5 COMMON RETIREMENT PLANNING WORRIES, AND HOW TO MANAGE THEM

After working for about four decades, you want to pursue your interests and passion when you eventually transit into retirement. By starting early and including your partner in a shared retirement plan, you will put yourself in the best position to succeed.

With the high cost of living, it’s natural for Singaporeans to worry about the adequacy of their retirement plan, and whether their income during retirement is going to be enough. To ensure you remain on track, here are five retirement planning questions everyone needs to ask.

After CPF Life, any remaining amount you need can come from supplemental retirement income streams. For investment properties and rental income, you may not have to worry about drawdown as they are typically recurring. However, how much rental income you receive may fluctuate depending on economic conditions.

You can also rely on retirement plans providing regular payouts to supplement CPF LIFE. Such plans typically allow you greater flexibility in staying invested even during your drawdown phase, as well as starting your drawdown from an earlier age.

With AIA Platinum Retirement Elite, you can choose to start your desired monthly retirement income from age 50 to 75, as well as combat inflation with a choice to increase yearly payouts between 0% and 5%.

AIA Platinum Retirement Elite allows you to invest cash or Supplementary Retirement Scheme (SRS) funds in three portfolios depending you’re your risk appetite, managed by leading global asset managers BlackRock, Wellington Management and Baillie Gifford, that have close to US$9 trillion in combined assets under management.

If you wish to drawdown from a personal investment portfolio of stocks and bonds, you can use a common rule of thumb that advocates you to withdraw about 4% of the portfolio amount each year.

At the same time, you do not need to liquidate your entire investment portfolio once you retire either. As you may enjoy a relatively long retirement, with those aged 65 today expected to live another 21 years, part of your retirement funds can still be ploughed in lower-risk investments to continue growing.

While planning your drawdown, ensure you also keep your emergency savings fund as well as build another pot of cash buffer to cushion against sequence risk – the risk of a market crash just when you are about to start withdrawing from your investments. Instead of liquidating your investments when prices are heavily depressed, you can tap into this cash buffer first.

With medical inflation far outpacing the core inflation rate in Singapore, affordable healthcare is another important consideration for retirement planning.

According to the Mercer Marsh Benefits 2019 Medical Trends Around the World survey, medical inflation in Singapore was 10% in the year before.

Singapore provides a basic health insurance plan which helps to pay for large hospital bills and selected costly outpatient treatments through MediShield Life. Premiums are kept affordable and subsidies are available for those who need them. These premiums can also be fully paid by MediSave.

Source: Ministry of Health

Those with greater means can choose to have private integrated shield plans with more extensive coverage for higher class wards in public hospitals and private hospitals.

For AIA HealthShield Gold Max, there is flexibility in choosing the extent of private coverage you desire for four different coverage levels and premiums. A portion of the premiums can also be paid with your MediSave.

There is no rule against retiring while you still have debts, such as your home loan or other personal loans. However, it can become stressful having to fork out a large recurring payment each month when you are no longer working.

As opposed to other lifestyle expenditures, where you can cut down in case of a financial shock, debts have to paid down each month regardless of your financial circumstances.

Even if it is good debt, such as for your home, the burden of having to fork out for it each month can weigh you down.

Instead, it could be financially prudent to pay off all your debts before considering retirement. Even if the interest rate is low, the peace of mind that you get knowing that you don’t owe the bank any money is good to have during retirement.

Apart from continuing to work, right-sizing to a smaller home can unlock a chunk of cash to pay off any debts you may have and also put into CPF LIFE, or other investments to boost your retirement income streams.

There’s no time like now to start planning for your retirement. The earlier you start, the less worry you will have, as you leverage on your long investment horizon to compound your investments across decades and to ride out short-term market volatility.

After answering these five questions about your retirement plan, you may still have more questions. If you need help with clarifications, contact an AIA Financial Services Consultant to guide you in implementing your plans and securing your retirement today.