November 6, 2014

Imagine relaxing in a prestigious three-bedroom Villa, complete with a swimming pool and a personal butler. Enjoy your afternoon with gastronomic lunches and dinners prepared by in-house chefs. Unwind with a sunset speedboat cruise to nearby islands. Sounds Impossible? Even if a luxurious retirement seems far-fetched, at the very least, a worry-free retirement should be attainable for most people. Financial security is the key to a worry-free retirement

To be financially independent, you need to plan carefully and start saving early so your money works harder for you through investment and compounding interest.However, there are many factors that could impact your retirement plans. Inflation, over the years, can eat into your savings and what you have today may be worth a lot less in 10 years’ time.

An increasing average life expectancy also means that your savings may have to stretch longer than you planned for it to last. With advancements in medicine and improvements in living standards, the life expectancy of Singaporeans is increasing. With increased life expectancy come higher medical expenses. As you age, medical expenses generally increase. With rising healthcare costs it can become increasingly difficult to protect your retirement funds.

How much do you need for retirement?

The amount of retirement funds you need depends on the kind of lifestyle you want to maintain. Do you plan to do a lot of travelling? Are there some hobbies that you would like to pursue? Whether you have just started your career or building your nest egg, it is never too early to start planning for retirement. When you obtained your first job during your 20s, building your career could be your top priority. So retirement planning may seem too far away from you.

When you are in your 30s, you are in the “make or break” years. It is understandable how individuals in their 20s are too busy with love and career distractions in their lives to think about retirement. It is a remote prospect. But most 30-somethings should be settling down. You have also been working for more than ten years, and you have come to realise that retirement is drawing closer. And if you have not planned for retirement, when you entered your 40s, commitments like caring for parents and children take priorities and could further delays your retirement planning.

But if you haven’t already started, it’s not too late. It will just require more effort to catch up.

Daniel Chia, Manulife’s Financial Planner, shares more insight on the different stages of a person’s life when it comes to retirement planning: Typically, a person’s life is divided into different stages such as the 20s, 30s, 40s and 50s. For each stage, what percentage of one’s salary should be allocated for retirement investment?

Let’s go through each of the different stages.


In this phase, time outstanding to a retirement age of 65 is about 40 years. When you are in your 20s, you have time on your side. Thus you can take risks and make plans to build your first pot of wealth. Percentage wise, I would recommend to put aside 20 per cent of your income, and tweak accordingly as the situation permits.


You are about 30 years away from retirement. You still have time on your side but most likely, you would have accumulated loans or debts due to higher commitments. If you plan right, you should have your first pot of wealth in your 30s. You should maintain your savings rate at 10 – 20 per cent so as to enable liquidity, and to watch out for pitfalls such as the interest payments on your loans. To add, financial commitments such as housing and children’s expenses also play a contributing factor in this phase.


With about 20 years to retirement, time is of the essence and any debts you have, will most likely decrease significantly. In your 40s, you should have accumulated your second pot of wealth. This is the prime time to plough cash into dividend-paying solutions, and to look for consistency in a portfolio rather than overreaching for returns. This is because your career is drawing to a close. Investing 30 percent – 40 percent of your income would be ideal.


As you are nearing retirement at this age, you should be looking for more guarantees in the solutions you seek out with the facilities available to you. You are at the sunset of your career, and should start looking for your third pot of wealth. The emphasis should be on accumulating more savings.

What type of investment product provides the flexibility to adjust one’s asset allocation for different life stage? Ideally, a mixture of Investment-Linked Regular Plans (Long Term Planning), some use of Short-Term Fixed Deposits (Liquidity), investments In Funds/Stocks (for hedging against inflation), and the use of endowments as a cornerstone for retirement planning. Always re-evaluate your own risk appetite, so as to get a complete and suitable solution to your retirement needs.

How aggressive should a person be in his 20s in planning for retirement? Executives in their 20s, usually have the best opportunity to deal with retirement savings and planning. This is due to the fact that they have lesser commitments and financial liabilities. He or she should explore more aggressive solutions available in the market. However, do always reassess what you need as your life evolves.

What is the retirement strategy recommended for someone in his 30s? The situation for someone in his or her 30s has always been to provide for the family. This means having more commitments. Being prudent is encouraged at this phase.

What is the retirement strategy recommended for someone in his 40s? A senior executive in their 40s would probably apply a solution that is more welcoming in terms of coupon paying bonds or dividend-paying vehicles. By now your debts or loans would have been freed up. Thus, you enjoy more liquidity to pursue bigger-ticket investments and tangible assets that are have proven track records. These include higher interest coupon-paying investment vehicles, and those that can assist you in planning for your retirement.