from REITs or stocks
• Bond or annuity payouts
• A withdrawal strategy (e.g., the 4% rule or dynamic withdrawal plans)

Also, consider using a “bucket strategy” — keep a portion of savings in cash or T-bills for short-term needs, medium-risk assets for the next 5–10 years, and higher-growth investments for longer-term drawdowns.

Read more: Retirement planning: from investing to enjoying the payout

It’s a marathon, not a sprint

Retirement isn’t a finish line — it’s a phase that may last 20 to 30 years or more. Inflation-proofing your savings doesn’t mean taking huge risks. It means being intentional with your strategy, using the right tools (like CPF and SRS), and letting your money work smarter through long-term investing.

Disclaimers:

All figures used are for illustrative purposes only and are subject to rounding.

The information presented is for general information only and does not have regard to the specific investment objectives, financial situation or particular needs of any particular person.

MoneySense is Singapore’s national financial education programme. Its aim is to help Singaporeans to manage their money well, and make sound financial decisions on their own. MoneySense is not affiliated with, nor does it endorse commercial entities or their business activities. For more useful resources on personal finance, visit www.moneysense.gov.sg and follow us on Facebook (www.facebook.com/MoneySense) and Instagram (@moneysense_sg).

Information correct as at 23 May 2025.