WHILE it is never too early to start retirement planning, you need to put yourself on the right path to start your journey towards a worry-free retirement.
Here are some retirement planning tips you can utilise to reach your goal:
-Have a retirement plan – Not having a retirement plan is the most common mistake many people make. Failing to plan is planning to fail. You should think about your retirement goals and commit to regularly saving and investing to reach them.
-Take inflation into account – Inflation will affect your retirement fund and your purchasing power. Personal inflation varies according to individuals’ lifestyle, demographic such as where you live (urban or rural), and more. As a rule of thumb, you may calculate your retirement fund based on a 100% income replacement ratio. This means that the current amount of your monthly expenses is what you need monthly when you retire.
-Start saving early – “Procrastination is the thief of time, ” said English poet Edward Young. Your most valuable asset when saving for retirement is time. The more time you have until retirement, the easier it could be to achieve your retirement goals. The longer you delay getting started, the harder it will be and the greater the risk to your future lifestyle.
-Invest according to your risk tolerance – Risk tolerance is an important component in investment planning. Your risk tolerance is your level of comfort to withstand the ups and downs of investing. You must understand your risk tolerance before committing to an investment.
-Invest regularly – Many people start investing and let their investment portfolios go into sleep mode. Even if retirement seems far away, it is important for you to continually add some amount to your portfolios.
This is because from time to time, there will be changes in your personal needs, spending patterns or lifestyle goals, which may call for adjustments to your investments. Investing regularly, monitoring and reviewing your portfolio periodically, and adopting a long-term view in the process will make your money work for you.
Remember to diversify your investment portfolio.
-Understand diversification – Remember to diversify your investment portfolio. As the saying goes, “Don’t put all your eggs into one basket.” Spread your investment across different asset classes, sectors and regions to ensure that your savings grow while mitigating the risk of market volatility.
You can utilise direct debit authorisation (DDA) facilities to make regular and disciplined investments in unit trust and private retirement scheme (PRS) funds. This method will allow you to habitually save and not feel the burden of setting aside sums for your golden years.
Meanwhile, the following are a few key important takeaways that you should always keep in mind when planning for your retirement:
-Protect your savings – About five years before retiring, you should start focusing more on protecting your savings rather than growing them. You can reduce risks by shifting your assets to more conservative investments and consciously avoiding borrowings or taking early withdrawals.
-Do not retire with debt – Financial planners will generally recommend not retiring until credit card, mortgage and other forms of debt are paid off. These monthly payments can deplete savings, which will ultimately go to various interests and instalments.
-Take healthcare costs into account – Malaysia’s healthcare costs have increased rapidly over the years and not setting aside a percentage of retirement income specifically for healthcare can have a negative impact on your retirement fund.
You are advised to get adequate insurance coverage such as critical illness insurance, personal accident insurance and healthcare insurance (with hospitalisation) before retirement to help offset any medical bills incurred during your retirement period.
Having enough insurance coverage for your future healthcare costs will help you ensure you will not deplete your retirement savings account prematurely.
For more information and financial tips, visit www.publicmutual.com.my
This article is prepared solely for educational and awareness purposes and should not be construed as an offer or a solicitation of an offer to purchase or subscribe to products offered by Public Mutual. No representation or warranty is made by Public Mutual, nor is there acceptance of any responsibility or liability as to the accuracy, completeness or correctness of the information contained herein.
