Financial Freedom: Retirement

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Retirement Planning 101 for Millenials

As a millennial, you have the advantage of time on your side when it comes to retirement planning. However, it’s never too early to start thinking about your financial future and what you want your retirement to look like. In this article, we’ll explore some of the key elements of retirement planning for millenials and give you a solid starting point for building a secure financial future.

First, let’s talk about why retirement planning is important. Most people want to retire at some point in their lives, whether that’s in their 60s, 70s, or even 80s. But without a solid plan in place, you may find yourself struggling to make ends meet when you reach retirement age. To avoid this, it’s important to start planning for your future as early as possible.

The next step is to determine how much money you’ll need to have saved by the time you reach retirement age. A common rule of thumb is to aim for 80% of your current income. However, this number will vary depending on your lifestyle and what you want your retirement to look like. For example, if you plan on traveling the world or buying a second home, you’ll need more money saved than if you plan on staying at home and living a more modest lifestyle.

Once you have a goal in mind, it’s time to start saving. One of the best ways to save for retirement as a millennial is to take advantage of a 401(k) plan offered by your employer. If your employer offers a matching contribution, make sure to contribute enough to take full advantage of the match. Additionally, consider contributing to an IRA or a Roth IRA, both of which offer tax benefits and the ability to invest in a variety of assets.

Another important element of retirement planning is diversifying your investments. By spreading your money across a variety of investments, you can reduce your risk and increase your chances of success. Consider a mix of stocks, bonds, and mutual funds to create a well-diversified portfolio.

Finally, it’s important to review and adjust your retirement plan as your life changes. This could mean changing your savings goals, adjusting your investment strategy, or seeking the help of a financial advisor. Regularly reviewing your plan will help ensure that you stay on track and that your investments are aligned with your goals.

Safe to say, retirement planning is an important aspect of your financial future. By starting early, determining your goals, saving regularly, diversifying your investments, and regularly reviewing your plan, you can build a solid foundation for your retirement years. Don’t wait any longer to start planning for your future – take control of your finances today!

How Much is CPF Retirement Sum

CPF Retirement Sum. Easy yet complicated.

Fact #1 - For your retirement needs

Firstly, to withdraw money from your CPF at age 55, you are required to meet the CPF retirement sum. At the age of 55, one's money in the Ordinary Account and Special Account are swept into the Retirement Account.

How Much Savings Should I Have at 35

How much savings should one have at age 35? I think that is an interesting question that demands a good answer.

I was recently browsing an article when I came across something that caught my attention.

The article was giving a rule of thumb on how much one should have saved at age 35, 45, 55 and 65.

I am not too sure whether I recall the figures correctly but it stated that these were the sums required:
- @ age 35 = 1 times your annual income
- @ age 45 = 3 times your annual income
- @ age 55 = 5 times your annual income
- @ age 65 = 8 times your annual income

Saving in gold bullion perhaps?

What this means is that if you have an annual income of say, $100,000, you should have saved the same amount by age 35. At age 45, you should have saved $300,000 (3 times annual income). And at age 55 and 65, $500,000 and $800,000 respectively. This assumes no income growth.

I am wondering whether this is a realistic sum. I personally think it sounds realistic because assuming the person retires with am annual income of $200,000 , it means that he should have saved $1.6 million. Not very high but definitely a stretched and achievable target.

What do you think?

Building Up Retirement Funds - Two Easy Ways?

There are many ways to build up your retirement funds in Singapore. You can choose to just keep it in the bank or find other ways to make your savings grow. Well, there are actually 2 easy ways to do so that probably helps you beat the low interest paid on bank deposits.

The first way is the Singapore Savings Bond. This is basically government issued debt sold to the public every month. Minimum investment amount is $500 with a cap of $50,000. There is no penalty for cashing out early and the principal is paid at the end of 10 years. The interest paid out increases each year. Holding it to the max of 10 years will give annual average returns of 2.6%. Totally risk free since they are backed by Singapore government

The second method I can think of is to top up your CPF account or even your spouse CPF account. You can claim tax relief ( up to $7000) and you can enjoy 4 to 5% interest depending on how much you have in your CPF. Problem is that you will only be able to touch it many years later at your drawdown age when CPF Life kicks in for you.

So what do you think about the two ways I have outlined? Leave your comments below!

How Much To Save Per Month

How much should one save every month? Well, this is really a difficult question to answer. And it is difficult to give a straight answer because it can be quantified in absolute dollar amounts (say, $500 per month) or it can be stated as a percentage of one's salary (say, 20% of household income).

Well of course, one will always hear that you should save 10% of your income. However, I personally think that amount is way too low. It probably is correct when you are first starting out to work and have a low starting base salary (say $2,500). After paying for rent and stuff, it is unlikely that you will have much to spare. So 10% (or $250 per month) is probably a reasonable starting point. But it shouldn't stay that way for long. You probably need to start saving more.

