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I have a retired friend in his 60s who says that the day he retired was the day he stopped wishing he was younger. He now spends his days hiking and learning Russian as his younger ex-colleagues slog away.
Most people start to think about retirement when they hit their 40s, although a few start to plan in their 30s or earlier.
Whether retirement seems like a hazy abstraction that’s decades away or you’re planning to FIRE your way to an early retirement, here’s a piece of advice: start to plan as early as you possibly can. If you haven’t started yet, do it now, even if it means having to postpone tonight’s scheduled binge of your current Netflix series.
Here are 5 things you can do right now for a comfortable retirement.
1. Pay yourself first
There’s always a never-ending list of bills to pay, but you can make budgeting easier if you remember to always pay yourself first. One way is to transfer into a separate savings account the money you will set aside for your emergency fund, investments, retirement and so on. Automate this process if you’re too lazy (or often forget) to make a manual transfer every month.
Paying yourself first ensures that you can consistently set aside the cash allocated to investments, emergency fund and retirement.
More importantly, when you pay yourself first, you’re eliminating any temptation to overspend. Conversely, if you give yourself free reign to spend, you might realise at the end of the month that you’ve got nothing left over.
If you’ve got an adequate emergency fund and have been regularly saving and investing your money, good job! You deserve a gold star. Don’t forget to keep up the good work, as consistency over a long period is needed in order to truly enjoy a financially secure future.
By the way, saving and investing are not mutually exclusive and can be done in tandem, such as through a plan that helps you accumulate and invest your wealth.
2. Look for investments that offer security even during market volatility
Covid-19 has made investing much more uncertain. For example, those of us who have been investing in the STI ETF would have had a heart attack when the pandemic hit and share prices dropped like a stone.
But that doesn’t mean it’s not worthwhile trying to grow your money. When it comes to retirement planning needs, you can go for a financial plan that guarantees the capital you put in.
When a plan offers a “capital guarantee”, it means that you will get back at least all the money that you have paid into the plan — no matter what market conditions are like. That means you will never have to worry about “losing” your hard-earned money, even in a recession.
Take AIA Elite Secure Income, for instance. This new plan guarantees 100% of the total basic premiums, which will be paid out to customers in the form of a Secure Monthly Income. (This Secure Monthly Income is payable if all your premium payments are up to date, you have made no withdrawals from the basic premium unit and bonus unit, and the policy has not been previously reinstated.)
Once the Secure Monthly Income has been paid out in full, you will continue to receive your Target Monthly Income. The Target Monthly Income may be payable over a period that is shorter or longer than the payout period which you would have indicated when you signed up for the plan, subject to market performance. You can also enjoy regular boosts to your investment amount, from year 10 onwards and every 5 years thereafter.
In this way, the plan lets you take advantage of potential wealth growth while protecting you from losing money, no matter how volatile the market is.
Using a plan like AIA Elite Secure Income in which to stash and grow your savings might be a smarter idea than leaving your money in a bank account, especially with the current low interest rate environment. Even stashing the cash in a biscuit tin like our forefathers likely did isn’t a good idea as you never know when some neighbour’s electric bicycle charger might start a fire.
Not only can it be safer to stash your cash in the plan, your money also has the potential to grow. The plan’s funds are managed by investment management professionals, and you get access to institutional funds that you can’t invest in by yourself.
AIA Elite Secure Income offers 2 groups of lower-risk AIA Elite Funds, namely AIA Elite Balanced or AIA Elite Conservative. Both are managed by world-class investment managers Baillie Gifford, BlackRock, Wellington Management and Capital International, and also supported by AIA’s investment management capabilities.
3. Plan the age you’d like to retire at
Whether you’d like to retire in 30 years’ time or are ready to throw in the towel any day now, it helps to make up your mind on exactly when you want to retire. With this goal in mind, you’ll have a clear target to work towards instead of vaguely stumbling towards a foggy point in the future.
With a concrete timeframe, you can figure out how much you need and then work backwards to determine your savings goals. Check out AIA’s savings calculator if you need a hand with that.
By the way, there’s nothing wrong with aiming high, but make sure your goal is realistic, otherwise you might end up getting disappointed and give up. We’re all different. Some people are fine with eating packed lunches on park benches, others wilt if not eating in an air-conditioned restaurant. Decide what level of thrift is acceptable to you and work with that.
4. Plan your target monthly income
If you feel that your CPF LIFE payouts may not be sufficient to support you in retirement, it’s good to have your own stream of income.
