Retirement planning is a crucial aspect of financial management that often requires careful consideration and strategic decision-making. Yet, it is hardly a priority for many, until when it might be too late. According to an article published in Business Times (source: https://www.businesstimes.com.sg/wealth/science-behind-why-we-are-bad-saving-retirement), 3 in 4 of those polled, planned to start retirement planning at the age of 35. That means for the majority of fresh graduates in their 20s, retirement planning is the least of their priorities. When people start retirement planning late, they have a shorter runway to accumulating their wealth.

In Singapore, where the cost of living continues to rise, avoiding common mistakes in retirement planning is essential to ensure a comfortable and secure future. Some of these common mistakes may include, but not limited to:

Relying only on CPF, thinking it’s more than sufficient
Thinking that retirement planning can wait
Not factoring the effects of inflation on their savings (didn’t bother to explore ways to hedge their savings against inflation)
Not willing to consider long-term investing due to the fear of risk on loss of investment capital
Underestimating the living, healthcare and long-term care costs for seniors
Not considering that longevity or outliving their savings is also a risk

Let’s delve into some key areas where individuals can focus to navigate the complexities of retirement planning effectively.

Understanding Retirement Needs:

One common mistake people make is underestimating their retirement needs. It’s vital to realistically assess how much they will need to maintain their desired standard of living post-retirement. Consider factors like inflation, healthcare costs, and potential emergencies when calculating your retirement fund requirements.

Funding Retirement via CPF:

The Central Provident Fund (CPF) is a cornerstone of retirement planning in Singapore. Explore options to see how to best maximize your CPF contributions to build a robust retirement fund. Understand the various CPF schemes available for retirement planning, such as the Retirement Sum Scheme, to ensure a steady stream of income during your golden years.

Using Investment and Savings for Retirement:

Diversifying your investment portfolio and cultivating a habit of regular saving are integral to a sound retirement plan. With professional advice, you can align your investment strategy with your risk tolerance and retirement goals. Remember, starting early and staying consistent with your savings can significantly impact your retirement nest egg. When you start investing early, you can also ride out the economic turbulence.

Insurance and Healthcare Planning:

Healthcare costs can escalate during retirement, making insurance coverage even more crucial. Explore health insurance options like Integrated Shield plans to supplement the MediShield Life and consider additional private insurance for additional comprehensive coverage (if required). Also, factor in the long-term care costs, and use the right insurance to safeguard against potential health-related expenses in later years.

Estate & Legacy Planning:

Many people often overlook the importance of estate planning in retirement. Establish a will, designate beneficiaries, and organise your assets to ensure a smooth transfer of wealth to your loved ones. Consider setting up trusts or making charitable contributions as part of your legacy planning (where desired).

Lifestyle & Housing Considerations:

Retirement is not just about finances; it’s also about lifestyle choices. Evaluate your post-retirement plans, including where you want to live and how you envision spending your time. Factor in housing options, such as downsizing or relocating, to align with your retirement lifestyle preferences. If you’re used to occasional dining at restaurants, consider if you will be okay with hawker food at retirement.

Continued Income & Engagement:

Retirement doesn’t necessarily mean the end of earning opportunities. Explore part-time work, consultancy roles, or passion projects to supplement your retirement income and stay engaged. This is provided that you are still in good health. Pursuing hobbies, volunteering, or joining social groups can also enhance your post-retirement quality of life.

Final Thoughts

In conclusion, successful retirement planning in Singapore demands a holistic approach that integrates financial prudence, lifestyle considerations, and long-term vision. By avoiding common pitfalls and focusing on key aspects like understanding retirement needs, prudent financial management, and comprehensive planning, individuals can pave the way for a fulfilling and secure retirement journey. Start planning early, stay informed, and seek professional guidance to navigate the complexities of retirement planning with confidence.

How do you know if you’re ready for retirement? Get the retirement readiness checklist to assess yourself here: https://cammietan.com/free-subscribers-only-resources/

Disclaimer:

The views and opinions expressed in this article are those of the author, and do not reflect the official position of any agency, organization, employer, or company. This content is for general knowledge only and does not constitute financial advice. Please consult a licensed financial advisor for personalised recommendations.

About the author:

Cammie currently holds a financial advisory license for distribution of insurance and collective investments scheme products. She also has an Estate Succession Practitioner certification. Trained as an Architect and being a brain tumour survivor, she identifies herself as The Resilience Planner in Personal Finance. Her approach to financial advisory is consultative. She encourages her clients to be participative and ask her questions. She believes that because Personal Finance is personal, she works with her clients to cater for tailored solutions to suit each individual’s needs and goals in life.