After all (and as a very simple illustration) , if you only have 40 years of working life (let's assume you work from age 25 to 65) and spend 20 years in retirement, common sense or simple mathematics will tell you that you are working for 40 years to support 60 years of living expenses. That means you should only be spending 2/3 (two-thirds) of your income in the first 40 years so that you have 1/3 (one-third) of it left for the remaining 20 years of your life. I am really making many assumptions and simplifying the entire financial planning process so it is really best if you work out for yourself what is a realistic amount. On that basis, saving 33% of your income is probably the way to be safe.

Does this amount sound alarmingly high? Well, yes it is. Life expectancy has gone up and the cost of living has also been creeping up slowly but surely.

Another way to come to a figure is to work out your desired retirement income (or monthly expenses you expect to incur once retired) If you just assume an average expenditure for a married couple of $5000 per month for 20 years, that alone will sum up to $1.2 million dollars in savings that are necessary. That is quite a large sum of money without catering for any buffers. If the couple has a combined household income of $120,000 per annum, it will take them 10 solid years of saving 100% of their salaries just to set aside $1.2 million.

So how much should one save every month? Definitely a lot more than 10% of your salary if you intend to be financially stable and secure. In fact, it might be better to err on the side of caution and save more while you are young rather than to wait till retirement and realise that you have to cut down on your expenditure just to stretch your retirement dollars.

Two Ideas That Will Change Your View About Investing Forever

One day, when I was taking a shower (now readers know where all my inspiration comes from!!), I reflected on my years of working, investing, conversations with friends/family/colleague and tried to distill what were the two most important ideas or messages that I should tell anyone who was getting started on investing/retirement planning/personal finance.

You see, in Asia or in Singapore, personal finance is still pretty much a taboo topic. It isn't the best lunch conversation topic (unless one is talking about the latest stock picks and how who and who made a million bucks from some investment). But people in general tend not to reveal their own investments, savings, etc, etc. Money is almost like a taboo topic that is not discussed.

I have heard and read about so many ideas but I think these are the two most revolutionary ideas that will perhaps change the perception or philosophy of investors:

Idea #1 - Investing is for Income

I don't really recall when this idea struck me or came into my head. It might have been a book I read or when I was just thinking about retirement planning in general. But the key idea to investing is not to "earn a million dollars" or to "buy a big house", etc. Well, those are the material things that people want and I guess it is easier for people to relate to some kind of physical possession or numerical value to determine that they have reached financial freedom. However, this is probably misguided.

For most people, becoming a millionaire seems to be the ultimate goal. However, if you dig deeper and ask them why they want to be a millionaire, it is probably due to the pre-conceived idea that with a million dollars, they no longer have to work and can retire in peace. That probably explains why many people buy the lottery. The idea of having a big house is also related to the very simplistic idea that "if I own a big house, I must be rich, just like people on TV/movies. If that is the case, I no longer need to work". While these physical possessions gives many people a financial goal to strive for, at the end of the day, if you drill down deeper, you know that reaching these arbitrarily set goals probably does not put one in a better stead to achieve financial freedom.

At the end of the day, it boils down to cashflow. Give a big spender a million dollars and let him retire at age 30. It is possible that the million dollars can be spent even before his lifetime and he will have to return to work. And that probably explains why many lottery ticket winners end up becoming bankrupt or broke again. So the idea is cashflow. And the idea is that all that you are investing for is not for a big house or for a million dollars, but it is for the sole purpose of income. It is the common Chinese saying : " qian sheng qian" or "using money to grow more money".

When one invests, the million dollar goal (or two million dollar goal) is actually so that you can start drawing down on that sum of money during your retirement years. That is how most financial planners will actually work out how much you need for your retirement. They take the age you intend to retire, and the expected life expectancy, and calculate your monthly expenditure to indicate what is the $X dollar value that you need in retirement funds. But so many people forget that the $X dollar value is meant to provide them with income when they stop working and stop drawing an income.

So at the end of the day, all investing is for the sake of income. Nothing more and nothing less. That is the sole goal of investing. You are basically trying to build up a stockpile of cash that you can tap upon when you are not drawing any money. If you have $10million dollars invested in an instrument that gives you a 10% per annum yield, you will have $1million in income to spend every year. That is as simple as it gets. If you put that $10million in a bank with 0% interest, what you draw down on that bank account every month is basically income while the original value of your bank account just gets depleted month after month.

This idea is "revolutionary" because not many people I know of think or speak of investing in that sort of way. They always speak of investing as some sort of arbitrary goal or just about making more money from the stock market. If you realise that investing is about income, you will realise that building up that income is just one side of the story. What you as an individual will also need to manage is your monthly expenditure so that it does not exceed your monthly income. And isn't that all there is to personal finance. No wonder we hear the frequent maxim: "Spend less than you earn". Because even when you retire, you also need to spend less that you get in income.

