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6 retirement planning mistakes to avoid

When it comes to retirement planning, there is no one-size-fits-all plan. Retirement has a different meaning for each one of us - in fact, retirement aspirations have evolved with time..

While the earlier generations may have seen themselves working as a loyal employee in a stable company until the day they retire, the younger generation seems to have a different idea. Our millennials are more optimistic about their retirement - the Manulife Investor Sentiment Index showed that 83% of millennials interviewed expect to maintain or improve on their current lifestyle after they retire, compared to just 56% for those above age 50.

Although financial planning will have to cater to individual wants and needs, the necessity of having enough to live comfortably in our golden years however, remains the same.

When working on a plan for retirement, it is thus important to keep these 6 retirement common mistakes in mind to ensure the end results meet your retirement goals.

1. Starting to save when it's too late

“When should I start saving for retirement?”

A recent study by Manulife shows that most Singaporeans start planning for retirement only around age 38. You might think that 38 years old is early for retirement planning, but the fact that in this group, only two out of five Singaporeans are confident about meeting their retirement needs shows age 38 is in fact too late.

Amidst the other ongoing financial commitments you might have in your 30s such as mortgages, car loans, building a family, saving for retirement and paying insurance premiums it seems impossible to put aside an extra few hundred dollars per month for your retirement fund. But it all comes down to good budgeting and having a solid financial plan.

In fact, you should consider saving money for retirement as part of your entire work life, just like paying taxes.

When in doubt, check in with a Financial Consultant that can help you figure out how to build your retirement portfolio

2. Underestimating the retirement amount you need

“How much is enough for retirement?”

Whether you are in your 20s, 30s or 40s now, you may feel that you don't need a lot of money to live in Singapore. This might be because food is cheap, you have access to subsidised healthcare and you hardly feel the pinch of your mortgage because your CPF savings is doing the job. You can even afford a number of overseas trips a year, thanks to all the budget airlines!

But the fact is when you are not drawing an income, things become different. During your retirement years, you are likely to be living entirely on your savings and CPF retirement fund and they are, unfortunately, finite. This is why proper financial planning requires a conservative estimate which takes into consideration contingency measures.

Your retirement portfolio not only needs to have a good estimate of how much you need to maintain your desired lifestyle, but it also needs to take into consideration the effects of inflation, as well as cater to any healthcare expenses you might incur in your elder years


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3. Putting all your retirement savings in the bank

“Where should I put my retirement savings?”

When it comes to saving money, it is not unusual to put them into a savings account at the bank. After all, that's where you have easy access to cash. Additionally, you get paid a minimal interest as well.

While a deposit account may be practical for everyday transaction purposes, the low interest rate does not make a good long-term instrument for saving. In fact, your money is slowly losing its purchasing power as the effects of inflation overpower the interest rate you are getting.

4. Neglecting protection

“Do I need insurance protection after retirement?”

When we talk about retirement planning, an overwhelming amount of attention is put on saving enough money. Many neglect the fact that having a good protection plan is also part of smart retirement planning.

According to a report that studied the burden of disease in 20171 , Singaporeans typically spend an average of 10.6 years out of a lifespan of 84.8 in ill-health. That's about 12.5% of our life; being in sickness does not only cause us to suffer, it can put a huge burden on our family and care-givers as well.

The time spent in ill-health may also coincide with our retirement years, causing us to be unable to enjoy life as we hoped to, and the care cost also taking a toll on our finances when we aren't working anymore. Therefore, an insurance plan that can protect against an increased likelihood of medical and care expenses is of utmost importance.

5. Fear of investing

“Should I consider investing some money for retirement?”

Other than ensuring that your money is put into inflation-beating financial instruments, you might want to consider investing as part of your retirement portfolio strategy as well.

Investing when you are younger allows you to take more risk and earn higher potential returns for your future use. As you move nearer towards retirement age, you may not want to risk your retirement savings in risky assets since you'd have more reliance on the funds.

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6. Not reviewing your retirement plan regularly

“How often should I review my retirement plan?”

Our financial situation and life circumstances change all the time, which is why it is important to review our retirement plan once a year. Reviewing your portfolio include, balancing your portfolio to keep up with market changes and ensuring you are on track in meeting your retirement goals. Doing this will help to keep you be assured of your future and keep you both physically and emotionally at ease.

You can, of course, plan ahead to avoid most of these retirement planning mistakes. If you need help, speak to one of our Financial Consultants.

The information in this article does not necessarily reflect the views of Manulife (Singapore) Pte. Ltd. These are general information and does not constitute or form any recommendation of insurance plan.

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    These insurance products are underwritten by Manulife (Singapore) Pte. Ltd. (Reg. No. 198002116D). This advertisement has not been reviewed by the Monetary Authority of Singapore. Buying a life insurance policy is a long-term commitment. There may be high costs involved if you terminate the policy early, and your policy's surrender value (if any) may be zero or less than the total premiums paid. Buying health insurance products that are unsuitable for you may affect your ability to finance your future healthcare needs. This advertisement is for your information only and does not consider your specific investment objectives, financial situation or needs. It is not a contract of insurance and is not intended as an offer or recommendation to purchase the plan. You can find the full terms and conditions, details, and exclusions for the mentioned insurance product(s) in the policy contract.

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