You are finally reaching that stage in life where retirement is on the horizon. After a long and fruitful career, you're ready to make the transition to a more time-rich lifestyle, where you'll have the space to enjoy the presence of loved ones, hobbies, travel and community activities. But are you ready to enjoy the retirement lifestyle you want?
Making the transition from worker to retiree in the five to ten years leading up to retirement is about more than just saving up a retirement nest egg. In the decade before you stop working, you become more vulnerable to market downturns, and a short-term impact on your finances can have huge implications on your retirement.
That's why we've designed the OCBC Bank’s approach to your Silver Years, a financial planning approach for anyone who envisions retirement in 5 to 10 years.
Our approach helps you become retirement-ready by focusing your retirement planning efforts on three key areas:
Through our approach, we take your individual needs and lifestyle into account to create a customised plan to help you become financially ready for retirement.
Here’s how we do it:
How much you need in retirement really depends on your individual needs and lifestyle. You will need to ensure you have enough wealth to fund your health and lifestyle needs.
While some estimates go as high as S$2 million, that is certainly not the case for everybody! Use OCBC's Retirement Calculator to work out how much you really need and to start building a plan to get there.
If the sum you need in retirement looks a little high, don't forget that there are ways to reduce your cash flow needs in retirement, such as downgrading your current home and reducing your insurance protection if you are over insured. For instance, if your kids are all grown up, you might no longer need as much life insurance coverage as before.
Before you begin making plans to achieve your designated retirement sum, the first step to take is to build up an emergency fund that can help you to weather any financial emergencies without having to dip into your retirement savings and investments. Depending on your needs, this could be three months' worth of living expenses kept in a savings account.
As you progress towards retirement and beyond, you will want to shift your asset allocation to reduce risk, as well as identify any gaps you might have overlooked. For instance, you want to ensure you have adequate financial support to pay for your medical bills. To increase your insurance coverage, it is good to explore with insurance companies on their available hospitalisation and surgical insurance plans. Some insurers even offer ElderShield supplementary insurance products that have been approved by the government.
Next, you want to ensure that you have a sound investment strategy in place that focuses on paying out an income and dividends that will fund your retirement.
At this stage, you should reduce exposure to highly volatile instruments like single stocks, single country equity funds or investments that are illiquid like properties. Consider reducing your exposure to such investments and moving into diversified multi-asset strategy funds that invest in a broad range of asset classes, which are less risky.
Don’t forget to rebalance your portfolio at regular intervals so you don't expose your wealth to unnecessary risk.
Besides investments, also consider other solutions that will offer you a more holistic retirement income. You might want to consider endowment plans which provide the stability of pre-determined returns, structured deposits which guarantee preservation of your capital, as well as legacy solutions that enable you to transfer your wealth to the next generation.
As you approach retirement, your insurance needs are likely to be quite different from when you were building your career, so evaluate your coverage to ensure you are not under nor overly protection. In addition, any company-sponsored health insurance lapses once you stop working, so it’s important to ensure you have other insurance plans in place.
In particular, you want to be sure you have adequate health insurance coverage as your healthcare needs rise. Compare the various health insurance options on the market to find one that offers a good balance between protection and price.
You might also want to consider supplementing your medical insurance with disability insurance. Together with health insurance, it can keep you financially covered in case of a sudden deterioration in health.
Money should be a tool to help you achieve your desired lifestyle in a sustainable way, so monitor your income and spending regularly to ensure you are not overspending.
Devise a retirement budget that will let you allocate your retirement spending to the things that matter. Work out how much you intend to spend on food, entertainment, transport and so on. With less than a decade to go before you retire, it's worth the extra effort!
There are also debit and credit cards that can help you get a bit more value out of every dollar. For instance, the following OCBC credit cards offer rewards each time you spend:
Planning to retire within a couple of years can seem daunting, but when you break it down into a few simple steps with the OCBC Bank’s approach to your Silver Years, you will find that it is very achievable.
OCBC Bank’s approach to your Silver Years helps you transition into your retirement life, from making sure you are adequately protected to determining whether the investment risk in your retirement portfolio is appropriate. Our experts will analyse your finances and investments and provide personalised recommendations based on your situation. With this advice, you can make all the right decisions, putting you in the best possible position to enjoy your Silver Years.
Insurance policies will be underwritten by The Great Eastern Life Assurance Company and are not bank deposits or obligations of, or guaranteed by OCBC Bank. This is for general information and does not take into account your particular investment and protection aims, financial situation or needs. You should seek advice from a financial adviser before committing to a purchase. Otherwise, you should consider the suitability of the investment.
Covering your health pays in the long run. Ray has done it, so can you.
Master your lifestyle by saying “can” to a wealth of new experiences, just like Ken.