Once this idea is firmly implanted in your head, it will then help you better strategise how you want to go about building up that income stream for your retirement years. For some people, it could be just a bank account. For others, it might be bonds or dividend yielding stocks/REITs or businesses or even rental income from property.

Here is where the 2nd idea then comes in a little much easier....

Idea #2 - If You Intend to Work for the Rest of Your Life, You Don't Really Need to Invest

I know that this idea will probably draw a lot of flak from some readers who will still think that it is important to invest. What I am alluding to is the hypothetical situation of a person who has no intention to retire and whose life expectancy is say at age 80. Effectively, a financial planner who does his calculation will realise that there is no investment product he can offer this person especially if the person is willing to live within his means.

If one is able to work till death and still draw an income, then you literally will not have the need to set up a retirement fund. However, there is of course all the unexpected events that life can throw at us. Illness, retrenchment, disabilities, etc, etc can all potentially strike us even if we intend to work for life. So at the end of the day, one will still need to prepare for such unforeseen scenarios either through investing/savings/insurance.

I don't intend to retire, but I still invest. And the reason I invest is just in case there comes a day when I am forced to retire.

How Long Singaporeans Are Going To Spend in Retirement & Why Women May Be In Trouble

According to survey findings released by Manulife Asset Management's Aging Asia Research Series, many people in Singapore are underestimating the length of time that they will actually be spending in retirement.

Many Singapore individuals are expecting the retirement period as a married couple to be 19 years when it is actually closer to 24 years. The projected retirement duration was estimated by analysing the mortality rates from Singapore' Department of Statistics.

Elsewhere, other surveys done by other companies have also shown that 4 in 10 Singaporeans want to retire at 55. Four in 10 Singaporeans also have not started saving for retirement. These are all worrying figures. It shows that there is probably a general lack of good retirement planning amongst Singaporeans.

Expected length of Retirement

Retirement and life expectancy is something that is closely linked. Given the longer lifespan of women, women are also likely to outlive their male counterparts by another 11 years. That brings the typical male retirement length to be 24 years and females to 35 years. This assumes a retirement age of 62 years old.

This seems to be a worrying figure as it probably means that most people will have far less than sufficient money to afford an early retirement or even a comfortable retirement.

It also spells trouble for women as they will be spending a considerable portion of their retirement alone, as the sole survivor. And this has deeper implications as women often exit the workforce much earlier to their male counterparts and would thus have accumulated much less for their retirement spending.

The long life expectancy and the inflation rate is also probably some reasons why the CPF Minimum Sum needs to increase to cater for the changing needs of an ageing population.

Retirement Period Longer than Working Life?

Assuming an individual starts work at age 25 and retires at say age 55, they would have only worked a grand total of 30 years. For a male, it would mean he would have to save up enough money to spend for another 24 years while for a female, it would mean she would have to save up enough money to spend for another 35 years (which is even longer than the period of time she has spent in employment).

Many people are probably making all kinds of retirement planning mistakes by making wrong assumptions about their retirement age and the amount they need to save up. If the time spent in retirement is going to be almost as long as your entire working life, one better start planning early and carefully.

Basically, should not wait until they are only 40 or 50 years old before they start saving for retirement. They better start saving for retirement at age 30 or even much earlier. In my opinion, it is good that people start thinking about their desired retirement age and retirement planning as soon as they start working.

Time to Re-think Retirement?

So is it time to re-think retirement? My thoughts on retirement have changed over the years. When I first started working, I thought retirement was something to be desired. But after thinking about it, I have come to view retirement differently. Given the long life expectancy, it is perhaps one remains employed and continue to contribute to society. After all, spending 20 over years in retirement is not going to be fun when you have nothing to do.

For those who are interested, do check out the following links

Articles on retirement, savings, financial planning and investing:

Real Estate Investment Trusts (REITs)

Commodities/Gold/Silver

Insurance

Popular Reads

The Road to Financial Freedom:

Retiring on Dividend Earnings

All investors like to make a return on their investment, and stock dividends give a great return on your investment. There is no guarantee of dividend payment, but it is unusual for most companies not to pay out every year. Investors can use these dividend payments to fund an expansion in their portfolio or just take the money out.

Most companies that are doing well issue dividends to shareholders annually, but this depends on the company being successful. If a company exceeds targets it can pay a larger dividend and if it is struggling it can cancel the dividend payments completely.

What are Dividends?

Dividends are a bonus paid out of profits to shareholders, with a small amount paid to the holder of each stock. For investors with a small stake and few shares it might not amount to much, but it can add up for large shareholders. Pension schemes and other large investors use this income to supplement the proceeds of their investments, and you can use them in the same way to help fund your retirement without having to sell your shares.

In fact, many investors use the dividend yield of a stock to help influence their buying decisions. One trading theory is that a high dividend yield indicates that the stock is selling cheap and might increase in the future. This can make it a desirable investment, but investors should take care to ensure that the company is not falling on hard times.

