In our previous article on retirement, we went into debunking common retirement myths that existed in Singapore. We received good supportive comments with some asking us to further dwell upon the topic. As such, we decided to identify 3 retirement planning process that we feel would be useful for you to think about.
Before going any further, we like to integrate an analogy into our retirement planning process; successfully planning for a retirement is akin to adopting a healthy lifestyle, it requires a deliberate effort to get started, a commitment to stay involved long-term with the plan & the right knowledge.
1 – A deliberate effort to get started.
Adopting a healthy lifestyle begins with a deliberate decision to get started. For the majority of people, it may not be the most natural thing. Like how our taste buds crave for sweet, sour, salty and savoury foods, while on the flip side of the coin, we do not enjoy having to jog every day.
In the same way, planning for a retirement first requires us to make a conscious decision to get started. We need to come to the realisation that retirement planning is a personal responsibility for each individual. For the majority of us, this is going to be counterintuitive to our natural habits. There will always be new ways for us to blow our cash in shopping-centric Singapore, be it the latest gadgets that everyone has, expensive holidays to splurge on in Europe, or even worst….the car!
The sooner you come to the realisation that nobody is going to be responsible for your retirement and you need to start actively taking charge of it, the better, and more effective your plan will be.
2 – A commitment to stay involved long-term
Achieving a healthy lifestyle is not something that happens overnight. Perseverance and commitment in ensuring that one is incorporating the right diet and exercise in a concerted effort is important in ensuring a plan’s long-term success.
Similarly, retirement planning is something that requires us to stay involved, and for a long period of time. You have to be disciplined in saving every month & also in investing your money wisely. It is over the long-run whereby you would reap the fruits of your labour. Immediate results are rare – just asked those guys at Sentosa with washboard abs, it was not produced overnight.
One effective way to ensure that you are able to stick to your saving and investment goals would be to simply to set realistic targets for yourself. For example, if you have a habit of spending all of your monthly salary, why not take a first step and aim to save at least 10% of it? This can be achieved by opening one less bottle at Zouk each month (or even buying jugs instead!), cutting down on dining at MBS or simply taking the public transport (and by this we don’t mean “cabbing it”) more often. You might find it difficult at the start but it is by no means an impossible feat. A little bit of extra effort will go a long way.
3 – The Right Knowledge
Having too much of something good, can become a bad thing. Just because everyone is drinking Chinese herbal tea does not mean we start gulping 16 pots of it down every day. Just because people say that apples are good for health does not mean we eat four slices of it for lunch with a side of apple sticks and a glass of apple juice to wash it down.
It is important to strike a balance and practice a bit of common sense when it comes to planning for retirement. There is no ‘one size fits all’ type solution when it comes to financial planning. Just because everyone is currently investing in properties does not mean you should sell your home and buy an office space to rent out.
For example, if you are a salaried worker holding a stable job long-term job, your job security is higher than the average Singaporean. In that case, you can consider taking larger risk in your investment portfolio such as dabbling in the stock market to buy into high-growth companies in the hopes of earning a higher return, which naturally makes it a riskier option. The logic for that is that even if the economy takes a dip, you are likely to still hold a job and would have a stable monthly income to fall back on even if your investments doesn’t work out as well as you had hoped.
On the other hand, if you are a businessman, with a business that is highly dependent on the performance of the economy, then it would not be wise for you to take too much risk in your investment decisions as you would otherwise. Your business is already a ‘risk’ by itself. Instead focus your investment portfolio on capital preservation instruments such as triple-A rated bonds, fixed deposits or even to contribute as much as possible to your CPF account. If the economy does turn south, you will be able to rely on your investment to tide you over the bad times instead of suffering a double whammy when you realise losses in your portfolio as well.
So what do we do?
The point we are trying to make here is that retirement planning is not some sort of rocket science whereby you need to be an expert to sketch the blueprint. A little common sense, some discipline and a conscious decision to make it a priority goes a long way for each one of us.
For a start, you can pick up the Sunday Times & read their invest column section which provides a variety of different investment advice each week. Of course you can also follow us on facebook and start your retirement planning today simply by ‘investing’ a little bit of your time to read useful financial literacy articles.
We wish you all the best ahead and do drop us a note if you have any questions or comments on retirement. We are always glad to hear from our readers!
Original photo by Benjamin Lim. Used with permission.
DollarsAndSense.sg is a website that aims to provide interesting, bite-sized financial articles which are relevant to the average Singaporean. Subscribe to our free e-newsletter to receive exclusive content not available on our website. Follow us as well on Instagram @DNSsingapore to get your daily dose of finance knowledge through photos.
Bonds and Fixed Income