5 SIMPLE WAYS TO START PLANNING EARLY FOR YOUR RETIREMENT

Continuous improvement in healthcare systems has significantly increased the life expectancy of Singaporeans (source: CNA). Hence, there is a greater risk of experiencing retirement inadequacy if you put off your retirement planning. Yes, people do outlive their resources! Early retirement planning, an essential part of financial wellness, helps you avoid running short of money in your retirement years. This helps to ensure that you maintain adequate emergency savings, live your dream retirement lifestyle, and even afford unpredictable, out-of-pocket medical expenses that could cost you more than you can imagine.

KNOWING HOW MUCH YOU NEED FOR RETIREMENT

Simply deciding on a sum of money you want to save every month is not going to cut it. Just like making any purchase, you need to know the exact cost in order to be able to pay for it. So do some calculations to find out how much you need for your retirement. For example, most financial consultants will advise using 70% of your annual income as a benchmark. Imagine you decide to retire when you are 55. Bearing in mind Singapore’s life expectancy is 83.93 years, you are going to plan for 29 years of retirement. If you make $72,000 annually, you should put away $50,400 x 29 = $1,461,600 for retirement. Oh, whille you are at it, you have to factor in inflation rate too.

INVESTING WITH A LONG-TERM MINDSET

Let us be honest; it takes extreme prudence to be able to commit 70% of your annual income to the sole purpose of saving. That’s when investing comes in but no, we are not asking you to invest in the first thing and everything you see. Don’t go for quick gains but instead invest wisely and with a mindset that you’re going to be in the market for a long time. This will ensure that you can soar above the volatility that is expected in any kind of investment environments.

BUILDING PASSIVE INCOME

Passive income is an effective way to generate extra cash before and in retirement. Because it could be a side hustle or investing in dividend stocks, you can achieve a steady flow of cash without the commitment of a full-time job. Creating a passive flow of income to supplement your retirement later on isn’t as daunting as it sounds. How, you may ask? Just think of property rental, insurance, and also government schemes such as the Supplementary Scheme withdrawals and the CPF LIFE payouts.

BUILDING PROTECTION AGAINST UNKNOWNS

We all know the unpredictability in life. Getting protected in the form of insurance policies could be your best financial protection against life’s unknowns. Of course, you cannot protect yourself against every unknown but it would be good to question yourself about the probability of a life-changing event such as retrenchment or a medical condition that may require a large sum of money to treat? Once you make a list of these probable events, sequence them from the highest likelihood to the lowest likelihood, and get relevant protection against these possible situations.

GETTING HELP FROM A FINANCIAL CONSULTANT

Now, don’t get us wrong. We are not trying to upsell something here but honestly, in order to effectively plan for retirement through the adoption of the first four ideas mentioned earlier in this article, you will need the help of a financial consultant – if you are going to do it right. Sure, you can also do it on your own, but it takes a very well-informed person who has spent time studying the different financial offerings in the different markets in order to do it right. Would you want to spend your time conducting the tedious research? Financial consultants have the background knowledge of the financial products and services available in the market and they have been trained to assess risk appetite as well as have an eye to match you with the most suited financial offerings based on your personal situation and aspirations. If you haven’t had the chance to speak with a financial consultant yet, why not give it a try today and see where it can bring you? After all, you are not obligated to make any purchases and you can definitely benefit from the complimentary consultation in some ways.