Retirement Planning

There is a growing awareness among Singaporean for the need to plan for their own retirement. Gone are the days where people intend to rely on their children for their living expenses after they retire. In this era, most of us are caught in between supporting our parents and children at the same time. Thus this generation is conveniently termed as " Sandwich Generation". Even the government is trying to help us in this aspect by coming up with various schemes like the Minimum Sum Scheme, Supplementary Retirement etc..

However there are many road blocks to saving for retirement. Below are some of the common ones:

• Spending too much and saving too little
• Unexpected expenses
• Inadequate insurance
• Divorce
• Using retirement Fund prematurely
  

There are ways to overcome the roadblocks to retirement saving. First and foremost, be aware of your spending ratio. If you have difficultly in saving up, you can set a 90/10 spending ratio for a start. 90% of your income to maintain your current living standard and 10%(*exclude cpf contribution) directed towards long-term financial objective . Slowly decrease your expenses and increase on the saving portion to eventually a 80/20 ratio.

Second, before planning for a retirement it is important to have an emergency fund set aside. This fund is to help you to meet any urgent needs. This emergency fund size is recommended to be around 3-6 month of your current income.

Third, you should ensure you are adequately covered in your insurance needs. In the event of any illness, it will protect your wealth not being exhausted from the medical bill and other expense. Your effort in building your golden years nest will not be wasted. Take note that insurance needs does not only apply to personal life insurance, it should also include general insurance to cover your property and assets. Take a person who is currently a retiree for exampler, if a fire breaks out in his house, the cost of re-instating the house will immediately deplete a substantial portion of his retirement fund.

In my next post I will elaborate more on the various sources and instruments available to achieve the difficult but do-able objective of retiring right.