3 Reasons Why Planning For Your Retirement Now Will Pay Off

Retirement seems to be the dream for most of us. I mean, who wouldn’t want to spend their days primarily doing things they love? Yet, money doesn’t fall from the sky. With no steady flow of income, it might be difficult to sustain your lifestyle – or if you want to live the dream by switching up your lifestyle and travel the world, you’re definitely going to need some extra funds.
Even if you plan to live out your retirement days simply, saving for a rainy day is always a good idea. While Singaporeans top the world in life expectancy at 84.8 years, there have been an increasing number of years spent in ill health. This means sufficient funds will need to be set aside for health-related costs and other necessities, such as hiring a helper.

1. Exponential Inflation

What goes up and never comes down? Inflation rates. A movie ticket would cost you just S$2.50 back in the day. Now, a standard adult ticket would set you back S$13.50 – excluding popcorn. This goes to show that the general cost of everything is only going to go up. According to a research commissioned by NTUC Income, the average amount that Singaporeans aged 30 to 55 years old believed they needed was S$3,314 a month, which is set to rise with inflation. Without proper planning, that amount is going to deplete your savings pretty quickly. And if you want to live a more atas lifestyle, you probably should start saving now.

2. Use Compound Interest to your advantage

This is when the math you learnt in school becomes actually useful. To refresh your memory, Compound interest is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit. Let your money work for you by planning your retirement early, and you’ll see an exponential growth in your funds over time. If you invest your monthly savings into a retirement plan that offers returns compounded over time, your returns will be much more than someone who sets aside the same amount without compound interest. This is brilliantly summed up by Albert Einstein, who once said, ‘Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.’

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3. You can't rely on CPF Life

CPF LIFE is a retirement scheme that provides you with a monthly payout for as long as you live. That sounds like a dream come true, but it’s probably not enough to sustain your lifestyle. Under the Basic Retirement Scheme, the monthly payout you’ll get from the age of 65 is S$660-S$720 – that’s just about 20% of the S$3,314 that Singaporeans feel they need for retirement. As such, CPF LIFE should not be your retirement plan, but complementary to it. Making plans aside from CPF LIFE will allow for the diversification of your income streams. As the saying goes, “don’t put your eggs in one basket”.
You might be one of those that fall into the “Sandwich Generation”. This refers to working adults who are financially responsible for their children, as well as their parents and can be especially pressurising as they are their parents’ retirement plan and their children’s future. As a result, it is easy for those who fall in the Sandwich Generation to neglect their own retirement planning. To prevent this vicious cycle from repeating itself, start early, and plan for your retirement now. There are many high yield retirement plans out there, and if you find yourself being confused as to which is the best for you, don’t be afraid to leave your contact below, and our preferred advisors will be more than happy to guide you through this.

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