While the ideal retirement scenario may differ according to individuals, one thing is certain. At a specific point in your life, you would wish that having an occupation is a flexible option instead of a means of survival. While there are no hard and fast rules to retirement, the general view is always to start early.
Never underestimate the effects of compounding returning on your saving.
Read about: The Complete Guide to Retirement Planning (2023 Edition) *NEW*
Where do you stand compared to your peers
A survey conducted by Nielsen and commissioned by NTUC Income note that young adults in Singapore are keen to start planning for retirement when empowered with knowledge. 86% of Singaporeans who are between 25 and 35 years old are willing to set aside S$300 a month towards retirement. Within this age group, 55% of them have started some form of savings and financial planning for their future.
The ideal amount most Singaporean are looking to accumulate for retirement: 1 million.
The similarity with another survey commissioned by Manulife brought up another point – Most Singaporeans surveyed regretted not planning their investments better, particularly the lack of proactivity in their portfolio review and holding too much cash.
How can you begin (Age 20 to 30)
If you have just started working, health and protection coverage should be the main priority. We covered the basic health and protection insurance plans and policies that are affordable to the mass. Only a minimal budget is required to get you started on your essential insurance needs.
Looking into cutting down on unnecessary needs and small luxuries if you have too. The cost of a Starbucks coffee goes a long way towards funding your financial journey.
Avoid making common financial mistakes as you start out, and have a habit of keeping track of your finances.
Read About: Where do I start with financial planning?
Where do you proceed (Age 30 to 40)
By now, you should have a stable income, time to work on building up your wealth accumulation by actively investing. Participate in the long-term returns of the economy by investing in Unit Trust Funds or Exchange Traded Funds. Find out the pros and cons which we covered in an earlier article.
If you prefer financial products with a minimum guaranteed value, consider a Whole Life insurance or Investment Linked Policy if have not done so. Either of the insurance product can help provides additional coverage for Critical Illness, Early Critical Illness and TPD on top of the main policy benefits.
Read About: 3 best Investment Linked Policy in Singapore (updated 2023)
What should you do next (Age 40 to 60)
If you have a lump sum of funds from your saving or maturity of insurance policies, lock-in the funds for higher financial returns. Retirement plans and annuity policies allow you a guaranteed monthly income and/ or a lump sum upon reaching your desired retirement age.
Here is what you can expect when you start early to age 65 (Assuming 8% p.a rate of returns):
- At age 40, setting aside a yearly sum of S$ 6,000 would result in S$438,635.
- At age 55, setting aside a yearly sum of S$ 6,000 would result in S$86,919.
Similarly, Unit Trust Funds and ETFs can maximise the growth of your money at the cost of higher volatility. Found out the pros and cons and your risk appetite before making your financial allocations.
Read About: 3 best retirement plans and annuity policies in Singapore (updated 2023)
Why do you need to diversify (Age 60 and above)
By now, you should be anticipating your retirement if your finances are sound. Taking up new financial products with long-term financial commitment may not be suitable. Consider supplementing your retirement payout from your CPF Life and annuity policies with additional income sources.
- Single premium Investment Linked Policy – Allows a constant stream of income with a guaranteed death benefit. Short term price volatility may be ignored as the financial objective is to provide a financial payout.
- Unit Trust Funds (Income Focus) – Investment with a focus on providing an income stream. Due to the fund objective of providing income, price volatility may be lower.
Your CPF LIFE payout will be starting in a few years (depending if you have chosen to defer payout), allowing you to receive a lifetime of payout.
But do you know that your CPF accounts can be used for more than getting a property and retirement purposes?
Action always beats intention
Take charge of your finances now.
Drop us a message and let one of our independent financial advisors work out your financial portfolio. Alternatively, speak to an experienced financial advisor to work out your financial goals and objective.