Karen Tang, CFP®: Certified Financial Planner in Singapore

4 Steps to Plan for Your Retirement

4 Steps to Plan for Your Retirement

In all my years as a financial practitioner and money coach, I’ve met people who are nonchalant about their retirement planning and those who are concerned and determined to make their dream retirement come true.

What was the difference between them?

The ones who were on track to reach their retirement goals had a plan. They were intentional. They were focused. They took the time to think about what kind of future they wanted. And then they started working on their plan with an “Eye of the Tiger” intensity, not letting anything get in their way.

Do You Have A Retirement Plan In Place?

It is never too early to start planning for your retirement future. And it is certainly not an “old people” thing. Smart people start early because they know that time is their friend.

What Is Retirement Planning?

Retirement planning is the process of ascertaining how much money you will need to sustain your lifestyle in retirement, and then putting a plan in place to save and invest towards that goal. 

Here are a few questions I want you to ask yourself as you start planning for your retirement: 

  • When do I want to retire?
  • What do I want to do in retirement?
  • What is my ideal retirement lifestyle?
  • What is the monthly income I need to sustain my retirement expenses?
  • What is my life expectancy? 
  • What is the retirement nest egg I need to build up by the time I retire? 
  • How much will I need to save, invest to reach my goal?
  • What streams of income do I have during retirement?
  • What about medical expenses and long term care in retirement?

Why Is A Retirement Plan So Important?

Because it gives you a clear path to success. It inspires you to take action. Start this process with a qualified financial planning practitioner. The faster you hit the ground, the faster you will be able to make progress.

4 Steps to Plan For Your Retirement

The end goal of financial planning is a comfortable retirement. A lot of folks tell me they are intimidated just thinking about planning for retirement. They just don’t know where to start.

Here are four steps that I use to guide my clients in their retirement planning process:

Step 1: Set Your Retirement Goals

What is your dream retirement? Do you want to jet set around the world? Donate more, financially and physically, to your favourite causes? Buy a house in your favourite destination? Spend quality time with your grandchildren?  

Whatever your dreams and goals are, having a high-definition picture in your mind of what you want your retirement to look like will keep you motivated and staying on track. 

The starting point for retirement planning is to answer the above questions honestly. These are important questions and they will provide a gauge on how close you are to making your dream retirement a reality.

Step 2: Save 20% of Income for Your Retirement Plan

How much do you need to save for your dream retirement? The more the merrier. Just like how 20% of your monthly income is automatically transferred to the Central Provident Fund on a monthly basis, you should match this amount with cash savings for your retirement.

Your goal is to consistently save and invest for retirement as you focus on other financial obligations, such as education funding for your children and repaying mortgage. This means you need to first have clarity about your cash flow and your balance sheet (assets and liabilities). When children are financially independent and mortgage fully paid, you can increase your retirement savings later if necessary.

Step 3: Save and Invest for the Long Term 

What are the three potential enemies you will face while investing for your retirement plan? Fear. Anxiety. Impulsiveness. When markets plunge, the instinctive behaviour is panic and that often results in selling off holdings at a loss in order to ‘stay safe’. Investing is a marathon, not a sprint. To build wealth and invest with success, you need time and patience. Investing is also not for the faint hearted. The stock market is like a roller coaster ride – the ups and downs can cause you to feel uncomfortable and even disheartened. But if you have put in place a framework for making sound financial decisions, you know you can ride through the volatility with confidence.

If you have a plan in place, it is crucial that you review it regularly to ensure you are on track to achieving your goal.

Your retirement plan should ideally have a good balance of investments and insurance (endowment) plans.

  • Investments are the ‘growth engines’ but returns are subject to market volatility and hence, returns are not guaranteed.

  • Endowment plans, on the other hand, set a solid foundation for your wealth accumulation – very low risk, consistent and give guaranteed returns where your capital and retirement income payouts are guaranteed in your retirement years.

Don’t forget Long Term Care and Health insurance

Keep in mind that long term care and health insurance are vital in your retirement years. It will protect the money you have saved for retirement by helping to pay for nursing home stay or home care as well as hospital bills. Hence, make sure to factor these insurance costs into your retirement budget. It is non-negotiable!

Step 4: Work With a Qualified Financial AdvisorCERTIFIED FINANCIAL PLANNER

Retirement planning is neither a solo sport nor a DIY activity. You need someone who can help create a retirement plan that fits with your life and your goals. This person will help you figure out the numbers, and sound you out on the pitfalls to avoid. That means working with a financial advisor you can trust and one who has the mathematical aptitude to guide you accurately.

Take Action Now!

Need help with your retirement planning? I can work with you to create a retirement plan for your specific situation and help you understand your savings and investment options. How you live out your later years in the future is dependent on the steps you take today to achieve a secure retirement. Contact me today!