Monday, June 21, 2010

Take cover from retirement risks

Singapore will face the same retirement issues Japan face today as we are approaching aged society from a ageing society. Retirees must be prepared to return to workforce or delay their retirement unless they done their retirement planning during their younger days.
CPF Life was introduced to provide a regular payout for as long as you live because with medicine and technology advancement, the probability of outliving your savings and assets are much higher. However, to ensure comfortable retirement, other sources of retirement income are required.

Cover the biggest cost in retirement by transferring some of the risk to insurers with a hospitalisation and surgical insurance plan. Don’t underestimate cost of health-care or nursing cost as medical expenses are higher for person above 65.

If you plan to retire at 60 and expected to live till 90, there will be 30 years without a pay cheque. So make sure there is a serious calculation of retirement income instead of just rough estimation because it will be impractical to re-enter the workforce when you realized that you don’t have enough money.

It is going to be harder to time the market, so rather than timing the market, stay invested after a market decline to gain from the subsequent recovery. Always try to balance investment performance of retirement portfolio with withdrawal to ensure that retirement funds will last.

Inflation is going to play a very important factor when planning for your retirement funds as it can erode the value of your funds over time. Do not underestimate how big the impact of inflation on your portfolio.

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