Even though the average person is currently
working more hours, most of their income is spent to pay off their debts,
leaving very little to put aside to adequately fund their retirement account.
Plus, if we throw in factors like inflation and taxes, chances are your golden
years might end up less shiny.
So upon due thinking, I thought it would be
interesting to share with you some ideas on planning and managing your
retirement account. I mean, what is the worth of ideas if not shared?
1) Start Early.
a. The sooner you start the better. Simply
because time would make your money grow, that is if you choose the right investment mechanism.
2) Identify your risk factor for your savings.
There are mainly 2 types of risks related to retirement savings:
a. Shortfall risk – Shortfall risk can occur
either from not saving enough during your working years or from being too
conservative with your investments. By investing too safely, you can run the
risk of not having enough money when you retire as inflation would eat up your
money.
b. The risk of losing principal - The risk of
losing principal is often associated with volatility or the price fluctuations
within a specified period of time. Although volatility is inherent in the
markets, TIME IS ON YOUR SIDE…
3) Plan for your long term needs.
a. We spend half of our health to gain wealth.
And later, we realize that we’d be spending half of our wealth to gain back
that health. So we need to plan for what is known as “non-market losses”,
catastrophic things like health care and long term care. As the average cost of
medical expense is increasing at a rate of 10% every year, we have to weigh the
cost of long-term care premiums against the cost of paying for care out of our
pockets.
4) Your expense in retirement.
a. Although some expenses may reduce when we
retire, the cost of maintaining our lifestyle might not reduce. When given the
option, many would like to maintain the same level of luxury or even take it up
a notch (or few) upon retiring. But this is only possible if you have a
constant stream of cash inflow. With the active source of income scraped off,
the passive income has to be equal or in fact be higher than your
pre-retirement earnings. Because let’s face it, just because you take a step
back from working, you can’t expect the cost of living to take a step back too.
5) Loaning Money
a. KEEP YOUR MONEY FOR YOUR RETIREMENT! Learn
to say NO when you have to. Most parents (especially Asian parents) feel that
they are obligated (or as they call it their duty) to save up for their
children and have a good amount of properties to present to their kids.
Honestly, the kid would be able to earn his/her living and parents should
(after providing the basic necessities for their kids) live their lives. What’s the point of slogging when you don’t
get the chance to reap what you sow? So parents, spend the money on yourselves
and children, start standing on your own feet.
So, your lifestyle
after retirement is basically yours to choose. If you’d like suggestions, feel
free to contact me and I would be willing to lay out a few options. Remember;
don’t leave till tomorrow what you can do today.
Prepared By,
Ashveen Chakravarthy
Sekaran
