A recent Nielsen survey commissioned by NTUC Income found that 1 in 3 working Singapore adults are not planning for their retirement citing various reasons.
With higher life expectancy and rising expectations in terms of our standard of living, it is important that we start planning. Just as you would plan for your career, what you do now could well determine how you live your golden years after retirement.
This 2-part series will provide useful tips how you can plan for retirement in 3 simple steps: Define, Protect and Build.
1) Define Your Life After Retirement
Firstly, it is important to define your retirement goals.
When do you plan to retire?
How much do you want to have on a monthly basis?
How much do you actually need?
Decisions need to be made in terms of our lifestyle choices and even our property choices.
Do we rightsize or continue with our current lifestyle?
Having an idea to the above questions will help you to work backwards so you can kick-start your plan.
[image credits: pixabay]
As you define your plan, it is also important to assess how much money you can expect to have from savings, insurance policies and most importantly, CPF savings.
With the latest changes to the CPF scheme this year, Singaporeans now have 3 retirement sums to choose from, namely Basic, Full and Enhanced Retirement Sum.
These CPF LIFE payouts range from S$660 to S$1920 a month. Do remember to take a look at the numerous calculators available on the CPF website to help you in your planning.
2) Make Sure You Are Properly Protected
The second step is to protect both ourselves and our loved ones.
Poor health and the financial strain arising from the sudden loss of employment and medical bills incurred are amongst the biggest risks that would disrupt our retirement planning.
Imagine the sudden loss of income in the unfortunate event of a serious accident or worse, permanent disability.
Therefore, adequate protection in the form of proper insurance cover will help hedge against such risks.
It is important to start as early as possible to take advantage of lower premiums and better terms of coverage especially when you are in good health.
Our insurance needs will probably change as the circumstances of our lives changes. It is vital to get the right insurance for the right purposes.
Speak to a professional and independent financial advisor to find out more.
[image credits: pixabay]
3) Build Up Wealth Over Time
The final step towards retirement planning is to build wealth.
The basic step to build wealth is to save for it, as it is impossible to build wealth without savings.
Have an automatic deduction plan that transfers at least 10-15% of your monthly income into a savings account.
This amount can vary accordingly to income but 10-15% is the minimum you should aim to save.
Learn to take advantage of accounts that offer higher interest rate.
Consider also the supplementary retirement scheme (SRS) that provides tax benefits and higher interest rates to encourage savings for your retirement.
The old saying “Never put your eggs in one basket” holds true here.
Learnt how to build a diversified portfolio using a mixture of instruments currently available in the market today or speak to a qualified investment professional.
We will explore this in greater detail in Part 2.