I’ve been dreaming of retirement ever since I started working… that’s how traumatic my first job was. So it’s really never too early to start planning for the day when you can finally kiss full-time work good bye.
A lot of this was discussed during NTUC Income’s “Start Retiring?“panel, with panel guests weighing in on their own perspectives on how to start retiring early, but there are so many variables that planning can get overwhelming. How expensive will living in Singapore be by then? Will you have enough money? And will you need botox? Here are five areas you need to take into account when planning.
1. Beef up your savings, investments and passive income sources
If you have no money, you don’t even need to think of retiring. For most Singaporeans, the main thing standing in the way of being happily retired is a lack of money. Financial planning, which you should begin doing as early in life as possible and not when you’re on the cusp of 60, is essential if you want to retire on time.
You’ll want to chart out how much of your monthly income you can save each month, and come up with an investment plan for your money so it can grow. You’ll also want to think about the possibility of opening up some passive income streams, whether now or in the future. For instance, if you have kids right now, you can plan to rent out their bedrooms when they grow up and move out… let’s just hope they can afford to when the time comes.
1 in 3 of the Singaporeans who responded to a recent survey said that they had not started saving for retirement, and 40% of respondents admitted that they lacked the knowledge on the options available to actually help them start planning. Don’t let that be you.
2. Try to gauge the cost of living when you retire
Nobody, not even your fengshui master or fortune teller, can accurately predict how expensive life is going to be when you are sixty or seventy. In fact, most of the pioneer generation folks had no idea Singapore would become one of the world’s most expensive cities.
Even so, you should make an effort to gauge the cost of living in future, taking into account historical inflation rates. When you plan for how much you’ll need to retire, always consider a reasonable degree of inflation just to be safe.
Another thing that will greatly impact the cost of retirement is where you plan to retire and what your lifestyle will be like when the time comes. As we discussed elsewhere on MoneySmart, quite a few countries offer retirement visas, and most of them are way cheaper than Singapore.
3. Avoid inflating your lifestyle when you’re young
If you’re cruising around in an Audi convertible and going on ski trips to Niseko every year, you’d better be able to maintain that lifestyle when you retire. Otherwise, it’s best to try not to inflate your lifestyle too much when you’re young, because the amount you spend in youth is indicative of how much you’ll need when you’re older, medical expenses aside.
It’s unrealistic to assume you’ll be able to downgrade your life completely and spend all your free time watching TV or sitting at the void deck with the other old folks once you retire. By spending less now, you’ll not only have more money to channel towards retirement, you also reduce the overall amount you need in order to kiss you job goodbye. By living simply today, you could be buying yourself many more years of freedom.
Now, I’m not saying that you should be living like a beggar all the way till your retirement, because that just defeats the purpose of good planning, but many young Singaporeans even go as far as taking on additional debt just to feed a lifestyle that is outside the scope of their budgeting.
The point here is planning is key in order to avoid going overboard. Making sure you properly set out your retirement goals and setting aside money to work towards that will help you to both enjoy life now and still achieve what you want to in the future.
4. Maintain your health
One of the biggest costs you’ll have to contend with as a retiree will be healthcare. You know the saying: it’s more expensive to get sick than to die in Singapore. A serious or chronic illness can be very costly to deal with in Singapore and can seriously derail your retirement plans, which then puts you in a bind as you’ll be too sick to work too.
There’s been increasing spotlight on Singaporeans’ increasingly poor health due to lack of exercise, bad diets and stressful lives. Unfortunately, too many of us take the view that we should work hard when we’re young even if we do so to the detriment of our wellbeing, and worry about our health when we’re older.
Based on the number of older people at my previous workplaces with diabetes and other serious health problems, it might be too late for us when the time comes.
5. Have a career plan in place if you plan to work
While working in retirement sounds counterintuitive, we don’t mean you’re going to be slogging away in the same old desk job when you’re 70 or collecting cardboard on the streets.
Instead, as a retiree you might want the option to work on a part-time or flexible basis, or to dedicate your time to a cause or business you feel passionately about. Whether you do it for the income or for fun, you should begin planning for the transition years before you actually retire. This will ensure that you are more self-sustainable from an income perspective and don’t have to worry about relying on these avenues to keep up your expenses when you retire.
One of my friend’s retired fathers gives kids swimming lessons in his condo pool, while another friend’s mother, a former accountant, occasionally does part-time work on a project basis.
Certain types of work in retirement will require more planning than others, such as in the case of doing some kind of hobby-related work. If you wish to continue on at your workplace but on a part-time basis or as a consultant, you’ll have to speak with the head honchos to find out if that would even be possible.
Have you started planning for retirement? Tell us why or why not in the comments!
This article was brought to you by NTUC Income as part of their Start Retiring? campaign.