ARTICLES
Planning for your retirement
When it comes to planning for retirement, the most common reasons given for not planning is not knowing how and what to do about it as it is perceived to be difficult and complicated. In addition, behavioural factors often influence our decisions to start planning for our retirement. In fact it’s often been said that most people spend more time planning for their holidays than their retirement and therefore it is not a surprise that we focus on planning to meet short-term rather than our long-term needs. Coupled with our present preoccupation and busyness, retirement planning is often not on the immediate to-do list but at the same time it is one important plan for the future we need to address now.
“…people spend more time planning for their holidays than their retirement”
A retirement plan is essentially a roadmap detailing our aspirations as to what we want our retirement to be. It remains a well-intentioned plan unless actions are taken to move you towards achieving the desired outcomes of your plan.
“Map out our retirement aspirations in terms of lifestyle, living standards and the funding needed”
To formulate a retirement plan involves taking the time to think about what you want for your retirement life and making appropriate choices and timely decisions and to commit towards achieving the plan. Our retirement plan should therefore map out our retirement aspirations in terms of lifestyle, living standards and the funding needed.
One of the key components we need to consider is to have adequate and sufficient funding to enjoy what we want for our retirement life.
As such, we will have to address how much retirement funds we will need to accumulate to generate our future retirement income. This involves reviewing our current EPF and other retirement savings and projecting the required nest egg, which will then reveal the savings gap we need to close to achieve our desired funding.
To close the savings gap, we will need to make assumptions about how much we will need to save more within the time horizon and the required compound growth as well as the risks involved. For the less financial savvy, this may seem to be a daunting task which often deters people from planning their retirement.
It is difficult to plan for your retirement future as it involves thinking through what you want out of your retirement with many uncertainties surrounding it. However, this should not be preclude us from taking action now to ensure that we continue to live the way we have been accustomed into our retirement years.
Our current standard of living is supported by our income levels, which needs to be replaced once we stop earning when we retire. The downside for not planning to replace our income is that we will most probably have to downsize or reduce our standard of living when we retire. That’s a scenario that we don’t want to happen and as such we will need to ensure that we have adequate retirement funds to generate our retirement income.
“Thinking through what you want out of your retirement”
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