Top Retirement Planning Tips
If you're looking for guidance on how to plan for your greying years, you'll find no shortage of articles and resources on the subject.
However, what works for other people might not necessarily work for you. Everyone has different circumstances to deal with and different views on what their ideal retirement would look like. For some, planning to save $1 million by the age of 60 is a good place to start; for others, such an amount may be neither affordable nor necessary, or too low to support their dream retirement.
Still, it always helps to hear from insiders and financial advisers on what you should consider when thinking about retirement. Here are some top tips to help you on your way.
1. Prepare for the Unexpected
The one certainty in life is that life is uncertain. You may manage to hit your monetary goals for retirement, but that doesn't mean you won't encounter unexpected financial setbacks. You or your loved ones may fall ill or become disabled, or encounter other financial troubles that quickly deplete your savings. Always plan a buffer to cater for such unforeseen events.
Another suggestion is to set aside some money in a "Fund for Future Unknowns", which you should grow in a low- to moderate- risk investment, ideally starting before retirement, and to refrain from touching it unless absolutely required. A good medical insurance plan would also be useful to cover any unexpected medical costs that may arise.
2. Teach Your Children (or Younger Investors) to Avoid Your Mistakes
Teach younger investors to start saving and investing early so as to maximise the benefits of long-term investing and the power of compounding. While many things are out of your control (such as stock market prices, the state of the economy, and even home price appreciation), you can control how much you save, and where and how you invest.
If they are your children, this will help them become financially secure and be one less thing for you to worry about. You also want to prepare your children or beneficiaries to know how to manage your assets wisely when you eventually pass on your wealth to them, whether it is little or much, so that it will not be squandered away in a few weeks on an expensive holiday or new car.
3. Get Ready for Feeling a Little “Unwanted”
When you retire, you may suddenly find yourself with a whole lot of spare time – time which had in the past been spent getting up early, commuting to work, going home late and dealing with household affairs. For many people, our jobs are a big part of our identities, and when that is gone, we need something else to fill that void to keep us from feeling bored or unproductive.
Make plans on what to do with your time – be it pursuing your hobbies, engaging in volunteer work, or even just spending time with the people you love.
Consider building a circle of friends that you enjoy being with. Just meeting regularly for lunch or coffee (or, better still, going for long hikes or playing sports) will keep up the social stimulation and activity we all need to thrive. Staying at home and binge-watching TV is the sure route to a quicker death.
4. Keep on Working!
Before retirement, you might have had to endure jobs you didn't like just to have enough to live on. But entering retirement gives you more freedom to find work that you genuinely enjoy. This could be a part-time job, online work or consultancy to make use of the skills you acquired in your previous career, or working on a hobby and seeing if you can make some money out of it.
With advances in medical science, most of us will be looking at 20-30 years in retirement. That's a lot of years without an income, given that expenses could remain the same or rise even higher with inflation.
For the lucky few where income isn't as much of a concern, you could perhaps volunteer with a social cause close to your heart.
Find something to keep your brain and body engaged, even for just half a day or a few hours a week. Interestingly, studies have found that keeping your mind engaged actually extends your life-span! People who retire and spend each day merely lounging around actually die faster. If you end up receiving some income from that work, it could additionally go towards defraying your ongoing expenses, or to give yourself a little treat!
5. Watch Your Finances, and Meet Regularly with a Trusted Adviser
Many of us plan our retirement finances in our 50s when we are still relatively sharp and capable of mentally assessing investment opportunities. What we fail to realise is the high likelihood that many of us will experience significant decline in our mental faculties as we age and approach our 70s and 80s. This will make us more vulnerable, which is why financial criminals often target the elderly.
The Monetary Authority of Singapore requires financial institutions to take extra measures when selling investment products to the elderly (generally defined as over 60 years of age), recognising that they are more prone to being mis-sold investment products.
It is wise to spend some time looking for a trusted adviser, and build up a strong relationship when you are still alert and sharp. Once into retirement, you should meet with your adviser once or twice a year to assess that your retirement plan is still on track and to get a second opinion on any venture or new opportunity you may be contemplating. Your adviser should be competent enough to also maintain a holistic view of your financial situation, including being able to liaise with your solicitor, accountant and other professionals.
This is also the stage when you should be working with your adviser on your legacy plans, for distribution of your estate to your beneficiaries, including charitable organisations.
Of course, such services do not come for free, unless you already have sizeable assets being managed by your adviser. Otherwise, it may be worthwhile to work out some fee arrangement at the outset, and review it from time to time. Your spouse or next-of-kin should also be involved in the meetings, so that if anything were to happen to you, he or she would be able to know where all your assets are, with the help of your adviser.
