We all dream of retiring in comfort and living out the rest of our days in contented bliss. What many people do not realise is that to turn this dream into reality, careful planning and early actions have to be taken.
According to the DBS-Manulife Retirement Wellness Study in November 2015, respondents start planning for their retirement at the age of 38. The statistics suggest that Singaporeans hold high expectations for their retirement years, yet many are leaving it till it is too late to make their dreams a reality.
The Retirement Wellness Index measures retirement preparedness among pre-retirees based on health, wealth and social aspects. Based on a 100-point scale, a higher score means better preparation towards retirement. Singapore scored 46 points, compared to the regional average of 56 points.
Across the three benchmarks, Singapore scored lowest for the wealth aspect; suggesting that the respondents feel less confident and financially ready for retirement. Only 36% of Singaporeans aged 40-60 are confident that they will have sufficient retirement funds, while 30% expect that they will have to downgrade their current lifestyle and habits when they retire.
Too many of us are caught up in the misconception that saving for our retirement can wait until we earn more. Truth is, there is never a “good” time to start retirement planning. But there are advantages to starting early. If you start early, you have the advantage of more time to grow your savings. For the investors, a long term horizon will also help to ride out short-term price fluctuations.
Are you inspired to start saving for your golden years? Get ready with just three simple steps:
Step 1: Define your goals
- Ask yourself WHEN and HOW you would like to retire. Work out how much money you will need when you retire to sustain your desired lifestyle.
- With average life expectancy on the rise, Singaporeans can expect to live longer and healthier lives. Carefully consider the number of years you expect your savings to last you so you do not outlive your retirement funds.
Online tools such as the CPF retirement estimator can help you estimate how much you need to set aside.
Step 2: Talk to a financial planner if you need professional help
Calculate how much money you will possess by the time you retire. You should aim to pay off all your liabilities before retirement to minimise debts during your golden years.
– Review your insurance coverage. Healthcare costs can escalate unexpectedly as you get older. If you do not have any insurance coverage now, you are strongly encouraged to consider coverage for disability, critical illnesses, personal accident and hospitalisation. If you already have insurance plans in place, do ensure that they cover your retirement years, or explore insurance options where you continue to enjoy coverage after you stop paying premiums. When in doubt, seek an experienced financial planner who will be able to assist and advise you accordingly.
Step 3: Map out your retirement savings plan
– Work out a plan that consists of regular savings and investments to accumulate your retirement funds.
– Monitor and assess your plan regularly and adjust it according to your varying needs or bandwidth for risk.
– If you cannot afford it, do not take on high-risk investments in the hope of achieving your desired retirement lifestyle. Instead, you should revise your expectations to one that is achievable within your means.
Retirement planning – it pays off to start young. The earlier you set plans in place, the better prepared you are for future spending needs, especially for those rainy days.
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