How much do you need to retire? It is normal for one to get caught up in certain aspects of life like starting a family. Many people forget to do their own retirement planning once they start a family or build their own business. Well, how much does one really need to retire? Here is a simple checklist to get you started.
1) Pick a retirement age
The mandatory retirement age is currently 62 and there are plans to raise it perhaps to 65. It would be good to act prudently and pick an earlier age so that you will work on a shorter timeframe to achieve your retirement goals. Most people would settle on 62 as their retirement age. From the set retirement age, you can know how many more years you have to your retirement and thus how much you will need to save and invest to get to your retirement goals.
2) Determine your retirement lifestyle.
Write down your estimated retirement expenses. How much will you need for basic bills such as housing, food and insurance? What will your medical expenses be? How much will a supplemental insurance policy cost? What if you plan to travel?
You might also still be paying taxes and will have miscellaneous expenses. The better your spending plan estimates, the more you can project your lifestyle expenses. Make sure that these plans are as detailed as possible. From here, take into account of inflation and calculate how much you will need at your retirement age in terms of dollars at that point in time.
3) Get a savings plan
If you can save at least 15% of your annual income, you’ll probably be able to cover most of your retirement expenses. The trouble is, most people do not have the discipline to save.
How then do you increase your savings? Put your retirement contributions into a savings plan. There are many insurance companies that sell regular savings plans with a certain degree of insurance coverage (which is always an added bonus!). The younger you start your savings plan, the easier it is for compounding interest to do its work. This is similar for investments. In fact, some savvy individuals may decide to place their savings in investments like equities or properties. If done right, the investments can pave the way to a very comfortable retirement in the future.
4) Get professional help (if you need it)
A lot of people will think that they have it all planned out and just because they are good at math in school, they are good with everything that deals with numbers. Well, retirement planning is not like that and there are professionals who are trained to do such work. Moreover, things may change. You may lose a job or switch careers. Your health may force you into early retirement. You may get divorced. The only way to plan for unforeseen circumstances is to create fool proof plan in the first place that is built on solid savings and planning. There’s no harm in asking for advice, but make sure you work with a “fiduciary adviser” who puts your interests first. Stock traders, property agents and insurance agents are generally not retirement planners. Look for certified financial planners (usually some insurance agents may have such qualifications) to sit down and analyse your retirement plan and investment portfolio.
Yours Sincerely,
Daryl Lum
p.s. I am a Certified Financial Planner registered with the Financial Planning Association of Singapore. However, I do not sell life insurance products. The purpose of me writing this article is to share my knowledge with readers. I enjoy discussing financial planning with anyone who may be keen.
Read about some retirement myths here or read my previous article about insurance here