The size and frequency of any dividend payments are issued to stockholders when the company files its accounts. These should be issued to all shareholders, who can use them to see how their investment is performing.

Using Dividends

While you are working and amassing shares to build a nest egg, it makes sense to invest the dividends back into buying more shares. This is a great way to increase your stock portfolio without having to spend any of your own money.

Alternatively, people use the dividend payments to pay for the nice things in life. They spend the money to pay for a holiday, a new car or anything else they might need a lump sum to pay for.

In Retirement

Once you retire, you can continue to use dividends in exactly the same way as you did previously. However, most retired people are on a reduced income and might even struggle to survive on their pension. For these people, the extra income that comes from the dividends certainly makes life a lot easier. It is important, however not to rely on these dividends as the companies can decide not to issue them at any time. Shareholders should treat them as a bonus rather than part of their income.

For most retired people, it makes sense to hold onto any investment in the stock market for as long as they can afford to. The long term benefit to their income from the dividends might very well outweigh the short-term gains from selling the stock and living off the proceeds.

Retirement Planning Mistakes

[Photo credits: Image by kwerfeldein]

For most people, retirement is probably the best part of life they look forward to. Yet, many people often make certain mistakes in retirement planning. In this article, you will find out what are some of the common mistakes made and how you can probably avoid them.

Introduction

Retirement is a time when you will no longer need to work for income and when you can spend time doing the things you like to do, such as spending more time with your family or travelling. In order to enjoy this time it is important to plan properly for your retirement.

The best way to enjoy your retirement is to be financially secure. The only way to ensure that is to start saving towards your retirement fund early, and let compounding returns do its work. Of course, you will also have to hope that you do not get caught out by any of the common retirement planning mistakes.

Start Early

The sad fact is that to get the maximum benefit for your contributions to a retirement fund, the money has to be in the account for as long as possible. This means ideally starting to contribute as soon as you start work and using 40 years of compound interest to increase the size of your fund. Many people often think that they have time to spare and only start planning for retirement when it is too late.

The best time to start retirement planning is actually when you have just started work. By planning early, you will get a good overall idea of how much you need for retirement and how much you ought to save to reach that amount. Retirement planning and life expectancy also goes hand-in-hand. One basically needs to know how many years you are expected to spend in retirement in order to save up sufficient money.

Taking Risks and Failure to Diversify

When you are younger it is tempting to take risks with your investment to increase the size of it faster. This will usually give you a bigger return much faster. However, the downside is an increased risk of the investment going wrong and turning sour. This matters less when you are young as the fund still has plenty of time to recover, but when you are approaching retirement age, it is best to be more prudent with your money.

At a point about ten years before you are planning to retire, consider moving your funds from a high risk investment to a lower-risk investment. This should reduce the risk to your money and make sure that as much as possible is available for your retirement.

The mistake that people make when planning their retirement is to put all of their funds into the same place. This might give you the best return on your money, but if it encounters a problem you might lose some, or even all, of your investment. If possible diversify your investment so that the money is in several different places and invested in several different markets to keep it safe.

As people frequently mention, asset allocation is probably one of the biggest mistakes that people fail to take care of when doing investments. How often it is that we hear about people who are near their retirement and lose all they have because of some risky investment. This can be avoided if we allocate our assets properly.

Consult Independent Professionals

Can you trust your financial advisor? As well meaning as they might be, your friends, family and bank manager might not have access to the best information or access to the best products for your needs. While they might be sincere in their intentions, they still might be sincerely wrong. When you start retirement planning, avoid the common mistake of consulting the wrong people to help you plan your future. The best advice is always available from an independent professional, who will be able to find you the best retirement products for your situation.

Once you have chosen a retirement plan, it is important to reconsider it on a regular basis. Life changes, like getting married or starting a family, will need you to re-examine your situation and perhaps change your investment priorities.

Conclusion

We are all not financial experts, so it is easy to make retirement planning mistakes that will affect the quality of life during your golden years. Get independent advice from experts and diversify your investments to protect your future and make the most of your retirement.

Saving for Retirement at 30

It’s starting to become the dream of more and more people, to be able to retire just after you leave your 20’s. So saving for retirement at 30 is sort of the new thing, the thing that many young professionals strive for and something that can be in the back of people’s mind when they choose their occupation. The better job, the more money, and the earlier they can retire.

In a fluctuating world economy you have to take several things in to consideration if you’re seriously thinking about going in to retirement when you’re in your early 30’s. First of all, you need to look at how much money you can make in a month and in a year from your occupation. After that, the amount you can spare for an investment portfolio.

Let’s face it, unless you get a job that pays 8-10 thousand US Dollars every month you won’t have enough to get by for the next 50 years when you turn 30. So the best way of increasing your money if you have a steady job is by getting an investment portfolio. Invest your money in stocks, bare bonds, commodities, oil, gold and silver, and currency to get the best rate of return on your money.

