The Big R — all you need to know

Ah, the big R.

The thought of retirement often conjures up images of old people living their best life — relaxing by the beach with a piña colada in hand, strolling through the streets of a rustic European town, or spending time at home playing a couple of rounds of mahjong with friends. What a life, isn’t it?

And more often than not, this picture-perfect image of retirement is often accompanied by envious sighs of “this will be me someday”, or for the slightly cynical, a “I hope I’ll be able to save enough money before I’m too old to move.”

But retirement isn’t as simple as slogging it out for 40 years and then using all your hard-earned money to fulfil the hedonistic lifestyle of your dreams. In fact, retirement takes quite a bit of planning, and that should begin as early as your 20s!

Going back to basics

By now, we already know that retirement isn’t simply just quitting your job on your 63rd birthday (that’s Singapore’s official retirement age, by the way) and then leaving on a jet plane for indefinite periods of time. It actually requires a serious amount of planning.

What type of planning, you ask? Here’s a list of common concerns for today’s millennials:

The ability to pay off all loans before retirement

Whether you’re looking at housing, renovation or car loans, it’s important to ensure that you’ve paid off all outstanding debt before you think about retirement. After all, your source of income will be greatly reduced, or even paused indefinitely.

Whether you’ve parked aside sufficient emergency savings

By now you should be familiar with the idea of having emergency savings in our bank account. But as you get older, you’d also need to think about concerns that are more… geriatric by nature. Sure, while you have your Medisave and private insurance plans to rely on, it helps to have some money in your pocket in case of sudden health issues that require immediate financing.

If you’ll have enough funds to accommodate your post-retirement lifestyle

Traversing the world and feasting on exotic flavours at highly regarded omakase joints might sound like a dream, but if you don’t think one step ahead, these dreams might end up staying simply as dreams. For starters, you might want to be generous with your budgeting. What this means is that if you intend on travelling for an entire year upon retirement, you might want to set aside a little more than what your initial budget requires. This is to ensure that you’d be well prepared in case anything crops up unexpectedly, and you won’t have to re-evaluate your plans.

Alternatively, it could also be a matter of managing your retirement expectations, whether it’s cutting back on the extravagance, or setting your sights on more affordable goals. After all, there is beauty in leading a life of simplicity.

Factoring in life’s milestones and responsibilities

As you get older, you’d naturally have more responsibilities to handle, especially when it comes to money matters. One way to figure out if you’d be able to retire comfortably at your desired age is to work backwards, factoring in all your milestones that will happen eventually. These could be things like paying for housing and vehicle upgrades, your child’s education as well as caring for your elderly parents in the form of allowance or even forking out medical bills. By doing research on the average sum of money is required for each of these concerns, you’d be able to figure out just how much you should set aside before you can afford to not worry about incurring additional expenses.

How should I start saving up? Would an endowment plan be sufficient?

Simply saving is easy, but saving smart? That’s a whole other ball game.

However, the good news is that with so many different types of banking products and even financial platforms available these days, you can rest assured knowing that smart saving can be well within your reach. For many, owning an endowment plan is a simple way of building your wealth over a long period of time. While there are pros and cons of owning an endowment plan, they differ in magnitude based on how big your risk appetite is.

For instance, if you’re uncomfortable with locking in your money for long periods of time, or would rather own a plan that offers higher returns, then perhaps such a plan might not be as suitable for you. However, if you’re planning for your child’s future, need an insurance coverage or if you’re simply looking for a low-risk investment product, then this might be a well-suited option.

That being said, there is no one-size-fits-all financial product for individuals. In fact, if you’re looking for higher returns, you might even want to consider going into ETFs or stocks, which can bring about high payouts that can be useful for your retirement but of course, at a higher cost. If you’re looking for an advisor who’d be able to answer your queries on long-term savings, you could speak with Standard Chartered’s team of advisors.

Bottom Line

As you can tell, planning for retirement doesn’t have to happen when you’re older. In fact, it should begin as early as possible, so that you’d be able to set expectations and goals for yourself. The measures you need to take don’t have to be too drastic either — it could simply be making lifestyle changes early on, or could also be learning how to be more financially literate, which can be useful in jumpstarting your financial journey!

Get more tips and tricks on how to be a smart saver and ease into adulting on JumpStart Stories.