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.

Overview for January 2012

The first month of 2012 is over.  January has been pretty uneventful for me except for quite a few large ticket items that I have spent on.  Passive income and dividends were $0 but I am expecting a bumper crop in the month of February since that will be when all the dividends from my REITs will most probably come in.

Expenditure wise, I have probably burnt some holes in my pocket from some large ticket items:

• Car Servicing.  Sent my car for servicing and maintenance during the weekend.  It was long overdue and so, since I was free, decided that it will be a good time to spruce the car up a bit.  The costs added up quite a fair bit - over $560++. That was for a 36 point check (normal servicing, don't ask me what the checks were), changing a new  battery, change of transmission oil and new wipers to go along with it.

• Term Insurance.  Just made annual payment of S$347.50 for my wife's coverage. Necessary expenditure but expensive nonetheless.

Investments wise:

• Invested in First REIT mainly for dividend income.  First REIT is listed on the Singapore stock exchange and holds hospitals and nursing homes in various countries.  It gives a quarterly distribution of around 1.9 cents per unit.
• Invested in Gamco Global Gold &Natural Resource Trust (GGN) - provides US$14 monthly dividends. Yet to receive the first batch of dividends for January since it usually takes some time before the cheque is posted.  Expecting this to come in for the month of Feb 2012.

Blogging wise:

• Started an ad campaign and have spent close to US$100 on advertisements and promotional costs for this site.  
• Also exploring new ways to generate content (either by hiring a freelance writer or through other means).

Best Steak in Singapore?

Just ate at Astons today and felt that I had just eaten one of the best steaks in Singapore. Okay, I am pretty certain that there are better steaks around but this has to be the cheapest, most affordable and tastiest steak that I have eaten.

For those of you who know Astons, it is an unassuming Western restaurant that supposedly started out in a hawker(?) or foodcourt(?) somewhere in Singapore.  It slowly expanded and has several restaurants in Singapore.  It is a little like the Botak Jones stalls except that it is much better.

Ordering the Steak

I don't usually order steak when I eat from western food stalls in food courts or hawker centers.  The quality overall has been quite bad - at least based from my experience.  Many of the steaks are from dubious cuts and are either overcooked, tough or tasteless.

However, I decided to try the steak at Astons today.  They are after all quite well-known for their steaks (well, at least if I remember the food reviews correctly).  The last few occasions, I actually ate the burger so was thinking whether today was the day that I ought to jump out of my "comfort" zone.

I ordered a prime ribeye for $13.90.  The two side orders I chose were the coleslaw and onion rings.  Service was prompt and the dishes were ready in under 15 mins.

My Verdict

Loved the steak.  It was tender and cooked to perfection.  Other than the mushroom sauce which they seem to drizzle on everything (including their burgers), everything was perfect.  The onion rings were nice and crispy, the coleslaw was "oh so delicious"...  In fact, I wolfed down both the side orders before finishing the steak.

Will definitely eat it again if I visit Astons! Yum yum!

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]

First REIT and Ascott REIT Declare Dividends

First REIT just declared distribution/dividends of 1.93 cents per share.  A quick look at First REIT's dividend history gives me some sort of confidence to enter this REIT again.  I had previously sold off my entire shareholdings in it but have recently entered into it again buying 10 lots of it recently.  Since the distribution is paid quarterly, it looks like I will be receiving a small bonus every 3 months.  Not too bad for some passive income.  Based on my 10,000 shares, I figure that I will be receiving around $193 for Feb 2012.

Ascott REIT had also declared their semi annual dividends of slightly over 4 cents per share.  I currently hold 15 lots in Ascott REIT so that should also provide me with a neat sum of around $600 for Feb 2012.

I am also still waiting for my dividends from Gamco Global Gold Trust (GGN).  This is a monthly dividend stock and though the dividend is paid on 24 Jan, I figure that I will only receive the cheque in late Jan or early Feb.

Investing in Real Estate

Real estate is usually one of the most expensive purchases that a person ever makes. The cost of real estate has risen significantly worldwide over the last decade until the economic problems came to life. Even now that housing prices have stabilized, they are still much higher than at the start of the last decade.

This can make it difficult for people to buy or invest in real estate, but it is great for anyone who bought before the prices started to rise. As any loans on the property are paid off over time, the cost of living there will be limited to any taxes and repair bills.

Advantages of Real Estate

As well as providing you with somewhere to live, or work, real estate can really work as an investment. If you own housing, you can rent it out to bring in a nice amount of money every month to supplement your salary. You will have to pay out for any repairs, and bad tenants can do a lot of damage, but many landlords have an agency that takes care of all that for you. Another advantage of property is the high cost of it. It might cost you a lot of money to buy, but you can usually sell it for a profit. Many landlords accumulate a portfolio of property that they use as a retirement fund, and sell it off when it is time to retire.

Disadvantages

Real estate is really expensive, and it can be difficult to borrow the money you need to buy a property. This can make it very difficult to start investing in real estate, although treating it like a business and presenting a solid plan to your bank may help if you want an investment property. A lot of people also end up asset rich and cash poor.

Choosing Real Estate

The hard part is choosing which real estate to invest in. Your intended use of the property will determine which is suitable. A house for your family might be a completely different choice to a property intended for rental to the holiday market in a resort area for example.

If you have the necessary skills, then you can make a lot of money by buying properties that need renovating and performing the necessary repairs. Your skills will enable you to perform the repairs quickly and cheaply and you can turn around real estate like this for a profit within a short space of time.

Building and maintenance skills are also useful if you want to be a landlord. By doing the repairs yourself it will save on the costs of paying for skilled craftsmen. It will also save money if you can manage the real estate yourself and deal with the tenants, but many people prefer to use an agency to do that.

Real estate can be a great property investment that can make a great profit, but can lead to large losses. Anyone considering property as an investment needs to research the market properly and invest in the right property in the best location they can afford.

[This is a guest post]

How Much of Salary to Save

Based on a recent online survey, it was found that 2 out of 3 Singapore workers were saving no more than 20 per cent of their monthly salary. How much salary do I save?

I figured that I am currently saving about 30% of my monthly salary.  This goes into savings plans, bank deposits or stock investments.  This is probably possible for me because I have kept my "wants" to the bare minimal.  Apart from the occasional dining at restaurants, I probably do not spend much on anything else.  No gadgets, clothes or whatever.  So most of my expenditure is really going into my needs and paying for the bare essentials.

Based on my rough calculations, I also figure that I am possibly able to save as much as 50% of my salary if I really want to.  But that will really mean cutting back on many of the "luxury" items that I can afford.  Saving comes really easy to me as I am pretty much of a saver rather than a spender.  I do not see the need to have or own the latest toys and gizmos.  Being frugal is perhaps part of me =)  And that is perhaps why I have written posts like:

1. What am I saving for?
2. Saving Money on Coffee
3. How Much to Save
4. Saving for My Child's Education

As many people have always advised, it really is not about how much you save.  The most important thing is to get into the habit of saving.  Try to build up an emergency fund and also set up a disciplined savings plan for retirement.  Thereafter, it should get quite easy as you discover more and more ways to save money.  Like they say, the first step is always the hardest.