How should one start planning for their future? A good first step to take would be to consider both your basic needs and your ideal retirement lifestyle. By avoiding these four common mistakes, you would be well-equipped to plan for a comfortable retirement.
For young adults, living till your golden years may seem a long time from now. However, saving for retirement should be made a priority right at the start of your life. Many individuals tend to focus on funding short-term goals such as upgrading the home, buying an expensive car, or taking a holiday and may end up neglecting their plans to save for retirement. However, starting your retirement planning early will help you build your retirement nest egg in significant ways.
Let’s assume you are employed and below 55 years old. For every $1 that you contribute to your Special Account (SA), your employer will contribute $0.85. In 20 years, with the interest of up to 5%*, the amount of $1.85 would have increased to $3.70. In 40 years, this amount would have grown to $7.40. This means the original amount of $1 would have grown to more than 7 times
While an early retirement sounds good in theory, it leaves you less margin for error when it comes to your finances. This means you could find yourself in a pinch if you underestimate how much you need for your daily expenses due to the increasing cost of living.
Some early retirees also expressed regret at leaving the work force too soon even though they were still in good physical condition. More than just about the income, they missed the feeling of fulfilment a job gave them as well.
It’s important to take charge of your financial and estate planning but not all of us have the knowledge to do so. However, you should understand that in the unfortunate situation where you may no longer be able to manage your finances, either a family member or a close friend should still be aware of the financial decisions that have to be made. If you find it difficult to have conversations about money, seek help from a financial advisor so that you are able to make sound financial decisions.
Changes in age, health and income may affect your retirement plan in significant ways. While this can be a difficult topic to face, you should still plan for the different scenarios that may happen. A drastic change in health can affect decisions such as medical insurance needs, the possibility of long-term care and other expenses.
In addition, income and age differences could also mean different expectations of one’s retirement income. By considering all of these factors, you can then better manage your savings so that you can lead the retirement lifestyle you desire.