Many often wonder what a person should possess during retirement or pre-retirement. I would like to share with you some treasures which you should have. I have to admit the list below is not exhaustive and it may vary according to individual’s unique circumstance, but can serve as a framework for you to work out a list to suits your lifestyle and circumstances.
1. Fully Paid-Up Home
You will not have to worry about a roof over your head. You may argue you can rent. Unless you rent direct from HDB which comes with a host of conditions and restrictions, you would have to consider the probability of your landlord revising the rental upward regularly which will affect your budget.
2. Stable retirement income
a. Important to plan your CPF. You should try to top up as much as you can, so you can have the highest CPF Life pay out possible. How much you have in your CPF is intentional, it does not happen accidentally;
b. Layer your retirement with other sources of income apart from CPF Life. If you are before 50-year-old, you may consider investing in an annuity to give you a better outcome, just to name one. At the same time, you should avoid low liquidity and/or high volatility investments when you are in retirement. Low liquidity means it takes time to liquidate your investment, and high volatility means your investment could be under water when you need to divest. As a result, the former will result in not having the money on time and the latter means you will have to take losses when you divest.
3. Emergency Money
There will be occasions when your household appliances will need replacement, or you need to fix a leak in your house. Your regular income from CPF, and annuity may or may not be enough for you to buy a replacement or to fix a leak. Emergency cash is a place where you can draw down to finance your purchases/expenses.
4. Protection
a. If you can afford, try to have an entry level Integrated Private shield plan and a rider to cover as much out of pocket hospitalisation expenses as possible like co-insurances. You will be amazed how much out of pocket expenses you have to pay if you are not eligible for Pioneer or Medeka Generation subsidies;
b. Do not surrender your existing life insurances if you have them. This is so that your loved ones can be taken care of when you leave them prematurely during retirement and to finance your afterlife arrangement.
c. Long term care insurance like Care Shield and Eldershield. Although their pay-out is not much, they can help to soften the impact of long term care expenses.
5. Younger friends and exercises/work place friends
a. It is inevitable that you will find your peers leaving you one by one during retirement and it would be very depressing to find your social circle shrinking as you grow older. This will take a toll on your mental health. Join social/exercises clubs, churches fellowships and make friends with younger people. Keep making new friends so that your social circle will not shrink. Imagine you have a pool of 6 mah-jong kakis and they leave you one by one. Soon, you will find that you cannot have the numbers to start a game without new additions constantly. Sounds morbid but it is real;
b. Keep yourself engage physically. It will improve your mental and physical health. It will also help you fill your days with activities. Don’t do this alone, do it with friends and get your friends’ friends to join too. You will overcome the reality of shrinking pool of friends.
6. Budget
You should have a budget to keep tab on your incomings and outgoings. You must remember you no longer have a salary to rely on. Whatever extra you are spending beyond your CPF and annuity (if you have one) pay out or other investment income, they will have to come from your cash hoard or reserve. With the current low interest rate environment, they can be depleted more quickly than you realise.
7. Knowledge
Keep yourself curious, learn new skills and acquire new knowledge. It will keep your mind sharp, and you are less likely becoming a successful target for con artistes.
8. Finally, have your Will, Living Power of Attorney (LPA) and Advance Medical Directive (AMD) done. They are actual quite simple to do.
a. A Will is to make sure you distribute your assets to the people you want and do not subject your loved ones to the process of intestacy which can be very time consuming and tedious;
b. LPA will enable your trusted one to take care of you and your assets when you are no longer mentally capable;
c. AMD is to “give legal effect to, advance directives to medical practitioners against artificial prolongation of the dying process….” (ADVANCE MEDICAL DIRECTIVE ACT (CHAPTER 4A) It is also to relief your loved ones the burden that comes with making medical decisions during those difficult moment. I am very sure no one wants to hear “you should have tried and let him live, maybe a miracle could happen…………….” if you must make the decision to flip the ventilator’s switch.
Please WhatsApp me at 8750 8966 if you wish to speak with me how to plan your finances before retirement.
Ray Ng 30th September 2021.
Disclaimer: All information are for informational purposes only and should not be relied upon as financial advice.