Simple steps to achieving financial freedom later in life.
You’ve found your stride in your career and personal life. One thing’s for certain: Your outlook on life is different from your mother and the women before her. You value your individuality and independence as much as you love your work and family. As you make the most of your prime years now, you’re also determined to enjoy the same quality of life three, four or even five decades on.
Make the future a priority
It’s easy to focus on your present needs, such as financing a home, paying for childcare, or funding regular overseas vacations, as these seem more immediate and urgent. However, if you relish the idea of achieving financial freedom and having the liberty to pursue your passions sooner rather than later, then now’s a good time to take active steps in planning your retirement. The earlier you start, the more you will be able to set aside, and the less stressful the process will be.
Consider your retirement aspirations
How you envision your golden years will guide you in the planning. Do you dream of travelling the world? Spending hours at the golf course? Learning a foreign language? How will your daily routines change? And how would your current money mindset affect your retirement plan? Ask yourself how much you wish – and are able – to set aside to fund your lifestyle and passions, and what you can compromise on.
Manage the uncertainties
Whether you’re single, married or widowed, your goal for retirement would be self-sufficiency. You’ve probably looked into estate planning (link to other article here) to make sure your loved ones and dependents are cared for in your absence, but don’t stop there. Securing your finances for the future involves planning for the unplanned. This includes ensuring you have an income no matter how long you live, and making provisions for emergencies.
It’s important to factor in rising costs of living too, especially when it comes to medical expenses. Relying on your Central Provident Fund savings alone may not be enough. If you plan on financing retirement by downgrading your property, remember that the value of your property changes with the market, and with time. Diversifying your retirement income sources is one way to manage this risk.
Assess your current circumstances
Some unique challenges that women face include a longer life expectancy than men (hence needing retirement savings to last longer), lower earnings arising from the gender pay gap, and career disruptions due to childbirth, caregiving, and other domestic demands. You may, for instance, have left the workforce for some years to care for a family member, or taken on a lower-paying job that offered more flexible working hours. With fewer opportunities to fund your nest egg, it’s crucial that you put aside money regularly for retirement, and also maximise your current income.
Seek higher returns on your money
Savings are a secure way to stash funds, but you can also consider making your money work harder via investments, such as unit trusts and stocks. The Supplementary Retirement Scheme (SRS), offered by the Singapore government, will also allow you save more for retirement. Contributions to SRS are eligible for tax relief, and investment returns are tax-free. You’ll also earn 0.05% interest per annum on the non-invested part of your savings.
Get an alternative viewpoint
Finally, the big question remains: Just how much is enough? The sum will vary from person to person and according to various considerations, including those discussed above. A November 2015 survey by DBS and Manulife found that at least 7 in 10 Singaporeans have tried to figure out how much they’d need to save for retirement but only about 2 know the exact amount needed. To get an estimate, try DBS FutureMe, which lets you personalise your retirement plan based on your desired lifestyle. It projects your likely future expenditure (including inflation) based on your expenditure over the last six months on travel, dining, household expenses, and more.
It’s also prudent to seek advice from financial planning professionals, who can help you conduct a financial health check, and manage your wealth portfolio. With their training, expertise and resources, they will also provide you a valuable alternative perspective in planning for your future, especially where medical and property costs are a key concern. Get started on retirement planning – it’d be one of the best financial decisions of your life.