Being able to live a long life is great; provided we are in good health and have the necessary financial resources to live in the way that we want. By necessary financial resources, it would mean the savings that we accumulate during our working life must be able to provide us with the same, or almost the same standard of living for at least 30 years more.
Let’s delve into the 8 essential reasons why we need to start our Retirement Planning ASAP.
#1: Longer Life Expectancy
Globally and locally, studies and statistics have shown that life expectancy, or commonly referred to as LE, is on the rise. LE simply means Life Expectancy. In 1991, the average LE was 76 years. Today in 2021, it stands at 84 years. On average, LE increases by 2 to 3 years every decade.
With a longer LE, what does it mean for you? Simply put, you are definitely going to need more financial resources to meet your retirement needs and unexpected costs incurred by illness or hospice care.
#2: To Be An Old Man Or A Gentleman?
You have a choice: To be an old man or a gentleman. A retired gentleman is able to decide on his retirement lifestyle while a retired old man has little options to enjoy during his retirement.
Given a choice, most of us would prefer to be retire with grace, rather than to retire with haste and repent at leisure. Again, this brings us back to the core of needing a robust source of finances and assets to cater for your desired lifestyle.
#3: The Inevitable Inflation
Inflation makes the cost of living higher. In the early 1990s, the cost of chicken rice was $1.50 to $2. Today the cost of chicken rice is priced at $3 onwards. The rate of inflation averaged about 2% per annum over the last 30 years. Now imagine how much that plate of chicken rice would cost by the time you retire in 20 years’ time!
If you hope to still be able to enjoy that “more expensive” plate of chicken rice by the time you retire, you have to start planning now. Not just any financial plan, but one that is optimised to ensure your financial resources can cope with inflation.
#4: Juggling The Sandwiched Generation
For some, their parents depend on them for their retirement expenses. At the same time they have to cater for the financial needs of their growing children. Hence, we need to make sure we are financially self-sufficient to sustain through retirement.
Our children may depend on us to help out financially and there may even be instances where we need to chip in our funds to support our grandchildren. Being loving parents and grandparents, you would hope to take care of your family in the ways you can. With this, there is a need to cater more financial resources for these scenarios.
#5: CPF Retirement Fund
CPF is designed to cater for retirement needs. That is true to some extent but one must be aware of the possibility that the payout provided may not be sufficient to sustain different retirement expectations. Drawing from provided figures, the payout ranges from $750 to $2,180 when we turn 65 years old. Think of CPF as a tool that helps to supplement our retirement needs. We cannot, and should not, depend entirely on our CPF savings to fulfill our retirement needs.
It is common to see many people use monies from their CPF to pay for their housing. This is one way to help more Singaporeans purchase their own homes, but can create another issue in the future. The conundrum arises when they retire, they find that they have too little in their CPF balance to withdraw or to funnel towards their Retirement Account. When this happens, the unfortunate conclusion is that what remains of their CPF cannot even be used to fund part of their retirement needs.
So let this be a lesson learnt: Try not to use your CPF to pay for housing needs.
#6: Spend Now Or Save For Later
With the current income that we generate through work, we have the liberty to use this income in either way – to Spend or to Save.
You have two choices to go about it. Which way will you choose?
- Income minus Expenses = Savings
- Income minus Savings = Expenses
Saving up is always a good move, especially when we have the ability and income stream to save more for our golden years. It all boils down to how we choose to use our current income. Make the wise decision to decide on your savings amount before you decide on how much you want to spend.
#7: Clear Your Bucket List
We are not able to realise our big dreams where we are busy building a career and caring for the family during our prime years.
With enough financial resources, you can fulfil this bucket list during your golden years.
#8: Make Sure You Have Money
We need to make sure we do not run out of money during our retirement or if we should outlive our predicted mortality. With little or lesser money than desired, it creates unnecessary mental and physical stress, and may even lead to ill health and family conflict.
With a sufficient sum of money as the basis, more will be able to enjoy a fruitful and fulfilling retirement lifestyle.
If you are still thinking: “I’m still young and it’s too early to think about retirement!” It is time to rethink this! In fact, many surveys have shown that the main reason most people cannot retire comfortably is because they only began to save up when they approached their 40s. They lose the head start that they could have enjoyed, and end up not being able to accumulate the nest egg that they want.
So, why is it always better to get an early start?
Albert Einstein has once said: “Compound interest is the eighth wonder of the world.” Someone who starts saving at an early age enjoys the advantage of compounding. The longer the savings period, the more time the interest has to grow. Even for those who have already created your retirement plan, it would be a good idea to review it regularly as your needs will change with new life milestones. Speak to your consultant today.
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