Some days into 2014. Have you made your resolutions? Or these things ain't popular anymore? Anyway, I made mine. This year is about reaching out to as many people as possible and ensuring they have a basic knowledge of financial planning. And what better way then to reach out from here! So the first topic to share on is retirement planning since it was the last few things I shared on in 2013.
In my last post about the impossibilities to retire in Singapore. I mentioned about setting aside monies early for retirement. But how much? Where? Why? How?
To first answer the whys the where and how much will fall into place..
Then why? Well inflation is what u should be concerned about. My usual story of kopi o costing 50 cents 10 years ago and it costing about 90 cents today, inflation 4.13% per year for the past 10 yrs. So which means if inflation carries on at 4.13% the next 10 years. Your kopi o will cost $1.35 in 10 years time. Put that same 90 cents into a savings instrument of 0.05% returns, 10 years later it becomes $0.9045... cannot buy kopi o in 10 years time.
So if we put it into perspective. If your expenditure per month now is $1000 (not inclusive of holidays, car instalment, petrol, ERP, road tax, utilities, future kids school fees, phone bills, cable modem, cable tv, credit card bills...) and you intend to retire in 30 years time. Inflation is at 4%. You will need $3,244 per month at retirement. And based on our current life expectancy, you probably have another 20 yrs of retirement. Calculating very simply you will need $38,928 (not including more frequent visits to the hospital, medical bills, holidays, golf membership fees, high teas, property tax more than 1) per year for retirement. And to ensure this amount last for the next 20 years. You should have $778,560* at the point of your retirement.
Disclaimer
* this figure is based on you having expenditure of 1000 dollars now and no change in spending habits till retirement (scrooge!) with inflation rate at 4%. This does not constitue as a recommendation but a recommendation to call me.
The above calculation will answer how to plan for retirement.
How much to set aside will be dependent on where you put your monies. Leave it in a savings instrument that gives you 0.05% you will need to set aside $2146 per month to achieve $778,560 in 30 years time.
Put into endowment giving you 3% you will have to set aside $1324 per month.
Put into a medium risk investment giving about 5% you set aside $930 per month.
So where and how much will be dependent on your propensity to take risk. Not a risk taker set aside more in lower returns instruments. Risk taker take higher risk. But not all investment vehicles are sound. So enter with your eyes wide open.
So some of you may already have portfolios that may include many assets. Are those assets helping you to achieve your financial objectives? How risky are your assets or your strategy? Have you compiled your portfolio and determined their rate os return?
If you are an individual reading this please share with your friends. If you and a group of friends will want to learn more about detailed calculations for yourself, organise a group and email me. If you are an employee thinking a topic like this will be great for a self improvement talk in your office email me too. Tngjinyau@gmail.com
This is my first step achieving my resolution for the year. More importantly having a first step is an action. Have you actioned on your resolution? Is this years resolution the same as 2013.. if it is then action is what is lacking. Have a great 2014 ahead and stay tuned!
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