ARTICLE

Here's why retirement planning still matters, even if you intend to keep working your entire life

2024

8 min read

Let's face it, retirement planning is never a fun topic. Beyond that, everyone would have a more urgent financial obligation that they need to prioritise. This is why many tend to neglect putting a plan in place.

However, the idea of working into your golden years can seem achievable. In fact more Singaporean seniors want to work into their 80s and 90s not only for income, but to keep mentally and physically active as well. Sure, there's nothing to stop you from working your entire life. However, this does not exonerate you from planning for your retirement.

1. Your health and your job prospects may not be in your control

Things don't always go as planned. Just look at how COVID-19 has impacted the job market. For anyone reading into the statistics, older employees were more impacted by the pandemic.

Beyond the uncertainties of economic downturns, companies shut down all the time and job functions become redundant as technology and needs change. Individuals also cannot prevent illness or injury no matter how careful they are.

Your decision to keep working into your retirement may not always be yours to decide. An accident or retrenchment may rob you of your ability to stay employed and earn a salary at any time. Should anything happen to your family members, you may also find it necessary to take time off work to care for your loved one.

As you age, you will also find it more challenging to restart your career after losing your job or being made redundant. The pace of change in the working world is accelerating, and your skillsets may be outdated if you have stayed out of the workforce for several years to recover from, or take care of someone with, a medical condition.

To cushion against potential financial impacts of the uncertainties life may throw your way, you are typically encouraged to:

Maintain a liquid emergency savings fund worth between six to 12 months of your expenses before you find employment again, and
Buy adequate health and life insurance to protect you and your family's current standard of living should the unforeseen happen.

However, you still need a retirement plan to act as a safety net in your golden years. With AIA Platinum Wealth Elite 2.0, you can continue charting a long and fulfilling career, while also enjoying peace of mind thanks to its protection benefits, and the option to make cash withdrawals during your retirement.

This differentiates the benefit of such plans compared to CPF LIFE – which is only meant for drawdown in your retirement years. If everything goes according to plan, you can use this to supplement your retirement income on top of CPF LIFE. If you are unable or choose not to work during your golden years, you have an added financial safety net to fall back on.

AIA Platinum Wealth Elite 2.0 allows you to access best-in-class investment management and offers you a choice to invest in AIA Elite Funds or the AIA Adventurous Index Fund depending on your risk appetite.

If the unforeseen happens, AIA Platinum Wealth Elite 2.0 provides a lifetime of wealth protection up to age 122 against death, terminal illness or disability (with optional add-on). It also provides you security in the initial years of wealth accumulation (when your investments have not had the time to sufficiently compound), with guaranteed protection in the first 15 years.

2. Your earnings may be reduced, but expenses only go up

While there's no denying that experience counts, an older employee cannot work as hard or as long as much younger employees. They may also have less up-to-date work skills. In any case, older employees will surely not be seen as the future of the company.

At the same time, you may also incur higher costs as you age. Your healthcare costs will only continue to rise as you become more susceptible to health conditions. Medical inflation also tends to be much higher than the core inflation rate in Singapore.

As such, retirement planning is critical to ensure you have adequate financial resources when you need it the most.

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3. Plans change in different life phases

When you're younger, it's easy to think that you are invincible and will enjoy working for the rest of your life. Reality is that as you enter different phases of your life, your priorities will likely shift.

Without a retirement plan, you are not giving yourself the option to call it quits or explore new passions (that pay less or nothing) in your golden years. The best time to start building a sizeable retirement nest egg is when you're young. This will give you more options and a longer investment period to ride out market volatility and compound your wealth for your golden years – whether you want to continue working or not.

4. Leaving a legacy for your loved ones

Between your savings, CPF monies and CPF LIFE payouts, investments, and a potential for ongoing salary in your senior years, you may have enough for a comfortable time in your golden years.

For those with children, grandchildren or other dependents, you may also want to leave a legacy to give them a boost in their lives. This could be for their tertiary education, wedding, or seed funding (and confidence) to start a business of their own.

A comprehensive retirement plan includes factoring in how much your bequest will be at various stages of your life. This is less about safeguarding your retirement, and more about protecting your family's standard of living and financial backing.

5. Flexibility and liquidity for your wealth goals

The retirement age in Singapore is expected to go up to 65 by 2030. Regardless of what the retirement age in Singapore is when you enter your senior years, a prudent retirement plan gives you the flexibility you need to pursue the life you want in your later years. This is how AIA Platinum Wealth Elite 2.0 comes into the picture, as both a wealth accumulation and wealth protection solution.

You can also choose from single or regular premium payments, with personalised accumulation horizon, so you are in control at all times. Coupled with life protection up to age 122, you can be assured that your family's well-being will be taken care of – no matter what happens.

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