How you should start planning for your retirement

“You know that retirement is coming. It isn’t as though it just shows up one day and takes you by surprise, so you need to get ready for it.” – Warren Buffett

There is never a “good” time to start planning for our retirement. When it comes to retirement planning, many of us will wait until we earn more before we start to save more later. However, we have to account for the financial needs at different life stages, such as children’s education funds, thus, at a later stage; we may have other commitments that would hinder our planning for retirement.

One of the advantages of planning early is that you will have a longer time horizon and that means more time to grow your savings. If you have made investments, a long term horizon will also help to ride out short-term price fluctuations on your investments.

On the other hand, if you start late, you will have to work harder at growing your retirement savings. If you cannot afford to lose money, you should avoid investments that come with higher risks. You may even need to think of delaying retirement provided you remain employable.

In my newsletter to you, I will share the following:

  1. How you should start planning for your retirement
  2. 4 best places to keep your retirement savings in Singapore
  3. Stretching your retirement

How you should start planning for your retirement

  1. Determinate the retirement lifestyle you want

In doing so, you are able to work out the amount of money you will need when you retire to provide for your desired lifestyle.

  1. Assess your current situation

Work out how much money you can expect to have from your saving accounts, CPF savings, insurance policies and investment when you retire.

After accounting for your financial needs, calculate the different between the funds you expect to have at retirement and the amount you will need. Work out how much you need to start saving each month from today in order to make up for this shortfall.

  1. Get started on your retirement savings plan

Kick start a plan to help you save or invest on a regular basis. However, if you are new to investment, you must be aware of your risk appetite as well as your time horizon. It is important that you must take your time to choose and understand the products that suits you. A well-diversified portfolio will not just spread the risk for you, but at the same time balance the fluctuations of the values of the retirement portfolio.

4 best places to keep your retirement savings in Singapore

  1. Exchange Traded Funds (ETFs)

In ETFs, your money is pooled with the money of other investors and invested according to the objective of the funds such as to replicates a specific index.

ETFs investment has capital gain when the price of the units rises above the price paid while some ETFs also pay dividends. It generally are for people looking for potentially higher returns and are able to take the risk of losing all or substantial part of their investment amount

  1. Insurance Policies

If you are unsure about managing your own portfolio, an alternative would be through your own insurer. When it comes to retirement planning, insurance policies such as endowment plans would be recommended as a way to start regular savings.

In addition, apart from saving for your retirement goals, endowment plans typically provides for insurance coverage such as death benefits.

  1. Work with a wealth manager

Emotions do get in the way of managing your own money. Thus, one of the alternatives is to engage a qualified wealth manager to help you to diversify your portfolio.

  1. Supplementary Retirement Scheme (SRS)

The SRS provides a tax relief tool on your income. When you start withdrawing after retirement, only 50% of the amount withdrawn is taxed.

What is stopping younger singaporeans?

According to the survey, retirement planning among the young is impeded by short and mid-term financial commitments and lack of knowledge about when and how to save.

  • 20% of the 25 to 35 year olds in Singapore listed saving for first property as their main priority
  • 14% of the 20 to 35 year olds in Singapore listed providing money for their daily needs as priority
  • Saving for retirement only becomes a priority for those more than 36 years of age


Stretching your retirement

During the retirement stage, planning doesn’t end there. It is important to manage your funds prudently as you maintain a healthy and active lifestyle. At that stage, a portion of your retirement income may depend on investment income while the other portion from your savings.

The need to keep track of your finances would mean that budgeting is a must to ensure sustainable living expenses. Here are some tips to reduce discretionary expenses:

  • Instead of high teas, invite your friends over for pot-luck
  • Make or bake gifts for your friends and family instead of buying expensive gifts
  • Make full use of concessions for seniors, when possible
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