Retirement is a special time for everyone. It could be a time to travel around the world and do the things that you always wanted to do, without worry. It could also be a time where you simply want to spend quality time with your loved ones. Regardless, it is a matter of choice on how much time and the type of quality you want in each phase.
PRE RETIREMENT PHASE
This is the phase where we start asking themselves:
- What is the ideal retirement age for me?
- Do I want an “ordinary” retirement or do I want to enjoy my dream retirement lifestyle?
- What must I do now so that I can retire as soon as possible?
Increasing we are seeing young millennials as young as 25 starting to plan for their retirement so that they can retire early and extend their retirement phase for as long as possible. They understand that the later they start, the further away is their retirement. Time is of the essence.
During retirement, there are only 2 things to prepare for – our basic survival needs and our desired lifestyle wants. A well thought out retirement strategy must deploy different strategy for each of them.
Can you imagine only eating when you have income and not eating when you have no income? Hence it is a good practice to adopt the strategy of matching guaranteed needs with guaranteed income and vice versa. Assuming your current basic survival needs is $1,500 per month, in 20 years time, you need $2,500 per month after taking 2.5% inflation into account.
CPF Life is an instrument providing your first stream of guaranteed income. Increasingly many people are looking for another source of guaranteed income for a second layer of safety instead of solely relying on CPF Life.
Eldershield, or the upcoming CareShield should also form part of your building blocks for basic survival needs because:
- Income for your basic survival needs double when you are sick or disabled at old age
- No matter how good you are at investing, you cannot guarantee that your income will be doubled when you need it the most
- They help you to retain income even if you are sick or disabled
A rule of thumb for disability income is about 50% of your retirement income. Is there a gap in your portfolio?
Once your basic survival needs have been adequately addressed, we can then look at enriching your desired lifestyle wants through investments. All you need to know about investment is just 2 things – Return and Risk.
With investments (including property), there are only 3 ways to make money depending on your preference:
A trained farmer is able to identify a duckling from a gosling and select a quality goose over a sham.
No one can predict the future, however everyone can manage risk by investing globally and into different types of investments. In order to be successfully over the long term, start early and diversify your investments. The best time to invest is always yesterday!
Recapping on pre retirement phase
- The later you start, the further you are from retirement. Time is of the essence.
- Match guaranteed income with your basic survival needs and vice versa
- Do not forget about possible illness and disability events at retirement
- Understand your investment preference and its risks. Diversification is key
- Always reach out to a trained professional if in need of help
Stay tuned to the next phase of retirement!
Contact Bernard here to find out more about Will Planning.