If you have missed the news, Singapore television actress, Rebecca Lim, 29, was recently slammed by Singaporeans for an Instagram post which she claimed she was “retiring”. The post turned out to be a publicity stunt involving an insurance company to remind young professionals to plan financially for retirement.
While the publicity stunt generated much ill-will towards both Rebecca Lim and the insurance company involved, I think we should pay attention to what was raised about early retirement.
It is an important issue to think about, but one which we often procrastinate on.
After all, the point of working so hard in establishing our early career is to retire comfortably eventually, with enough to provide for oneself and our dependents, if any.
When you reach a career point where you are no longer struggling to pay your bills and loans, it is about the right time to look into planning for your retirement. Even if it is for many more decades ahead, the earlier you start planning, the more prepared you will be. In fact, it may even motivate you to push harder towards reaching your retirement goals!
Earlier in February, Dr. Michael Leong, the founder of financial portal ShareInvestor.com which was acquired by Singapore Press Holdings in 2008 for S$18 million, passed away from colon cancer at the age of 54.
Back in October 2014, Dr. Leong wrote a poignant post, “when you have enough money…”, which struck a chord with me.
“Money is very important when you start off in life. You need money to be comfortable in life. However, when you have enough money, you should thank your lucky stars as much of business is about luck. Also, after a while, any more money really does not make much of a difference. In fact, more money then can actually create more work, more stress and more unhappiness. Life is being contented with what you have and yearning for more may be asking for trouble.” Wrote Dr. Leong.
While I am definitely not as well off as Dr. Leong, I share his view that life is not just about money. If I can, I would like to plan for early retirement like Dr. Leong when I feel I have enough money to see me through to old age.
What is enough money?
It really depends on the individual. For some, they need to to be able to live in a large condominium, drive an expensive continental class and fly first class round the world for vacations. For others, like myself, I am contented living in a HDB flat, driving a second-hand car and traveling on budget.
Regardless, it pays to start saving and planning for your retirement early. The earlier you start, the more time you will have to grow your savings and the earlier you just might be able to retire. It may seem like a daunting task, but here are three easy steps to help you kick start your retirement plan.
Know what you are planning for
Identify your retirement needs and goals so you clearly know what you are planning for. Ask yourself – when do I want to retire and what would my preferred retirement lifestyle be?
Once you have your answers, you can start building your plan and think about how much money you will need to support your preferred post-retirement lifestyle.
As a rough guide, you will need about 60% to 70% of your last drawn monthly income. However, this varies according to your desired post-retirement lifestyle. Hence you can adjust this based on your own goals. Do note to also take into account, the effects of inflation when planning ahead.
There is actually a nifty CPF Retirement Estimator which you can use to get a simple estimate of the savings you will need for retirement. Try it out.
Assess your current situation
Now that you know your retirement goals and how much money you will need to achieve them, next, work out how much savings you can expect to have from your saving account, CPF account, insurance policies and investments when you retire.
Again, there is a nifty CPF Retirement Calculator which you can use to help you get a review of your current financial situation and whether you need to top up to meet your retirement goals.
Calculate the difference between what you have and what you will need to determine the shortfall. From there, you can then realistically work out what you may need to do to make up for the shortfall. It may serve as a motivation for you to start your own business or make some sound investments with your existing savings to grow your nest.
Start saving and/or investing
Now that you know your shortfall, you can put in place a plan to help you accumulate your retirement savings.
A warning here – no investments are risk-free. Hence it is important to first think about how much you can afford to invest and how much you can afford to lose before you start. Be extremely sceptical when an investment scheme claims to offer high returns but at low risk to investors – there is no free lunch in this world and it might just be another Ponzi scam. Remember that if an investment offered to you seems too good to be true, it probably is. If not, why would the other parties not keep all the benefits for themselves?
For me, I chose to invest my money into another business outside of my day job, which is why I founded Alvinology Media and joined Originally.US as a partner.
Monitor your savings and investment plan regularly and make changes along the way to suit your needs. For those who are more conservative with investment, always take into account the returns you can get from keep your money in your CPF and also find out more about other retirement initiatives such as the Supplementary Retirement Scheme.
I know there are some people who disregard their CPF savings for retirement, but this is not the right approach. There are various government schemes to help plan for your retirement and it is worthwhile to take a look at them.