A pathway to financial security | OCBC Singapore
Now reading:

A pathway to financial security

A pathway to financial security

  • February 2025
  • By OCBC
  • 5 mins read

As we approach retirement, and with the likelihood of leaving the workforce, we may begin to ponder how do we sustain our current lifestyle without a regular paycheck. In this context, passive income is a critical element of a well-structured retirement strategy.

Unlike active income, which is earned through direct labour, passive income refers to earnings generated from investments or assets that require minimal effort to maintain. This allows individuals to receive income without the need for active work.

Common sources of passive income include:

  • Dividends: Investing in dividend-paying stocks can yield regular income, enhancing your financial stability.
  • Interest payments: Investing in instruments such as fixed income unit trusts or Singapore Savings Bonds (SSBs) which offer regular payout.
  • Rental income: Leasing property to tenants can provide a steady stream of income, particularly with long-term lease agreements.

One of the primary reasons passive income is essential for pre-retirees is its contribution to financial independence. With the rising costs of living and healthcare expenses, passive income serves as a financial cushion, helping to cover these costs and allowing pre-retirees to maintain their desired lifestyle without rapidly depleting their savings.

Having passive income can also significantly enhance lifestyle choices during retirement. It provides the freedom to travel, pursue hobbies, or spend more time with family without the constant worry of financial constraints. This financial flexibility can lead to a more fulfilling retirement experience, enabling individuals to focus on what truly matters to them.

The method you choose for withdrawing from your retirement savings can greatly affect how long those savings will last. Let’s compare the strategies of Retiree A and Retiree B in managing their retirement funds. Assuming both have set aside S$480,000 for retirement and require a monthly expense of S$2,000:

  • Retiree A keeps his funds in a savings account and withdraws S$2,000 directly from the account every month. Without considering any interest earned, his savings would be depleted within 20 years (calculated as S$480,000 divided by (S$2,000 x 12 months). If he outlives his savings, he will face significant financial challenges.
  • Retiree B, on the other hand, invests his retirement savings in an income-generating asset that could potentially yield a return of 5% per annum. With this investment, he could potentially receive a monthly payout of S$2,000 (calculated as (S$480,000 x 5%) / 12 months). While this approach provides a consistent income stream and reduces the risk of outliving his savings, it’s important to note that the value of the initial investment may increase or decrease due to market volatility.

Incorporating passive income into your retirement strategy is not just a smart financial move; it is essential for achieving long-term financial security and independence. By thoughtfully investing in various passive income streams, pre-retirees can create a sustainable financial foundation that supports their lifestyle and enhances their overall retirement experience.

Important Information

This advertisement has not been reviewed by the Monetary Authority of Singapore.

