You’re worried about next month’s expenses – how do you even have time to think about retirement in Singapore? You may find it surprising that you’re not the only one on the island who thinks the same way. The Straits Times published a survey indicating that most of Singaporeans are unprepared for retirement. Although, 76% of them say that the only financial plan they have is to earn enough before retirement, only 25% of the respondents are following a proper plan for retirement.
More importantly, many Singaporeans don’t even know how and where to start retirement planning because of the two main reasons:
Survey also indicated that people tend to underestimate the funds they are going to receive in old age.
Latest surveys and figures highlight that majority of people don’t consider retirement planning at all. In fact, a large number of people expect they can work until they die. This is because people in Singapore expect their retirement savings cover just above 50% of 17 years of retirement.
Furthermore, because of higher life expectancy, 47% of Singaporeans believe they can only change their lifestyle only by opting to continue working for as long as possible.
Regardless of the circumstances that force people to work beyond retirement age, proper understanding about investment alternatives and expected benefits may help them change their minds.
Following steps will help people in planning their financial goals for retirement:
- Identify and Describe Retirement Goals
Setting or defining retirement goals is highly important for financial planning as it will determine the amount of financial burden you have to face at present.
When would you like to retire? What will your lifestyle be during retirement? How much will be needed to maintain that lifestyle? (Try out The New Savvy’s Retirement Calculator to find out how much you need! )
Depending upon the income, financial planners suggest that your aim should be to diminish your expenses month by month. You should be able to draw 2/3 of the amount drawn last month.
Because life expectancy in Singapore continues to improve, it is better to measure the time period of your saving. So, it is better for you to know how long your saving will last. You can use online tools to compute the amount you should set aside.
- Evaluate Where You Stand
Your future projections and expectations will determine how much you should save. Assess how much funds you expect and how much you actually need so you should start saving from today to minimise the difference
Calculate the amount you are expecting from insurance policies, CPF savings, savings account and investments at the time of retirement.
Minimise your debt or plan to pay of outstanding liabilities before you retire. Consider insurance coverage and make sure it covers your retirement years. It is important to minimise the financial burden of healthcare costs which will increase as you get older.
Similarly, make a financial plan to pay for other liabilities, such as children education and allocate a portion of your investments and savings accordingly.
- Get Started
Its time to build your retirement savings with a well-devised investment or savings plan. You need to understand investing and saving to be able to determine how much you can lose without affecting your financial position.
Before purchasing any package, examine and compare them thoroughly. Create a diversified portfolio to distribute risk and maintain the balance of investments. Read government’s Supplementary Retirement Scheme that offers tax benefits on your retirement savings.
Keep a close eye on your plan and don’t hesitate to change it, if needed. If necessary, revise your expectations and opt for the lifestyle that you can achieve within your resources.
- Your Investment Objective:
Decide whether you’re investing for regular income or preserve your capital. You may opt to invest small portion of your funds for capital growth. Make a well-diversified investment portfolio that best meets your objective.
- Risk Assessment:
Consider your investment risks. Don’t invest blindly or you might end up losing everything. With little retirement savings, don’t take too much risk and stay conservative.
- Investment Time Horizon:
There is no any particular time to plan your retirement. But if you start early, you will have longer time horizon and you can easily bear short-term price fluctuations.
- Manage Funds Prudently
Your lifestyle should be active, healthy and balanced with social activities during your retirement. One of the keys to retirement fund management is to prepare a budget that will help keeping track of your retirement income and expenses.
Most of the time, your retirement income comprises of your withdrawals from savings and investment income. If you’re getting investment income irregularly because of timings and payment, adjust your withdrawals to keep sufficient amount.
In case of fixed deposits, keep in mind when to transfer the amount into current account and when to roll over. Use budgeting to see how quickly you’re spending your funds, and reduce certain discretionary expenses to keep your expenses under control.
Find out how much you need to retire with our Retirement Calculator!
She was nominated and selected for FORTUNE Most Powerful Women conference in 2016 (Asia) and 2015 (San Francisco, Next Gen).
Anna has 10 years of experience in the financial sector and is currently a Director in Tera Capital. Her previous work experience includes positions at Citigroup, United Overseas Bank, a regional role in Business Monitor and a boutique private equity firm based in Shanghai. She graduated from Singapore Management University (Finance and Quantitative Finance).