Retirement Planning 101
Retirement can be the most carefree years of your life. Now is the time to take it easy & do the things you have always wanted to do but never found the time. However, to spend years without a full-time job does require a considerable amount of financial resources. The golden rule is retirement planning is to start planning as early as possible.
People make 3 common mistakes on retirement planning.
1) One, they put off retirement planning until it is too late.
It is human nature to pay less attention to long-term goals while focusing on more immediate needs or wants such as starting a family, saving for a house, buying a car, upgrading to a bigger property & so on. Or, you may be too caught up in the rigours of career-building to notice how quickly time slips by. Whatever the reason, early planning is essential; if you want to enjoy a comfortable retirement.
The later you start building your nest egg, the less time you give your money to work for you & the less financial resources you will have for old age.
2) The 2nd common mistake in retirement planning is saving too little.
Just how much do Singaporeans save apart from CPF? The answer is not very much. A large portion of Singaporeans’ CPF savings is used up for housing. This means that unless we are prepared to downgrade to smaller properties for retirement, we may well end up being asset-rich but cash-poor.
3) The 3rd common mistake people make in retirement planning is investing too conservatively or aggressively.
Some people equate prudent investing with putting all their money in the bank. This is a mistake because interest on bank deposits seldom keeps pace with inflation. Over time, inflation erodes a large portion of the money kept in your bank account.
When deciding what to invest in, you should take into account your age, risk appetite, investment horizon among other factors. The younger you are, & the more secure is your job, the less conservative you should be in your investment policy.
It is also possible for one to make the mistake of being overly aggressive at the wrong time. The closer you are to retirement, the more conservative your investment policy should be. Your priority then would be to preserve the wealth that you have accumulated in your younger years.
In conclusion, how well you live during your retirement depends on how you save & invest while you were working. Remember that it is never too early to start planning ahead. With time on your side & a systematic retirement plan, a carefree & comfortable retirement can be within reach.
