How to afford to live happily ever after
Many people think retirement planning is something you do in later in life. On the contrary, the earlier we start planning, the better our life will be when we stop work. It doesn’t matter how much you are making now. Planning ensures that you can literally ‘live happily ever after’.
How much money do I need?
There is no fixed amount that you need to retire comfortably. “Financial planners use several ways to calculate how much a person needs, but the general rule is, you need about two-thirds of your last drawn salary to maintain the lifestyle you are accustomed to,” says Alan.
So it depends. Do you want to go thrifty (if taking a holiday in Malacca is your style)? Or live the yuppie dream (with shopping sprees in Sydney)? Or do you hanker for luxury (on a five-star cruise to Alaska)? No matter what you choose, you need to invest early and well.
And then there are the unexpected setbacks. For instance, if one or both of you lose your jobs. Be prepared that even the best plans can go awry.
Why it’s important to start becoming savvy about investing your savings.
Forced savings through the CPF Scheme is generally considered a good thing. One of the biggest problems in Australia is that Australians are not saving enough for retirement (current contribution rate is 9%). However, you can’t put all your investments savings into CPF because funds in CPF are effectively locked away until retirement. So to map out your ‘pre’ and ‘post’ retirement needs you first need to understand how to allocate your financial resources.
With regards to the amount that people need to save, the question is, how much do you need to live on comfortably per year in retirement that will satisfy both your immediate needs and personal goals? These personal goals can be yearly overseas holidays, car replacement, upgrading furniture, etc. This means that advisor’s need to base retirement needs on your dreams and not your expenses or budget.
To base your retirement goals on your expenses or budget has the potential to ‘perpetuate’ poverty.
Finally, understanding financial products and issues is very important to your financial success. The educational aspect of financial planning is critical so that you can make ‘INFORMED’ financial decisions.
