The last time you looked in the mirror, you didn’t feel that wrinkly. Thank those Asian genes. But that doesn’t mean you shouldn’t be thinking about the day you retire. You may look very different by then and have fewer functioning organs, but you’ll surely thank yourself if you started preparing for retirement early.
While there is no substitute for saving and investing as much money as you can as early as possible, there are some other things to do to give yourself a little boost when it’s time to stop working, such as the following.
Find a passive income stream or two
The stereotypical image of retirement is to be able to stop working because you have saved up enough money to spend for the remainder of your life.
But in reality, finding a passive income stream or two as early on in life as possible can give you a big boost. Not only might it prove a source of retirement funds later on, it will also boost your income during your working years, enabling you to supercharge accumulation of your retirement nest egg.
What’s more, in the event of unexpected expenses or job loss, you’ll be glad you have passive income that prevents you from having to dig into your precious savings.
If you invest in stocks, you might want to consider picking up some dividend-yielding stocks, which can be a meaningful source of passive income when you’ve got enough of them.
If you’ve recently bought a 3-room or bigger HDB flat but are a single or do not have kids, you might want to consider renting out the spare rooms. You do not need to wait till your MOP is up to rent out spare rooms if you still reside in the flat. While living with strangers might not appeal to you, it’s worth well worth a shot just to see if it’s something you can handle. The amount of passive income you can generate from renting out a room over the years can be significant, so there is no need to wait till you are old to do so.
Invest as much of your money as you can while still maintaining an emergency fund
Most of us hold on to more cash than we should. In fact, it is not uncommon for Singaporeans well into their thirties and forties to not have invested a single cent other than buying a home.
The more of your money you invest, the harder you’re making it work for you, and the more cash you’ll potentially have when you’re ready to retire.
So it pays to figure out how to invest as much of your money as possible.
Of course, you will need to leave yourself a buffer of cash savings for your day-to-day expenses and for emergencies.
In particular, your emergency fund should be a certain number of months’ worth of expenses (typically between 3 to 6 for salaried employees). So if you spend $3,000 a month as the sole breadwinner of your family, you’ll probably want to maintain an emergency fund of between $9,000 (3 months), to $18,000 (6 months).
But for all that other cash, find ways to invest it. Even spare cash that you don’t really have a plan for can be invested for a year or two in a low-risk vehicle such as a fixed deposit or Singapore Savings Bonds. That’s better than letting it sit in the bank.
For starters, you’ll probably want to maintain a diversified stock portfolio and, if you can afford it, an investment property or two.
Downsize your life
Think you won’t need much money in retirement because all you’ll be doing is sitting at the void deck playing Chinese chess?
Well, if you’re living a high-flying, expensive lifestyle right now, it’s likely your expenses are going to be on the high side when you retire as well.
That’s why downsizing your life now, while you’re young and healthy, is the secret to not only needing less when you actually retire, but also being able to pump more money into your retirement fund now.
That’s also why getting into the habit of cooking your own meals, cycling to work, travelling budget-style and avoiding a consumerist throwaway lifestyle is something that can pay off decades down the road.
So cultivate good habits and try to live a simple life right now, knowing that it just might help you retire earlier.
How old are you and how are you preparing for retirement? Tell us in the comments!
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