Saving up for retirement at 30 with the help of an investment portfolio isn’t the easiest thing if you haven’t got
an idea how these things work. Then what you can do is get an investment adviser that can give you the best advice on where to invest your money for the best return.

We said previously that the money has to last for 50 years, and that’s true. The average life of a human is around 80 years, so if you’re looking at retiring at 30 you have to save up enough money for the coming 50 years. Now during your 20’s it is all about building your capital, that means a higher risk on your investments and putting more money in to markets that can have a large pay off.

When you decide to retire you will be thinking about keeping your capital, so making safe investments where you will have a much lower pay off rate but much more stability.

The next thing to do is to choose where you’d like to retire to. The most common and cheapest places would be the Philippines, Thailand and even Singapore. South East Asia is becoming a more and more popular destination for Asians looking to retire early. Find out basic costs such as, average rent per month, health care, food, transportation and all the other things that you will spend money on in a month. When you find a reasonable estimate of what you need to get on well every month it’s time to start doing a bit of math.

Take your average monthly spending and multiply by 12. That’ll give you your annual spending. Take your annual spending and multiply with 50 and you get an estimate of what you’ll need to get by for the next 50 years. So for example in Thailand you might need 50 000 Baths per month, 600 000 Bath in one year and 30 000 000 Bath for the next 50 years. A way to save on your monthly cost is to purchase a house or apartment when you move over but that would mean you’d have to increase what you need before you actually move.

[This article is a guest post by a writer in Philippines. Read more about retirement planning]

Retirement Age and Retirement Planning

As soon as we settle into working life we start to look forward to retirement - that great day when we can leave work for the last time and be free to enjoy our golden years. For most people, this happens at the birthday after you reach the government retirement age. Some people are lucky enough to have the financial security they need for early retirement. In either case, some form of retirement planning will be required. Retirement planning basically involves finding out the age that you will retire at and working towards saving enough money so that you will be able to live comfortably without drawing a salary when retirement comes.

The Retirement Age Act

In Singapore, the Retirement Age Act determines the minimum age of retirement. A person can currently retire the day before their 62nd birthday. This may change in the future, and as the average population ages the retirement age is likely to increase like it has in other countries. In some parts of Europe the retirement age is as high as 67 currently.

Employment Contracts

The employer should give the employee advance notice of their retirement unless their employment contract explicitly specifies it. It is also unnecessary for the employer to give any retirement benefit unless it is in the contract.

Employers do not have to retire an employee once they reach retirement age. If both are happy, then they can continue to work for as long as the employee remains fit and able to perform their duties.

Wage Reductions

To help companies in Singapore continue to employee older people, it is legal for them to reduce the wages of employees over the age of 60. This can be a straight salary reduction, or a reduction in any other employee-related costs such as bonus, benefits and pension contributions.

This can lead to experienced people losing up to 10% of their salary as soon as they celebrate their sixtieth birthday. Luckily, employers cannot just base the reduction on age alone, but must take into account other reasonable factors. These can include the employee’s ability to perform their duties fully as they age.

It is important to remember that the 10% is a maximum reduction and can be taken off in one chunk or in several smaller deductions. This allows the employer to effect a gradual reduction to the employee’s salary over a period of time.

Working after Retirement Age of 62

The Singapore Retirement Act does not allow for compulsory retirement at the age of 62, and neither does it stop anyone continuing to work beyond that age if they want to. Anyone who wants to continue working should arrange it with their employer. Re-employment after age 62 is also probably going to be a norm in the future.

Other Exceptions

Some fixed-term employment contracts are immune from the Retirement Act. People on these contracts can continue to work as normal and then retire at the end of the contract. A notification exists to the Retirement Act that specifies which people are exempt.

Conclusion

Retirement usually marks the end of your "paid" working life, and for many people it is something to look forward to. Others love work and try to continue working for as long as they possibly can. Whatever your views, it is important to know the laws in your country concerning retirement so that you know what are the likely scenarios (e.g. pay cut) when it is your time to retire.

"How to retire in Singapore?" is perhaps a question that is often on people's minds. For some people, it might even involve drastic moves like moving to a cheaper country to retire (read: Retire in Philippines). Well, if you are interested, you can also read some of my thoughts about retirement and let me know what you think.

Retire in Philippines

7107 islands of heaven; that is what you’ll find if you go to the Philippines.

Expat’s from all over the world are taking their hard earned money to the beautiful island paradise of Philippines to enjoy an early retirement at a place where they can afford to live and be treated like Kings and Queens. Talk about retirement planning!

The long, golden sand beaches stretch for miles and miles around island after island. Cruising between them with your own boat for a week or two to explore a new hidden place in paradise along with your spouse, partner or entire family that you brought with you when you made what most likely will be the best decision of your life.

