Friday, March 5, 2010

Plan for retirement

Have you heard the saying “Good things come to those who wait”? This may be true in some aspects of life, but it won’t get you far in retirement. Waiting too long to save for retirement is likely to lead to working longer or pinching pennies all through your 50s or 60s in a last-ditch effort to build your retirement fund.

Even in your teens, begin to develop a retirement strategy. Learn the basics of personal finance and begin your savings plan. Personal finance knowledge will not only help you plan for retirement buy also help you become a wise consumer before you buy a car or get a credit card. Remember, before you can make complex investments, you need to know how to plan. And before you can plan, you need to develop financial skill. You need to know how to save.

Start Saving as Soon as Possible

It may be difficult to try to save for your retirement if you are struggling to pay university tuition fee, build a business, buy your first HDB, or start a family. Buy if you begin in your late teens or early 20s and put $10 a week into your retirement fund (savings account), and keep putting it there for the next 30 or 40 years, you will have accumulated an impressive total because of the power of compound interest. Saving money early is the single smartest thing you can do to help secure your retirement.

Compound interest (interest paid on the ever-increasing total of principal and interest) is an effective tool for saving. The weekly amount you save is not necessarily as important as the fact that the money compounds for three or four decades. Start saving early, and your retirement savings will surpass those of your peers who put away much more a week, but do not start saving seriously until their late 30s or 40s. If, as your earning power grows, you deposit larger amounts into your account, and keep doing so, you can accumulate a sufficient amount for retirement.

Factors to consider

Remember, you must make wise decisions early in life regarding projected savings for retirement. You must investigate savings for retirement and the cost of education for you and your dependents.

Estimate how much you will receive from your CPF life or other retirement plan, savings, and investments. You do not want to outlive your assets because life expectancy rates are on the rise. To provide for economic security, you will need a minimum of 60%, and as much as 100% of your pre-retirement income to live comfortably. An income that will keep pace with inflation is especially important after you retire. Start assessing how to provide for a more secure retirement by

• Participating in health/wellness programs

• Reviewing long-term care options

• Staying abreast of financial trends

• Saving

Interesting facts – For every ten years you delay saving for retirement, you will need to save 3 times as much each month to catch up

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