| Retirement,
whether you are an employee or your own boss, is a prospect
that we all have to deal with, like it or not. Will you
be able to retire or will you outlive your savings? What
Does It All Mean To You?
During retirement, you may have to live on about 30%
of your last drawn income. This sharp drop in cash flow
may come as a shock to you. You may have enough for
your living expenses. But you are unlikely to be able
to maintain your pre-retirement lifestyle. Under such
circumstances, you may then have to consider these options:
| ~ |
Lower your expectations
for your retirement lifestyle |
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Work longer in your current
job or take up a retirement job |
| ~ |
Invest differently |
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Relocate to a lower-cost
country |
| ~ |
Sell your current property |
Different Strokes to Different Folks
What does retirement mean to you?
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Is there a suitable
successor to the business? |
| ~ |
Have I saved enough money
for my family and me? |
Owner-operator
Age, is but a number, when it comes to retirement. The
biggest worry next to cash for a soon-to-retire sole-proprietor
is the question, "When can I retire?" The
time you decide to retire is not dependent on working
till you are 55 or 62 years old. Rather, it's dependent
on the following factors: -
Employees
While employees work towards a fixed retirement age,
they have a different set of challenges when it comes
to financial planning. Employment uncertainty aside,
most employees do not have a proper savings-investment
framework in place. With changes in legislation, such
as the recent CPF contribution cuts, most are not equipped
and do not have the time to properly plan their finances,
let alone plan for retirement.
Challenges Of Retirement Planning
| ~ |
You are likely
to live longer after retirement than you parents |
| ~ |
Inflation erodes purchasing
power |
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Volatility of investment
markets |
When Should You Start Planning For Retirement?
Getting started is probably the hardest part of a retirement
plan. However, sooner you start, more you can reap from
the power of compounding.
Here is an example to illustrate the power of compounding:
Investment
per month |
50 |
20 |
| Investment per month |
$1,000 |
$120,000 |
| Investment rate of return |
8 % |
8 % |
| Total Investment outlay |
$120,000 |
$480,000 |
| Retirement fund at age 60 |
$176,000 |
$3.3 million |
|
To harness the power of compounding, the best time
to start retirement planning is now.
Seek Professional Advice
What is does financial planning mean to the financial
planner? Let's break it down into steps.
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You define your dream |
| ~ |
Together with you, the financial
planner quantifies that dream, putting a dollar
figure to it |
| ~ |
The financial planner puts together
a framework to help you achieve that dream. He/She
articulates the solution and the trade-offs |
| ~ |
The financial planner helps you
get from here to there |
Start planning early in partnership with your financial
adviser, your retirement could include some of the best
years of your life.
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