The South China Sea is home to the Philippines, a tropical paradise that can boast hot and humid weather 24 hours a day for 365 days of the year. Along with the amazing weather, the quality of life when you have a normal retirement payout every month is excellent. Before making this life changing decision there are several things you have to consider.

First of all, you have to think about where you’re going to live and how much you want to pay for it. The most expensive place in the Philippines by far is Manila. If you go to some of the regions outside or to remote islands you can find houses, apartments and bungalows for a lot less than in the large city of Manila. You can get accommodation from P10,000 per month all the way up to P50,000. 10,000 Philippine Pesos is around 220 USD.

The second biggest expense you’ll have is your utilities. That means water, electricity, phone etc. All of the things that will keep your house up and running and that will keep you nice and comfortable in your own little paradise. Your average cost for all your utilities will end up on average around P8,000.

Food and groceries is essential for anyone’s living and it is exactly the same in the Philippines. Now you can go down two roads, you either go for locally and nationally produced food or you go for imported food. Now the imported food will be at a higher cost, still, nowhere near the amounts you were paying at home. If you go for the local food you can save even more money. Budget about P30,000 for a single month if you’re not living by yourself.

Now we’re going to get to the luxuries that you can afford to have when you move to the Philippines if you have a decent budget. Two major ones are a personal driver and a maid. You can get a personal driver for between P3.000 and P5.000 a month, so under 100 USD! All you have to do is make sure you provide food during the day and a vehicle for them to drive in if they don’t have one. A maid is even cheaper than that. For about P2.000 every month you can have a maid doing all the work around the house that you never felt like doing or downright hated.

Taking all these things in to account, the Philippines is an amazing please to settle down after your hard years of working. Spend your money wisely and live the rest of your life being treated as a King or Queen.

Only in the Philippines.

[This article was written by a resident of the Phillipines.]

Retirement and Life Expectancy

When one thinks about retirement, one cannot escape from the somewhat morbid discussion about life expectancy. If I can break it down into simple non-statistical terms, life expectancy basically means the number of years one can expect to live up till (usually calculated at a certain age). And of course, most of us will be aware that based on statistics, most females in most countries have longer life expectancy than males. And in most developed countries, the life expectancy for males and females probably is around or moving towards the age of 80.

When Do You Want to Die?

So when thinking about the retirement age or retirement planning in general, it is inevitable that the question about life expectancy will come up. Meet any financial planner or insurance agent and they will most probably bring up the issue of the "age that one is expected to die" . Well, it is a valid question as many of the assumptions that are made will be based on the assumption of when you think you are going to die (okay, that sounds so blunt but it is the truth).

The problem with putting a pinpoint estimate on when you think you are going to die based on the statistical life expectancy is that you might over or under estimate how long you might live. Life expectancy is calculated based on a statistical average. And we learn in school that average basically means that the average person is expected to be around there but at the same time, there can be large variances.

So these large variances means that you can either die way before the average life expectancy or you could actually live a whole lot longer than what you previously expected. When it comes to retirement planning, I guess most people often make the assumption that the average life expectancy is the year that they will DEFINITELY DIE. But that is wrong and it is perhaps wise to cater for a bit more extra just in case you are not the average person. What happens if you retire at age 65 and die at age 95 or 105? Will you have enough retirement savings to last you till then if your initial planning assumption used was that you are expected to live until only 80? Yes, I know that might be going a bit overboard to cater in for such large variances in retirement planning but wouldn't you want to err on the safe side if your current income allows you to set aside a little more for your retirement?

Of course, if you die much earlier before the retirement age, then this is not a problem that you will have to worry about. Sorry for being so morbid but that is the truth.

But the main idea is this: Life expectancy is just a statistical average. When using it as a planning assumption for retirement planning, do remember that it is just an assumption. Life might not turn out the way you assume it is going to be and you might die much earlier or live much longer compared to the average person.

Retirement Plans

Have been thinking what I intend to do when I get older - like at age 65. I really cannot see myself not working and just sitting around at home doing nothing. As Singapore ages, I guess there will be more and more elderly folks around. When I am 65 (if I live that long), I will be surrounded by lots of old people.

Well, I don't really plan to retire. And I hope that I can stay employed for as long as possible. At least that will keep me active. But the matter of fact is that it will probably be difficult to work at the same pace that I am working now. So I will probably be doing WORK, but it might not necessarily be PAID WORK. It could be volunteer work or something else. I don't know.

Recently, the thought of opening a postage stamp shop just keeps creeping into my mind. Maybe I should just pursue my hobby and try to make a living out of it. That will be some cool retirement plan indeed. But it is difficult as the capital involved seems to be quite huge. And I will probably want to hoard all the stamps rather than sell them. Something for me to think about and work towards over the next 30 years perhaps.

