When it comes to retirement planning, there is no one-size-fits-all plan. Retirement has a different meaning for each one of us - it can be relaxing lavishly for one, and living simply for another.
Although financial planning will have to cater to individual wants and needs, the necessity of having enough to live comfortably in our golden years remains the same.
When working on your retirement plan, it is important to keep these 6 common mistakes in mind to ensure the end results meet your retirement goals.
Mistake 1: Only Starting To Save When It's Too Late
A recent Manulife study revealed that most Singaporeans start planning for retirement only at age 38. You might think that 38 years old sounds too early for retirement planning, but in this group, only 2 out of every 5 Singaporeans are confident about meeting their own retirement needs. This shows that age 38 is actually too late.
Amidst the other ongoing financial commitments you might have in your 30s, it may seem impossible to put aside an extra few hundred dollars per month for your retirement fund. But it all comes down to good budgeting and having a solid financial plan.
When in doubt, check in with a Financial Consultant that can help you figure out how to build your retirement portfolio.
"Then, when should I start planning for retirement?"
Have a read of one of our blogs here on when is the best time to start.
Mistake 2: Saving Too Little For Retirement
Whether you are in your 20s, 30s or 40s now, you may feel that you don't need a lot of money to live in Singapore. This might be because the food is cheap, you have access to subsidised healthcare, and you hardly feel the pinch of your mortgage because your CPF savings is doing the job. You can even afford a number of overseas trips a year, thanks to budget airlines!
But when you are not drawing an income, things become different. During your retirement years, you are likely to be living entirely on your savings and CPF retirement fund, which are unfortunately finite. Hence, proper financial planning requires a conservative estimate which takes into consideration contingency measures.
Your retirement portfolio not only needs to have a good estimate of how much you need to maintain your desired lifestyle, but it also needs to take into consideration the effects of inflation and healthcare expenses you might incur in your later years.
Here are some ideas on how to spend less to save more for your retirement fund, or when you're already retired.
Mistake 3: Keeping It TOO Safe...
When it comes to saving money, it is common to put them all into a savings account at the bank. After all, that's where you have easy access to your cash. Additionally, you get paid a minimal interest as well.
While this may be practical for everyday transaction purposes, the low interest rate does not make a good long-term instrument for saving. In fact, your money is slowly losing its purchasing power as the effects of inflation will overpower the interest rate you are getting.
Other than ensuring that your money is put into inflation-beating financial instruments, you might want to consider investing as part of your retirement portfolio strategy as well.
Investing when you are younger allows you to take more risk and earn higher potential returns for your future use. As you move nearer towards retirement age, you may not want to risk your retirement savings in risky assets since you'd have more reliance on the funds.
Mistake 4: Not Having A Good Protection Plan
When you think of retirement planning, saving money is where the attention is. However, many people neglect the fact that a good protection plan is also part of smart retirement planning.
An insurance plan that can protect against an increased likelihood of medical and care expenses is of utmost importance. The time spent in ill-health may also coincide with our retirement years, causing us to be unable to enjoy life as we hoped to, and the care cost also taking a toll on our finances when we aren't working anymore. Hence, consider getting an insurance plan that safeguards your retirement needs.
Mistake 5: Not Reviewing Your Retirement Plan Regularly
With the ever-rising inflation, changes in daily living costs, and other life circumstances, it is recommended to review your retirement plan at least once a year.
Reviewing and balancing your portfolio to fit the everchanging needs of the market ensures that you are on track towards meeting your retirement goals. Doing this also helps you to be at ease for your future.
Click here for more tips and tricks in retirement planning!
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