Retirement is a life phase many of us look forward to, but there are many myths and misconceptions about how to plan for it. We debunk five big retirement myths to give you the tools and knowledge to enjoy your golden years.
MYTH 1: Retirement is about me, myself, and I
Don’t forget about your dependents. It is possible your child or children won’t be financially independent when you’ve reached retirement age. Also, consider whether your elderly parents and your spouse will be financially reliant upon you. Retirement is in most cases not about you alone, and it is vital to include your dependents in your retirement equation.
MYTH 2: Retirement planning is for senior citizens
It is understandable that young working adults are caught up with their careers, and have retirement planning at the bottom of their to-do list. Retirement planning should be a priority early in life so that you’ll have ample time to grow your savings, and allow your money to work harder for you with compound interest, over the longer savings period.
MYTH 3: Retirement doesn’t require loads of cash
Retirement certainly doesn’t come cheap, but with early planning, a modest standard of living is achievable. To give you an idea of what’s involved, take the case of John, who is 25 years old. He plans to retire at 65. If he wishes to receive a monthly income of S$1,200 for the next 16 years after he turns 65, he would require approximately S$704,600 for his retirement based on a 3% inflation rate. That is a staggering amount for most of us. However, if John starts to save for his nest egg now and is able to earn a reasonable rate of return of 3% p.a., he has to set aside a modest sum of S$760 each month to meet his target. If he was able to invest part of his retirement savings to earn interest, he may be able to extend his retirement drawdown, and leave behind a legacy for his loved ones.
MYTH 4: You have to stop work at 65
Not today! A significant number of working adults surveyed in recent years prefer a semi-retirement, rather than giving up work completely. In the 21st century you’re likely to enjoy much better health than a 65 year old would have done decades ago. At the statutory retirement age, many people like to earn an income from part-time work or hobbies. They do this to supplement their savings and CPF while staying mentally active. An important consideration, especially while life expectancy continues to rise. To work out how much financial support you’ll need for your golden years, use the online retirement calculator.
MYTH 5: My property can look after my retirement funds
Again, it is unwise to assume you can always sell your property to make up for a shortage in retirement funds. There’s no telling if the costs of a new house or apartment in Singapore would rocket sky high by the time your retirement age comes around. Early retirement provision means that you will have the funds to enjoy your golden years without compromising your home.