How you can test-drive your retirement plans today

When buying a car, it is unlikely that you would simply walk into a dealership to pick up a car on the spot. You will likely go online to research what cars may fit your needs, ask family and friends if they have experience with the models you are looking at and also test drive cars to have a good feel of what you will end up driving.

You may think that putting in this effort is worthwhile because a car is a large expense and you need to make a good purchase decision. In the same token, you also need to make a really well-considered decision when planning for your retirement.

Spanning close to 23 years (between the statutory retirement age of 62 years and life expectancy in Singapore of nearly 85 years), your retirement will cost you even more dearly (and will impact your life a lot more) than a car. In fact, it is estimated that an elderly couple in retirement would need close to $649,000, by multiplying the Minimum Income Standards (MIS), that a study by Lee Kuan Yew School of Public Policy concluded was necessary to live on in Singapore, by 23 years.

With that said, here are four ways you can test-drive your retirement plans to see if you can truly support the lifestyle you hope to enjoy in retirement.

The statutory retirement age of 62 is just an official figure. In Singapore, workers who are able to must also be given the opportunity to remain in the workforce till the re-employment age of 67.

In addition, the government has also signalled its intention to increase the retirement age to 65 by around 2030, and extend the re-employment age to 70 at around the same time.

On an individual level, you should ask yourself when you want to retire – or even if you want to retire at all.

While the notion of finally leaving the stress-laden working world might be attractive, you have to consider whether you would even enjoy life without work. Not working will also mean you would have up to 10 hours more each day to find something else to do – ideally something equally or more fulfilling than your career.

To test-drive your retirement (or early retirement) lifestyle, you can take an extended leave or sabbatical from work, before officially tendering your resignation. This will allow you to discover potential challenges that you might not realise you would face.

If you find that you don’t have a lot to do after the initial few weeks, you may need to rethink your life in retirement. You could also realise that retirement isn’t as alluring as you thought it would be.

This question is more for those who want to right-size to a smaller home or live in a more affordable retirement destination such as Malaysia or Indonesia.

Before undertaking the drastic action of selling your home and buying a smaller one or moving to another country, you could rent the space for a year or two (while renting out your current place). While this may be an additional cost and inconvenience to bear, it can end up saving you a lot of time and money if you realise your plan to be unsuitable.

Of course, if you are planning to live in a cheaper overseas country, you might have to combine taking a sabbatical and renting a place overseas in your test-drive.

Often, the things you think you can do or achieve in retirement is little more than a pipe-dream. You may realise that they’re not things you actually want to do for the rest of your life.

If you dream about being able to hang out at the coffee shop with other retirees, without a sinew of worry in life, you may be in for a rude shock. Stress will always exist regardless of what you do or don’t do in life. Also, you may find that the slow pace is not something you actually appreciate.

If you think you will spend your free time getting healthier and cooking your own meals, then these are things you should start doing even before retiring to find out if you actually enjoy doing it.

If you want to figure out if you find fulfilment doing the things you have planned for in retirement, you can always take a sabbatical or even use your annual leave to have a taste by trying out those activities.

It’s easy to think that you can cut back on your monthly expenses while in your retirement. You may think you can simply go without things like overseas holidays, eating out, Grab rides and other forms of entertainment you currently indulge in. However, it’s another thing to actually forego the luxuries you have become accustomed to.

For a reality-check, you can easily test-drive this lifestyle for a year to see if you truly can live without these things. If you can’t, then retiring early might not be an option unless you can learn to wean yourself off these indulgences. Or if you’re young enough, you might need to work harder to grow a bigger nest egg.

You may think you will be able to drastically change your lifestyle in your retirement. In reality, after you get used to a certain standard of living or way of life, it can be difficult to make changes – both financially and emotionally.

To ensure you will be able to adjust to the lifestyle you are aiming for during retirement, you should test-drive it before you actually retire.

As you put away savings towards a retirement that you are dreaming about, you also need to ensure that you protect your nest egg from uncertainties. Having sufficient life insurance not only protects your dependents in the short-term, but also the plans you have built with your spouse in the long-term.

With life insurance, such as AIA Guaranteed Protect Plus (II), you can protect your young children or elderly parents with a multiplier of up to 5 times your insured sum needs till age 65 or 75, and thereafter still receive protection which caters for your spouse’s retirement plans in the event of death or total permanent disability. This protects you and your spouse from needing to dip into your retirement funds in any unforeseen scenarios. For enhanced coverage, you can purchase additional riders to cover critical illness as well.

At the same time, if you are healthy in your golden years, the plan accumulates a cash value that will mature once you turn 100 or as legacy to leave behind for your loved ones when you pass on.

To encourage you to adopt a healthier lifestyle, AIA Vitality rewards you with discounted health screening, gym membership discounts and exclusive deals on fitness-related gadgets, and travel and leisure activities.

Get savings of up to 30% off your first year’s premium when you purchase eligible AIA plans for specific coverage amounts, including AIA Guaranteed Protect Plus (II), from now to 15 March 2020. To find out more, visit https://www.aia.com.sg/en/campaigns-promotions/protect-with-a-great-save.html, or speak to your AIA Financial Services Consultant or Insurance Representative today. Alternatively, you may leave your contact details here so we can get in touch with you.