Retirement Planning Tips That Will Keep Worry At Bay

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This article first appeared on Financial Alliance’s blog.

While everyone wishes to put in place the best retirement plans, it ought to be noted that starting to build a retirement plan at a younger age has irreplaceable benefits.

The longer the time horizon, the better an investment portfolio can capitalise on the compounding effect on retirement fund value. It is, therefore, unsurprising to hear that on average, Singaporeans start planning for their retirement when they are 27 years old.

Below are three retirement planning tips that you could take into consideration when you set out to create what might be the best retirement plan for yourself so that you will not have to worry too much about it in the future.

 

Tip 1: Property Returns May Not Always Be the Key to Retirement

Sometimes, you could hold on to certain beliefs that might have an adverse impact on your ability to accumulate funding for your golden years and leave you worrying about your retirement funds.

More than 50% of the working population in Singapore perceive that properties offer the best returns for retirement savings but that trust may be unwarranted.

As Financial Alliance’s Wealth Management (Economy & Market Strategy) Director, Mr Sani Hamid, puts it, “The returns from property have been above average over the past few years as a result of low-interest rates and excess liquidity in the system. However, these conditions are not expected to last and thus, such returns may be hard to sustain as the property cycle moves into a new phase of its cycle.”

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Tip 2: Take Increased Life Expectancy into Consideration

With the advancement of medical treatment and technology, as well as a more widespread emphasis on healthy living and diet, life expectancy is higher than ever.

Yet with a longer life, it comes with more things that you will be worried about. In this case, you will be concerned about how much you will have to spare during your old age. You will then have to make careful planning for your retirement.

Hence, one of the essential retirement planning tips is to include an additional 5 years into one’s retirement plan. For example, if a person estimates that his retirement life will last for 20 years, he may wish to create a retirement plan that lasts for 25 years to ensure that he has more funds to live off.

Tip 3: Retain Risk Preferences Despite Starting Late

Do bear in mind that the later one starts planning, the more risky things get, so remedies, even if available, might be less effective. One mistake investors often make when starting late is to take on more risk than necessary to try and make up for the lost time.

Here are some methods that could be employed to make up for lost time include:

  1. Divide retirement investments into two portions: one to cater for the earlier stage of retirement (age 65 to 80) and one to cater for the later stage of retirement (age 80 to 90). The latter portion can take more risks since there’s a longer time period before these funds are needed.
  2. Save and invest a larger portion of income
  3. Look for ways to raise liquidity, for example, downsizing one’s property to partially cash out on one’s accommodation.

Unless it is absolutely necessary to take risks, a person should always keep to his/her risk preference. One’s retirement savings should also always have a combination of assets to reduce risk through diversification. With such an allocation, you will be less likely to worry about your finances when you reach retirement age.

Conclusion

We do hope that these retirement planning tips will help you to keep your worries at bay and get you started on planning for your old age.

At the end of the day, the best retirement plans will require more thought and action than the above retirement planning tips suggest, so do use them as food for thought, and take them into consideration when you are creating the retirement you desire.

With a comprehensive retirement plan, you only have to sit back and rest easy during your retirement years.

If you need some advice with regards to retirement planning, do feel free to contact me.

Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

Published By:

Eileen Low Geok Lin

I have been in the financial services industry for the past 20 years helping clients to amass wealth and addressing their protection needs. Strong ties with my clients and their families are established over the years as I work on their priorities on a continual basis.
Being an advocate of growth mindset, I strive towards helping my clients and their families to accumulate wealth and helping them grow their investment portfolios. This has honed my investment skills and helps to acquire new knowledge in this ever-changing landscape.
The long term relationships with my clients have been, and will continue to be my source of motivation to strive for excellence in this crucial industry. I wish to work with established individuals and to help families with legacy planning so that their next generation will benefit from the fruits of their labor.
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