  1. Any opinions or views of third parties expressed in this document are those of the third parties identified, and do not represent views of Oversea-Chinese Banking Corporation Limited (“OCBC Bank”, “us”, “we” or “our”).
  2. This information is intended for general circulation and / or discussion purposes only. It does not consider the specific investment objectives, financial situation or needs of any particular person.
  3. Before you make an investment, please seek advice from your Relationship Manager regarding the suitability of any investment product taking into account your specific investment objectives, financial situation or particular needs.
  4. If you choose not to do so, you should consider if the investment product is suitable for you, and conduct your own assessments and due diligence on the investment product.
  5. We are not making an offer, solicit to buy or sell or subscribe for any security or financial instrument, enter into any transaction or participate in any trading or investment strategy with you through this document. Nothing in this document shall be deemed as an offer or solicitation to buy or sell or subscribe for any security or financial instrument or to enter into any transaction or to participate in any particular trading or investment strategy.
  6. No representation or warranty whatsoever in respect of any information provided herein is given by OCBC Bank and it should not be relied upon as such. OCBC Bank does not undertake an obligation to update the information or to correct any inaccuracy that may become apparent at a later time. All information presented is subject to change without notice.
  7. OCBC Bank shall not be responsible or liable for any loss or damage whatsoever arising directly or indirectly howsoever in connection with or as a result of any person acting on any information provided herein.
  8. Investments are subject to investment risks, including the possible loss of the principal amount invested. The information provided herein may contain projections or other forward-looking statements regarding future events or future performance of countries, assets, markets or companies. Actual events or results may differ materially. Past performance figures, predictions or projections are not necessarily indicative of future or likely performance.
  9. Any reference to a company, financial product or asset class is used for illustrative purposes and does not represent our recommendation in any way.
  10. The information in and contents of this document may not be reproduced or disseminated in whole or in part without the Bank’s written consent.
  11. OCBC Bank, its related companies, and their respective directors and/or employees (collectively “Related Persons”) may, or might have in the future, interests in the investment products or the issuers mentioned herein. Such interests include effecting transactions in such investment products, and providing broking, investment banking and other financial services to such issuers. OCBC Bank and its Related Persons may also be related to, and receive fees from, providers of such investment products.
  12. You must read the Offer Document/Indicative Term Sheet/Product Highlight Sheet before deciding whether or not to purchase the investment product, copies of which may be obtained from your relationship manager.
  13. Any hyperlink to any third party article, or other website or webpage (including any websites or webpages owned, operated and maintained by third parties) is for informational purposes only and for your convenience only and is not an endorsement or verification of any such article, website or webpage by OCBC Bank and should only be accessed at your own risk. OCBC Bank does not review the contents of any such articles, website or webpage, and shall not be liable to any person for the same.

Global Equities Disclaimer

  1. Dividend growth is not guaranteed, nor are companies in which you invest obliged to pay dividends;
  2. Companies may go bankrupt rendering the original investment valueless;
  3. Equity markets may decline in value;
  4. Corporate earnings and financial markets may be volatile;
  5. If there is no recognised market for equities, then these may be difficult to sell and accurate information about their value may be hard to obtain;
  6. Smaller company investments may be difficult to sell if there is little liquidity in the market for such equities and there may be substantial differences between the buying price and the selling price;
  7. Equities on overseas markets may involve different risks to equities issued in Singapore;
  8. With regards to investments in overseas companies, foreign exchange rates may move in an unfavourable direction affecting adversely the valuation of investments in base currency terms.

Collective Investment Schemes

  1. A copy of the prospectus of each fund is available and may be obtained from the fund manager or any of its approved distributors. Potential investors should read the prospectus for details on the relevant fund before deciding whether to subscribe for, or purchase units in the fund.
  2. The value of the units in the funds and the income accruing to the units, if any, may fall or rise. Please refer to the prospectus of the relevant fund for the name of the fund manager and the investment objectives of the fund.
  3. Investment involves risks. Past performance figures do not reflect future performance.
  4. Any reference to a company, financial product or asset class is used for illustrative purposes and does not represent our recommendation in any way.
  5. For funds that are listed on an approved exchange, investors cannot redeem their units of those funds with the manager, or may only redeem units with the manager under certain specified conditions. The listing of the units of those funds on any approved exchange does not guarantee a liquid market for the units.
  6. Any indicative distribution rate may not be achieved and is not an indication, forecast, or projection of the future performance of the fund.

Foreign Currency

  1. Foreign currency investments or deposits are subject to inherent exchange rate fluctuation that may provide opportunities and risks. Consequently, exchange rate fluctuations may affect the value of your foreign currency investments or deposits.
  2. Earning on foreign currency investments or deposits may change depending on the exchange rates prevalent at the time of their maturity if you choose to convert.
  3. Exchange controls may apply to certain foreign currencies from time to time.
  4. Any pre-termination costs will be taken and deducted from your deposit directly and without notice.

Are you sure you want to leave our site?

You are leaving the OCBC Bank website and about to enter a third party website that OCBC Bank has no control over and is not responsible for. Before you proceed to use the third party website, please review the terms of use and privacy policy of their website. OCBC Bank’s Conditions of Access and Privacy and Security Policies do not apply at third party websites.
I would like to stayLeave website