Planning for retirement is as essential as other life aspirations, such as starting a family, buying a house, or buying a car. Research shows that 68% of people over 45 years would opt for retirement in the next five years; however, 48% cannot do so because of financial constraints. If you want to live in comfort in retirement, avoid the following retirement planning mistakes.
1. Late Planning and Saving for Retirement
When in your 20s, you may see retirement as being far away. However, the earlier you begin saving for retirement, the more you will have for your golden years.
Let’s say you require an annual income of $30,000 by the time you retire at 65, and you hope to live until 90:
The information below demonstrates three different situations:
Situation 1: Begin saving $500 per month at age 25, with 5% compound interest per year until age 65
Situation 2: Begin saving $800 per month at age 35, with 5% annual compound interest until age 65
Situation 3: Begin saving $1,200 per month at age 45, with 5% yearly compound interest until age 65
You will save more when you start saving at 25, despite putting away the least amount per month.
2. You Underrate your Retirement Age
Expect to live until 90 to enable you to build a more significant nest egg. In the meantime, boost your savings in case of early retirement. In Singapore, you can be re-employed from 62 until 65. But, when retirement planning in Singapore, ensure that you save enough if you are forced to retire before time.
3. Lack of a Debt Repayment Plan
Pay off your debt while funding your retirement, if possible. Even when facing financial struggles, have a debt repayment plan in place. Being debt-free gives you financial control, eradicates the interest cost, and leaves you with more cash to direct to your long-term investments and retirement savings. It also keeps you from making bad debt a lifestyle and retirement planning mistakes.
4. Neglecting your Health
People in retirement live healthier than pre-retirees. However, it would be good not to wait for retirement to maintain a healthier lifestyle. The cost of healthcare significantly increases as we grow older.
5. Making High-Risk Financial Investments
The CPF operates three accounts at attractive interest rates that help grow your savings. You can choose any of these accounts but avoid high-risk investments like stocks and equities on your own.
If you are planning for retirement, ensure you are adequately prepared for the life ahead, I can help you in retirement planning in Singapore. Contact me, and let’s get started.