CPF Minimum Sum Revised from $123,000 to $131,000

I read with interest the news about the revision to the CPF Minimum Sum. From 1 July 2011, the CPF Minimum Sum will be revised upwards from $123,000t to $131,000. This was announced by the CPF Board recently. The new Minimum Sum applies to CPF members who turn age 55 from 1 July 2011 to 30 Jun 2012. In fact, the Minimum Sum scheme was set at $80,000 in 2003 and has been revised upwards yearly, taking into account adjustments for inflation.

The Minimum Sum scheme is meant to help CPF members prepare for retirement where they can potentially have lifelong income for the rest of their lives.

Surprisingly, I noticed that many young people seemed to be unaware about the minimum sum scheme and how it applies to them. These people often have the misconception that retirement is something that they should worry about later on in their working lives and thus cannot be bothered about such schemes that will only affect them later on in life.

Please refer to the following link for more details on the CPF Minimum Sum

http://ask-us.cpf.gov.sg/Home/Hybrid/themes/CPF/Uploads/RSD_WDL/CPF_Minimum_Sum_Scheme.pdf

Mini-Retirements and New Year Resolutions

After reading the 4 hour work week (well, perhaps I should say skimming through), I came across the idea of mini-retirements. Of course, it is not always possible to implement every single thing that is written in the book but I tried to take a mini-retreat during the holiday season, not really being bothered about the money that I would have to spend.

My idea of retirement has changed over the years. I previously shared some of my thoughts on retirement. And I must say that it is quite aligned to what Tim Ferris says in his 4 hour work week book. Basically, retirement is an insurance policy or last resort if I am spending my life doing work that I do not like. Ideally, I should be enjoying my work so much that I do not want to retire. And if that does not happen, then of course, retirement is the only option left to get out of the hole that I might be in.

2011 is really just around the corner and I took a mini-retirement/retreat at a really reasonably nice hotel. Sipping margaritas and listening to lounge music, taking strolls by the beach, dipping in the emerald blue infinity pool and just lazing around with magazine in hand. These were some of the things that I did and I feel rejuvenated to get back to work when the new year starts.

Usually, I spend the year reflecting about what I have done in the past one year and set some resolutions that I would like to achieve for the new year. But I realised that I should just throw away the idea of making resolutions this year. I am bad at keeping them anyway and just feel that I am at a certain place in my life where I am pretty contented with where I am at right now. So I don't really need to make any resolutions at the moment - or at least for the year 2011.

2010 has been a good year for me. At the blogging end, I managed to make inroads into areas I never thought possible. Financially, everything is going well and I would like to think that I am quite financially secure at the moment.

I registered a new domain (sgstockscreener.com) and it has been getting good hits too. So that has been another area which I have been proud of. Just registering the domain and getting the site up was a feat by itself considering how prone I am to procrastination. There are definitely other areas that I would like to explore to bring my blogging to the next level. But that will have to wait till the new year and we will see how things go.

I wish all my readers a happy 2011.

Retirement Planning

Are you planning to retire? Is the fear of retirement bothering you night and day? Are you sure about your retirement planning and whether you have enough savings?

Well, these are some of the most common questions that one might ask oneself several times while planning for retirement. Retirement can be said to be the phase of life where a person leaves or losses his employment or professional identity forever. In fact, I have even read newspaper articles that suggest retirement as a concept is actually fairly new in our human history. Afterall, people in the past used to work as long as they were able to. There was no such thing as a retirement age!

I shudder at the thought of retirement. Afterall, I find it hard to imagine sitting at home having nothing to do. Yet I can't help notice the trend that these days, older people are increasingly moving towards semi retirement by reducing daily or weekly work hours before they actually go into full retirement. I have seen many real life examples. Others have even gone a step further and taken a more radical approach - by suggesting that one can go on mini-retirements throughout one's life. (Read the 4 Hour Work Week and you will know what I am talking about)

In today's world with its ever increasing cost of living, it is hard to imagine somebody retiring and totally stopping work and not drawing an income. How certain can one be that he will not outlive his or her savings? Based on the average life expectancy of Singaporeans, I think the average male or female will live to age 80. But that is being average and if one happens to be above average, you could possibly be living till 90 or even 100! What if you had only enough savings for 10 years or 20 years and retired at the age of 60. You will be too old to find employment then!

There are in fact some employment opportunities out there that allows for flexi work arrangements for the elderly. Singapore is also introducing a Re-employment Act to make employers offer older employees some kind of employment even after the official retirement age. In the future, it is not hard to imagine that elderly folks can work from home as they have easy access to the computer and internet.

For me, I believe I will try to work for as long as I can. I have changed my thinking about retirement a few times in my life. In the past, I wanted to retire as early as possible. Now, I see retirement as something that I want to avoid. If I can find something that I love to do, I don't mind doing it for the rest of my life!

It is useful to note this: Your retirement age is not fixed by law; in fact it’s fixed by your potential and willingness to work. In short, a retirement that makes your retired life fun loving and worthwhile is the best retirement plan that one can have. In fact, I would not call it retirement at all but rather active ageing.

