Ways to Build a Passive Income Stream in Singapore

11 August 2023

In our fast-paced world, financial freedom is a goal many aspire to achieve. One of the key drivers towards this goal is the concept of passive income. Unlike active income – which requires direct involvement and time – passive income is the money you earn with minimal to no daily involvement, allowing you to generate wealth around the clock. 

It's a simple logic – the more sources of income you have, the more financial security you enjoy. If one source of income dries up, you have others to fall back on. Plus, passive income frees up your time, allowing you to focus on what matters most. It's the stepping stone to financial independence, where your income is no longer tied to the hours you work.

Passive Income Examples: Where to Get Started

In Singapore, there are several vehicles to generate passive income from investments. Let’s explore three significant ones: CPF LIFE, Singapore Savings Bonds (SSBs), and robo-advisors.

1. CPF LIFE

Rolled out in 2009, the Central Provident Fund (CPF) offers Singaporeans a unique, risk-free, and steady income stream for life through CPF Lifelong Income for The Elderly (CPF LIFE). This feature makes it an attractive complement to any income investment portfolio. You are automatically enrolled in the CPF LIFE scheme as long as:

  • Your birth year is 1958 or later.
  • There's a minimum of $60,000 in your Retirement Account six months before you hit your Payout Eligibility Age (PEA).
  • You are a Singapore Citizen or Permanent Resident.

However, there are individuals who may not automatically fall under the CPF LIFE scheme. This includes those who are homemakers, individuals running their own businesses, and those who are self-employed, especially if they do not consistently contribute to their Central Provident Fund.

For Singapore Citizens or Permanent Residents not automatically incorporated into CPF LIFE, there's still an opportunity to join.You have the flexibility to initiate your enrollment whenever you decide to begin receiving payouts, which could be at any point from your 65th birthday until just one month shy of turning 80.

Regardless of the plan you choose – Basic, Standard, or Escalating – you can expect a reliable monthly payout upon reaching 65 years old. Unlike other annuity plans, CPF Life offers a sense of security because it is supported by the Singapore government, effectively eliminating default risk. Moreover, the payout amount is relatively predictable, providing you with a solid foundation in your retirement planning.

2. Singapore Savings Bonds

Often overlooked by investors seeking higher returns, Singapore Savings Bonds (SSBs) can play a crucial role in a well-balanced income investment portfolio. These bonds, guaranteed by the Singapore government, offer risk-free returns ranging from 1% to 2%. What makes SSBs even more appealing is their flexibility. 

Open to anyone over the age of 18, all that's required is a bank account with any of the three local banks and an individual CDP Securities account. These bonds can be purchased through the ATMs or internet banking platforms of DBS/POSB, OCBC, and UOB, or via OCBC's mobile app. Those investing through the Supplementary Retirement Scheme (SRS) can apply through their respective SRS Operator's internet banking portal.

Unlike conventional bonds that lock your capital until maturity, SSBs allow you to withdraw your investment without penalty, providing liquidity when you need it. Plus, the low minimum investment of $500 makes SSBs accessible to everyone, even those just starting their investing journey.

3. Robo-advisors

In the fast-paced digital world, robo-advisors have emerged as a game-changer. These platforms harness the power of technology to create diversified income investment portfolios that match your financial goals and risk tolerance. They handle everything from selecting investments to adjusting your income portfolio allocation, making investing a breeze.

StashAway is a leading robo-advisor that has captured the attention of investors with its unique Passive Income Portfolio. It employs a diversified investment strategy, investing in a mix of bonds, REITs, and dividend-paying stocks, contributing to a well-rounded fixed income portfolio. The objective is to offer consistent income fund returns, enhancing the overall income investment yield.

With any amount, you can start generating dividends that can either be reinvested for compound growth or withdrawn as passive income. This feature, along with StashAway's user-friendly interface and automated portfolio management, makes it an excellent choice for both beginners and seasoned investors alike.

Kickstart your passive income streams

As you start exploring your options in Singapore, it is important to understand that passive income doesn't mean 'effortless' income. The establishment of passive income streams often requires an initial investment of time, effort, or money. 

But once these streams are implemented and managed properly, they can yield significant long-term returns, making them reliable in the grand scheme of your financial journey. When paired with active income, savings, and smart money management, passive income can be a reliable cornerstone of a balanced financial plan.


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