If I were making a list of all the ways I would like to spend my time, retirement planning would likely feature very near the bottom. Contrary to what people may think of me as co-founder of DollarsAndSense, I don’t find it an enjoyable way to spend my time.
I actually find it quite similar to a pilot flying a plane. If you’re interested, you can read about how I try to balance a life of entrepreneurship, while planning for a sound retirement.
We Need A Plan
Pilots need to learn how to fly a plane before they’re even allowed to get into the cockpit. While we don’t need proof of financial knowledge to start planning for our retirement, you can see why it can go very wrong if we don’t know what we’re doing.
A career perk of working at DollarsAndSense is that I’m fairly attuned to most things that impact our financial lives. In a way, my career has autopiloted my retirement journey. I’m consuming content about proper and prudent retirement planning all the time. In fact, the more I know about retirement planning, the better I get at doing my job as a writer.
Executing Our Plan
When pilots start flying, they spend about 90% of their time on autopilot.
However, like most of you would already know, the 10% of the time that pilots actually spend flying the plane is not only the most crucial aspect of a flight but also concentrated at the start and end of the journey.
Just like how pilots usually manage the take-offs on their own, the bulk of our retirement planning work – especially those that are created to fly on autopilot – happens at the start of the journey.
For me, this was spending about 50% of my salary at the start of my career. This was a low-frills lifestyle – I was not yet married, didn’t have much financial commitments and my parents didn’t require me to contribute to their retirement plans.
Spending 50% also meant I was able to save and invest the other 50%. I ploughed this money in a globally diversified portfolio and an S-REITs portfolio. This gave me global exposure and an income portfolio. As I didn’t need the income, I was able to reinvest and compound the returns.
I also had to think about the worst-case scenarios – if something unexpected were to happen to me. I purchased adequate insurance that would mitigate my financial contributions to my family if I cannot work and provide for them.
The Actual Autopilot
After the take-off, pilots can finally hit the autopilot switch. They know where their plane is headed. This is similar to how we can go on autopilot once we know the trajectory of our retirement nest egg.
By spending a modest amount of my paycheck, I could autopilot decisions – like I did when I choose a different career that had to pay me a much lower salary at the start. While this may not seem like a decision that helps my retirement plan, I now earn a similar amount to what I would be making if I worked for someone else. At the same time, I’m building a valuable brand that I co-own – which could have a bearing on my financial future.
I was also saving and investing. This process is automated to snowball into another decent nest egg by the time I’m entering my retirement years.
Another way we are all building towards a stronger retirement on autopilot is via our CPF pot. With regular contributions to our CPF, we are constructing the foundation of our retirement nest egg, where we will receive monthly lifelong income from CPF LIFE payouts.
While we’re all autopiloting the build-up of this retirement pot, we can put in place plans to supercharge it via cash top-ups into our CPF accounts. This will also lower our taxes as we squirrel more away for our golden years.
In another article, I also found out that I’m on the way to building a $1 million CPF pot by the time I turn 65.
Hitting The Snooze Button On My Retirement Nest Egg?
The answer to this rhetoric question is no.
While the plane is essentially “flying on its own”, the success of the autopilot system ultimately hinges on the ability of the pilot. As you would have read also – autopilots can and do fail at times. When this happens, human pilots need to be attentive to take over when required. Even if it doesn’t fail, you should know when it’s not doing what you expected it to do – you need to know when to turn it off, reset it and then put it back on autopilot.
How I do this is by keeping a tab on my net worth each year. If my net worth is increasing, it feels like things are going in the right direction – and the autopilot is working. If it’s not, then it’s time to take over the controls and to spend some time figuring out what’s going wrong, and to fix these problems.
A Smoother, More Efficient And More Comfortable Path To Retirement
There’s always a need for human pilots to monitor the autopilot system and jump in when required. Similarly, there are things that autopilots do much better than human pilots. When used together, the autopilot system can help provide a smoother, more efficient and more comfortable journey.
Besides building our retirement nest egg, a whole other part of retirement planning involves making use of our nest egg in a sustainable manner. In this regard, CPF LIFE also provides an autopilot feature – giving us a monthly payout no matter how long we live.
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