Planning for retirement is a process that each of us will find ourselves going through at some point or the other.
A successful retirement requires a good, solid foundation, so set forth on the right foot and you will definitely achieve your goals. The first step is often the hardest, and before you dive into the complexities of retirement planning, you should sit back and ask yourself a few questions.
What kind of lifestyle do you hope to enjoy in your retirement years? Are you intending to maintain your current lifestyle, lead a simpler one, or reward yourself and your years of hard work with an even more extravagant one? For many, retirement is the time and chance to enjoy the fruit of their labour and pursue interests that they may not have had time for, such as travelling or picking up a new hobby. Think about when you want to retire, take stock of your assets, evaluate your health and plan for contingencies. Get started by using our retirement calculator to estimate how much you will need.
What expenses do you expect to see increase or decrease upon retirement?
Apart from the static expenses, variable factors such as projected inflation 20 to 30 years down the road, and making informed guesses on how long one will live will also affect your expense planning. A good plan will need to factor in a detailed list of projected expenses to be accurate.
And for those who have children, another important thing to consider is their education expenses. Setting aside a separate fund for their studies may be helpful in organising your finances; and as your children are most likely to be your beneficiaries, you will need to work out how much and through what means, such as wills, you want to bequeath these resources to them.
Your risk appetite, and hence investment portfolio, will change at different life stages and it is always best to ensure that they are aligned to your goals. Investment growth may help to combat inflation and make your money work faster and harder. Through investing, you can put your money in a variety of assets, with the potential to grow at a higher rate compared to the current interest rate.
Singaporeans, apart from using cash savings, can also opt to invest CPF savings in insurance products, unit trusts, bonds, shares and other various instruments.
You can also consider the Supplementary Retirement Scheme (SRS), which offers attractive tax benefits and reliefs, and lets you accumulate tax-free investment returns. Furthermore, only 50% of withdrawals from SRS are taxable at retirement, allowing you to better save for the future while reducing your present tax expenses. Additional information on the Supplementary Retirement Scheme can be found here.
There are also new products introduced by MAS such as Singapore Savings bonds which are a new type of government bond that offers individual investors a safe, long-term and flexible product to meet their savings and investment needs. Additional information on the Singapore Savings Bond can be found here .
Sudden loss of income, the lack of a contingency plan, inaccurate, over or underestimation, are factors that can affect your desired retirement. Health plays a big part as well - sudden illnesses or accidents may impact your retirement plans. And given that medical expenses may also climb disproportionately as you age, ensuring that you have comprehensive medical coverage will aid in countering such road bumps and see you through a happy, healthy retirement. A volatile financial market is also capable of wiping out retirement savings. By having a diversified portfolio, adequate emergency savings and the proper protection, you can significantly increase your chances of weathering out a bad storm. Ultimately, having foresight and planning well ahead will help you tackle problems head on and overcome them smoothly.
If you do your financial planning wisely and have assets to pass on, you should carefully consider who you would like to bequeath them to. And should a time come when you are rendered physically and mentally unable to make decisions, it would be prudent to decide how you would like to be medically treated. Making such decisions early will ease the burden of decision-making for your family members in the future, so be sure that your instructions are clear and your documents are accessible in case of emergency.
Using a trust to hold your assets ensures that you avoid the need for a will. Trusts can avoid probate delays, freezing of accounts, publicity, and can also reach out to future generations if you wish to benefit minor children or grandchildren. Usually, it will be necessary to have assets of about SGD2 million for a trust to be cost-effective.
Planning for retirement may seem like a daunting task, but the sooner you begin, the higher your chances are for a successful, stress-free retirement in the future. If you would like a partner to help you map out an effective and manageable retirement plan, simply make an appointment with us or contact your DBS Treasures Private Client Relationship Manager.
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