In order to plan for this, you have to work out how much you need each month in retirement in order to live a happy life. This really varies from person to person. Some are happy chillaxing at the kopitiam all day long, others want to live the Tatler life. So don’t worry too much about what other people claim you’ll need.
That said, one thing everyone should do is to factor in the role inflation could play in the future, particularly if retirement is 20 or 30 years down the road. In October 2021, Singapore’s overall inflation rose to an eight-year high of 3.2%, giving us an idea of the kinds of inflation figures we might face in the future.
Inflation will reduce the purchasing power of your cash savings, but there are ways to counter this, either through investment returns or by earning you additional funds to boost your capital amount.
For example, AIA Elite Secure Income gives your capital amount regular boosts with the Power-up Bonus from the end of the 10th policy year and every 5 years thereafter. You can also enjoy potentially higher returns by opting for the plan’s AIA Elite Funds — either AIA Elite Conservative or AIA Elite Balanced. Your money will be invested in institutional funds managed by a team of wealth professionals.
And in case you’re thinking of relying on your kids for a monthly allowance, be aware that they might struggle with raising a family of their own. By providing for your own retirement, you’re ending the cycle of the sandwiched generation, which they’ll surely thank you for.
5. Get a qualified financial advisor to simplify your journey
Investing and managing a financial portfolio takes a lot of time, especially when you’re not a pro or just hate math.
So, unless you love number crunching and poring over complicated charts, focus on fuss-free investing solutions that are credible and backed by professional expertise. For instance, the AIA Elite Funds let you leverage on best in-class expertise and portfolios in order to give you a shot at better returns.
AIA Elite Funds are managed by a dedicated team of wealth professionals at AIA Investments, the exclusive investment arm of AIA Group which is responsible for over USD330 billion in investible assets. AIA Investments also partners with some of the world’s leading global fund management firms to construct AIA Elite Funds which comprises a strategic mix of equities and bonds, focused on achieving sustainable, long-term investment returns to address your wealth creation needs.
It’s always useful to have a qualified financial advisor with a proven track record to do the number crunching, manage your financial planning needs and help you grow your retirement fund. AIA Insurance Representatives can assist you with retirement planning as well as work out your optimum protection coverage for a more holistic financial plan.
AIA Elite Secure Income helps you achieve all this and more
If you’re looking for a capital guaranteed plan that can pay out a monthly income to you and grow your wealth with potentially higher returns when you retire, consider AIA Elite Secure Income.
One of the plan’s key strengths is their team of professional investment managers who are working to get you better returns.
The plan is also easy to apply for. Just choose the age at which you wish to retire, your preferred retired income, how long you’d like to pay (one-time, 5 years or 10 years) and you’re good to go. There’s no medical check-up required or health questions asked. What’s more, while the plan is in force, you can look forward to Power-up Bonus, insurance coverage and flexibility of investment — such as ad-hoc or regular top-ups to your investment amount when you have spare cash and so on.
Protected up to specified limits by SDIC. This advertisement has not been reviewed by the Monetary Authority of Singapore.
AIA Elite Secure Income is an Investment-linked Plan (ILP) offered by AIA Singapore Private Limited (Reg. No. 201106386R) (“AIA”), which invests in ILP sub-fund(s). Investments in this plan are subject to investment risks including the possible loss of the principal amount invested. The performance of the ILP sub-fund(s) is not guaranteed and the value of the units in the ILP sub-fund(s) and the income accruing to the units, if any, may fall or rise. The actual Policy Value will depend on the actual performance of the policy as well as any alterations such as variation in the premium, such as premium holiday or partial withdrawals. There is a possibility that the Policy Value will fall to zero and in this case, policyholder can avoid the policy lapsing by topping up additional premium. Past performance is not necessarily indicative of the future performance of the ILP sub-fund(s). You should seek advice from an AIA Financial Services Consultant or Insurance Representative and read the product summary and product highlights sheet(s) before deciding whether the product is suitable for you. A product summary and product highlights sheet(s) relating to the ILP sub-fund(s) are available and may be obtained from your AIA Financial Services Consultant or Insurance Representative. A potential investor should read the product summary and product highlights sheet(s) before deciding whether to subscribe for units in the ILP sub-fund(s). T&Cs apply. For details, please visit aia.com.sg/esi. Protected up to specified limits by SDIC. This advertisement has not been reviewed by the Monetary Authority of Singapore.