How Do You Know When It's Time For You To Retire?

There comes a time in every person’s life where they would prefer not to work, and to retire from their work and live their life on their terms. However, contrary to what most people think, retirement is not something that happens once you reach a certain age; age shouldn’t be the sole factor for consideration when it comes to retirement. 

Retirement is a lifestyle and to enjoy a retirement lifestyle requires a plan and discipline to follow through. 

It could take many years of accumulation and preparation to be able to retire. Then, how would you know when you’re ready to retire?

You have achieved Financial Independence

You will need to be financially independent, with a retirement nest egg where you can withdraw from when you need money. Your financial portfolio will have to be well-diversified to ensure that you are able to receive continuous stream of retirement income, regardless of the market condition. Surely you wouldn’t want your retirement income to rise and fall with the market? 

Your Financial Portfolio 

Your Financial Portfolio should be well diversified across different asset classes, and also provide some guaranteed and non-guaranteed sources of retirement income.

By being diversified across different asset classes, you reduce the risk to your investment portfolio holdings should an economic crisis happens and without fail, they do happen every decade so you’ll face 2 to 4 economic crisis during retirement. You would be able to rebalance your portfolio, to purchase equities at a low with your cash, commodities and bond holdings which would protect your financial portfolio from inflation over time.

Also, it would be ideal to have a portion of your retirement income from guaranteed sources and a portion of your income from non-guaranteed sources. 

• An example of guaranteed source of retirement income would be from annuity plans such as CPF Life and retirement savings plan from Life Insurers where a portion of the retirement payout is guaranteed.
• An example of a non-guaranteed source of retirement income would be your dividends from your equity stock holdings, coupons from bond holdings and rental income from your property (REITs) holding.

You have sufficient Insurance Coverage in place

The most common cause of bankruptcy is because of health-care costs or time out of work due to illness. 

When we’re retired, we need to ensure that health-care costs does not affect out retirement lifestyle. 

The two most impactful costs of illness would be hospitalization bills and long-term care costs. This is probably the reason why our government came up with the Medishield Life scheme and the Careshield Life (previously Eldershield) scheme.

It’s important to enhance our Medishield Life plan to ensure it provides suitable hospitalization cover for us, along with a rider to ensure that our liability is transferred to the life insurer and limited through the use of panel clinics. It’s also important to enhance Careshield Life plan to ensure that in event of severe disability, we would receive a stream of cash payout that would supplement our retirement income.

If you have other life insurance plans, then that would be a plus because additional wealth would allow you to have more choices in treatment methods or lifestyle adjustments.

Your loved ones have sufficient insurance coverage

If your son or daughter were to fall ill, and he or she doesn’t have insurance coverage in place and is struggling with their medical bills, would you pay for their medical bills? As parents, our answer is usually “Yes”. Hence, if that is a potential risk to your retirement, then wouldn’t it be important to ensure that your children have the appropriate coverage in place?

Your spouse has a retirement plan in place 

It’s important to have a discussion with your spouse about retirement, to ensure both of you have a common understanding. Many times, couples would have different views on retirement. It’s normal to have different plans, expectations and even lifestyle choices when it comes to retirement. 

If your partner is unable to work, and did not save up for his or her retirement, would you take some portion out from your retirement savings and share with him or her? Depending on your answer and relationship dynamics, this may require some discussion to find a common ground.

No person can work forever, or work in the same capacity at all times. Instead of being “forced” to retire due to regression of mental and physical facilities or inability to keep up with the market trends, we might as well retire gracefully and enjoy our golden years.  

When we retire, we must see to it that we are able to live a financially independent post-work life. This means that the funds that we have saved throughout the years are enough not only to sustain our daily living expenses but also allow us to live our ideal lifestyle. If you feel overwhelmed and uncertain about your retirement, consulting a competent financial advisor would help you get on the right track towards a fulfilling retirement.