Your retirement years are literally your golden years. These are the years when you'll actually get to do what you've always been thinking of doing – wake up at your leisure, take those afternoon naps, spend quality time with family, take those dream vacations again, and have enough time for fitness and health.
You can achieve all these goals only if you have made the right kind of plans. Have you ever thought about something that you might not be getting right in planning your retirement?
Retirement could be quite tricky, simply because you would've spent about 35-40 years being employed and suddenly, there is an abrupt halt. Singaporeans tend to make quite a few mistakes in their retirement planning and some of these might end up being too costly.
Common retirement planning mistakes and how to avoid them
1. Being unaware of how much money you would need
You can never really predict exactly how much money you need to get through the post-retirement years. And obviously, you never know what sort of circumstance will suddenly make a massive dent in your savings.
If your plan entails saving or investing too little to fend for your retirement years, you might be in trouble. Your retirement life is a phase when you'd definitely not want to fall short of money, so make sure you have saved enough. Factor in inflation at the rate of at least 2.5% p.a. and accordingly adjust your monthly expenditure in your retirement years.
A good way of knowing how much you'll need is by calculating how much you currently spend every month and adjusting your future monthly spending in accordance with inflationary factors. You can also use a reliable online retirement calculator, such as this one from CPF to make good estimates and plan how much savings you would need.
Check this out: [Resource] 21 Online Calculators That Will Help You Master Your Personal Finances
2. Starting to think about retirement only when it's too late
Another detrimental mistake that most people make is not saving early enough. The brutal truth about not starting soon is that you wouldn't have accumulated enough to last you through your twilight years. Ideally you should start saving at least by the age of 30 to make sure you have a good corpus of funds by the time you're 55 or 60 years old.
Read also: Four Easy Ways to Double the Money You Make
3. Not making smart investments
It's not enough to save; you need to save smartly. Depending on your CPF Retirement Account and its related savings may not always be enough.
Look for saving and investment opportunities whenever you can. From a low-risk investment such as fixed deposits to a high-risk investment like unit trusts, you should distribute the risk on your investments prudently.
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4. Not considering your existing debt
Ideally, by the time you reach retirement, you should have paid off all your debt – be it credit card, personal loans, car loan, or home loan. But some debts have the habit of appearing never-ending – the most common being credit card debt. To avoid creating unnecessary financial worries, clear your debts before you begin your retirement life. Take a debt consolidation loan if required.
5. Not taking family emergencies into consideration
There might be times when you might have to spend big on a family emergency during retirement. An idea to tackle these unannounced emergencies is by investing separately for these specific emergencies.
These emergencies can be of any type – financial, health, disability, etc. Make sure that you have a separate emergency fund. Buy an Integrated Shield Plan alongside your MediShield Life, and a life insurance policy. These will not only help you be financially secure but also give you peace of mind.