5 tips you should know when planning for your retirement
26 September 2022 | 2-mins read
You know that one day, you’re going to retire. Since retirement is on the horizon, it makes sense to plan for it just as you would for other milestones like a wedding, a first job or the purchase of a new home. Retirement is like all these goals, but typically it takes a longer time to materialise.
With sufficient planning and the discipline to follow through with your plans, you can make your dreams of a comfortable retirement a reality. Here are the 5 tips to consider when planning for your retirement.
Tip 1 - Start when you are young
When you are young, retirement might seem like a distant dream, but it is never too early to start preparing for it. Get our guide on retirement planning for young adults here.
Another common misconception is that should you wait until you have accumulated lots of savings or put off retirement planning until after you have achieved certain milestones such as purchasing a home. However, starting small and early is better than waiting for the ‘ideal’ conditions, as compound interest can make even modest amounts grow significantly over the years.
That being said, it is never too late to start, so do not be discouraged if you have reached a certain age and are still unprepared for retirement. There are numerous options and solutions available for retirement planning at any age. Find out how you can help your parents plan for their retirement here.
Tip 2 – Find out how much retirement income you need
Picture your life when you stop working and estimate how much funds you will need to retire. Start by coming up with a monthly retirement income which includes daily necessities budget such as cost of groceries, transportation, utilities etc. Be sure to make provisions for healthcare related costs too. Next, include your discretionary spending budget such as your travel plans, getting a new smartphone whenever the latest edition comes out etc. Multiply your desired monthly retirement income by the number of years in retirement to give you an idea of how much funds you will need to retire.
Once you have an idea of how much funds you need when you retire, be sure to adjust the figure upwards for inflation, which raises the cost of living from year to year. To estimate the number of years it takes for inflation rate to double, you can divide 72 with the existing inflation rate1. For example, if current inflation rate is 3%, it would take 24 years for inflation rate to double.
Tip 3 – Build your retirement plan
After calculating your retirement goal and adjusting it for inflation, the next step is planning how you can achieve it. Figure out how much savings you need to put aside each month into your retirement fund to reach your goal.
In your zeal to put aside money for retirement, don’t forget to maintain an emergency cash fund at all times. Your emergency fund can be used to pay for unexpected expenses such as health emergencies or non-routine home repairs. Having this cash on hand will prevent you from turning to credit card debt or personal loans which, due to high interest rates, can be financially detrimental. It is recommended that you have at least 6 months’ worth of income in your emergency fund2.
Tip 4 – Diversify your retirement fund portfolio
To counter inflation and achieve your retirement dream sooner, it is important to have a diversified retirement fund portfolio.
Nowadays, there are also numerous financial products geared towards helping you become retirement ready, such as retirement insurance savings plans which may serve the dual purposes of wealth accumulation and insurance protection.
For example, Manulife SmartRetire (V) is a whole-life, regular-premium, investment-linked policy which combines both protection and investment components. You can choose to retire with a lump sum or stream of income from as early as age 40 and plan your investment journey to the tee with its curated suite of funds.
Tip 5 – Stick to your plan but keep it flexible
Regular premium retirement insurance savings plans are one example which you can select a plan with monthly premiums to ensure that you pay fixed premium amount every month.
However, life is full of uncertainties, and it is always better to choose retirement insurance plans that offer flexibility. For example, RetireReady Plus (III) has a premium freeze3 option which allows you to put your premium payment on hold while your policy stays in force in times of need. Nonetheless, should your retirement needs change, this plan also gives you the flexibility to change your income payout period4 anytime after the policy effective date and 2 years before your selected retirement age.
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Footnotes
- https://www.moneysense.gov.sg/articles/2018/10/introduction-to-retirement-planning
- https://www.straitstimes.com/business/banking/2-in-3-here-dont-have-savings-to-last-past-6-months-survey
- Not applicable to single premium policies.
- Please refer to the Product Summary and Policy Contract for more details.
Important Notes
These insurance products are underwritten by Manulife (Singapore) Pte. Ltd. (Reg. No. 198002116D). This advertisement has not been reviewed by the Monetary Authority of Singapore. Buying a life insurance policy is a long-term commitment. There may be high costs involved if you terminate the policy early, and your policy's surrender value (if any) may be zero or less than the total premiums paid. Your investments are subject to investment risks, and you may lose the principal amount invested. The performance of the Manulife SmartRetire (III) Fund(s) is not guaranteed. The unit prices and any income accruing to it may fall as well as rise. The Fund Managers shall have the absolute discretion to determine whether a distribution is to be made in respect of the Manulife SmartRetire (III) Fund(s) as well as the rate and frequency of distributions to be made. The distribution yield for the Manulife SmartRetire (III) Fund(s) is not guaranteed, and the Fund Managers may review the distribution policy depending on prevailing market conditions. Distributions may be made out of income, net capital gains and/or capital. Past distribution yields and payments are not necessarily indicative of future distribution yields and payments. Any payment of distributions by the Manulife SmartRetire (III) Fund(s) may result in an immediate decrease in the net asset value per unit. You should read the prospectus and the product highlights sheet and seek financial advice before deciding whether to purchase units in the Manulife SmartRetire (III) Fund(s). A copy of the prospectus and the product highlights sheet can be obtained from a Manulife Financial Consultant or our Appointed Distributors.
This article is for your information only and does not consider your specific investment objectives, financial situation or needs. It is not a contract of insurance and is not intended as an offer or recommendation to purchase the plan. You can find the full terms and conditions, details, and exclusions for the mentioned insurance product(s) in the policy contract.
This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the LIA or SDIC websites (www.lia.org.sg or www.sdic.org.sg).
We recommend that you seek advice from a Manulife Financial Consultant or our Appointed Distributors, or visit any DBS/POSB Branch before making a commitment to purchase a policy.
Information is correct as at 26 September 2022.
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