My Thoughts on Retirement

Retirement was a word that crept into my dictionary when I was around Secondary School. It was during that time that I heard that certain teachers were retiring. It was also during that time when I started to ask myself what I wanted to do with my life and when I intended to retire. It seemed like retirement was the norm and I was aghast to find out that retirement as a concept probably was seeded only recently.

In fact, I would like to think that most of the people who lived before our time never did retire. They simply took on a slower pace of life but continued to remain actively involved in running their own businesses be it food stalls, shops, etc, etc. I think our ancestors would give us an incredulous look when they find out that people actually get to enjoy retirement right now.

For me, I have many thoughts on retirement. Earlier thoughts revolved around saving enough money so that I could retire when I was 60 and then travel around the world. However, lately, my thinking about retirement has taken a 180 degree turn. I now feel that I never want to retire. If possible, I will like to be able to work for the rest of my life. However, I am uncertain which employer would be willing to hire me after I am 65 or 70.

So a lot of thoughts nowadays revolve around how I can possibly find a path for myself after that age where I will still be able to contribute back to society. Of course, I am assuming that I will still be alive then. Who knows, I might be 6 feet under by then =)

What jobs can one do after 65? How can I continue to work even after I am 65? What knowledge, skills and expertise must I build up from now till I am 65 so that I will still be relevant to society then?

Generate Income from Your Property

A few days ago, I wrote about HDB's Lease Buyback Scheme. I was just exploring the various options that might be available to people for generating income from their biggest asset: Their Homes or HDB flats.

I have been thinking about it for some days and I do feel that the Lease Buyback Scheme ought to be further improved if possible. For one, they should perhaps extend it to all Singaporeans to make it easier for older Singaporeans to liquidate the tail-end lease of their HDB flats. After all, not many people are ready for retirement in Singapore.

Renting Out

Another way that people can generate income from their property or HDB flat will be to rent out the entire flat or rent out certain rooms.

A person is allowed to rent out the entire flat after living in it for a certain number of years. (5 years if subsidised and 3 years if unsubsidised). Approval is required from HDB to rent out the flat. A higher property tax of 10% will be chargeable if you rent out your entire flat.

Alternatively, one can also rent out one or more rooms in your property or HDB flat with no change to the property tax payable.

Generating income from your property during your retirement years is fairly easy. However, one should realise that there are also certain risks and downsides involved:

1. Bad tenants (illegal immigrants, overstayers, people who don't pay rent, tenants who spoil your property).

2. Conflicts when living with tenants.

3. Lack of privacy.

Lease Buyback Scheme

I am not yet over 30 but I guess it will be interesting to explore certain options that are available to me when I pass the age of 62.

The Lease Buyback Scheme or LBS is a new monetisation option to help lower-income elderly flat owners unlock the value of their homes to meet their retirement needs. As it has always been reported in the news, most Singaporeans are asset rich but cash poor. After pouring in alot of their money into buying a house, they are often left with insufficient money for their retirement needs. This scheme will help them to stay on in their own flat.

Under the LBS, HDB will buy back the tail end of the flat lease from the elderly household. On top of the housing value that is unlocked, HDB will provide an additional $10,000 subsidy. Out of the total amount, $5000 will be given to the household as upfront cash. The rest of the money will be used to buy a CPF LIFE Plan to provide a monthly stream of income for life. The household will continue to stay in their flat which will be left with a 30-year lease.

Eligibility

LBS is eligible for Singapore Citizens households who:

are living in a 3-room or smaller flat
are at CPF draw down age (currently 62 years) or older
have not enjoyed more than one housing subsidy in the past
have not previously owned a 4 room or bigger flat, or private residential property
have lived in the flat for at least 5 years
have a monthly household income of $3000 or less
Do not have any outstanding loan of more than $5000

So am I eligible for it when I turn 62?

Firstly, I do not live in a 3-room or smaller flat so I will obviously not be eligible for it. It seems that this scheme is targeted at the elderly now and from statistics, only 25,000 households are eligible for LBS. This households will be those that fulfill the eligibility conditions stated above.

The amount that a household gets from the LBS depends on the valuation of their homes as well as the remaining lease.

LBS is not the only option for households who meet this criteria. Other monetisation options are also available for those with HDB flats. This might include renting out the HDB flat/room, moving to a HDB Studio Apartment or moving to a smaller, cheaper HDB flat.

For many Singaporeans, a HDB flat is their main asset and it will be useful to know that there are various options to generate income from their flats to meet their retirement needs.

In summary, elderly Singaporeans basically can explore 4 different options to generate income from their flat for their retirement needs. They are:

1. Rent Out Flat/Room

2. Move to a HDB Studio Apartment

3. Move to Smaller, Cheaper HDB Flat

4. Lease Buyback Scheme

Financial Freedom