Misassumptions on Retirement Planning

Many of our clients don’t see the importance of retirement planning and believe that as long they’re alive, they’d be able to handle all the things that life throws at them. Whilst that belief may apply for their current set of circumstances, as we age our circumstances change and the assumptions we hold to be true today, no longer apply. Let’s explore.

Assumption 1. We will be able to have a job (or find another job).

As we progress over our careers, employers continuously demand our skillsets and pay a higher salary for us to work for them. The way our mind functions would be to take the past and present, to extrapolate into the future and the future does look bright, with planning for retirement unnecessary. 

However, at a certain point in our career, our growing network, improving skill sets and rising energy levels would start to reverse and decline. We can see this in people around us who are beginning to suffer from afflictions from illness, and the onset of high blood pressure, high cholesterol, and high blood sugar because their body is no longer able to cope with the working lifestyle. It becomes harder for them to pick up new technologies. As their network retires, their ability to be relevant and leverage on their network will decline. This too will happen to us.

Most crucially, companies will prefer employing a younger and more energetic employee who could possibly grow alongside the company over time. 

Assumption 2. We can plan later, and we will still be able to save up in time.

The later years of our careers are typically the most uncertain and most unstable years. We’re more prone to falling ill and being retrenched. Instead of setting aside monies for our retirement, now we’re eating from our retirement nest egg. 

When we implement a last-minute, haphazard plan, it's only natural to have a last-minute, haphazard retirement lifestyle.

Assumption 3. CPF Life is enough and I could downgrade my property. 

We can never be too cautious especially when it comes to our future. CPF Life is the government’s version of a safety net for Singaporeans and downgrading property is the worst-case scenario for Singaporeans when we speak of retirement; don’t confuse your safety net for your retirement plan.  

If you’re substituting your retirement plan with your safety net, it's likely the old adage holds true: If you fail to plan, you plan to fail. A proper retirement plan would possibly include utilizing the Supplementary Retirement Scheme (SRS) established by the Ministry of Finance, accumulating through investments, or a specially designed retirement savings plan.

People who start planning their retirement early tend to reap the most benefits. Growing your retirement funds to the point where you could live comfortably without working takes years and even decades to accomplish. But no matter if you’re just starting your career or if you’re in the later stages of your life, it’s never too early or too late to start planning for your retirement. 

If you have no idea how and where to start with retirement planning, there are people who can help you out. A financial advisor will provide clarity on your current financial situation, and help you go through the different financial strategies, and come up with an effective plan that will help you achieve financial independence so you would be able to enjoy your retirement years.