People are living longer today and that has come with the need for more retirement planning – and for longer terms. With the happenings of recent times like surging inflation and lower interest rates, it seems that if we’re not already reviewing our financial plans for our future, we definitely should.
The gravity of inflation in 2022
Inflation has been in every other conversation these days, and for good reason: the inflation rate in Singapore in July 2022 was a whopping 7% year-on-year1 – our average inflation rate has only been about 2.5% over the past 50 years.2 At this rate, the cost of living is expected to double in just under 11 years3!
Of course, there are things you can do to cope with this, like looking at where the price hikes are most pronounced4 and making the necessary reductions in spending. For instance, take public transport more as private transport costs have gone up by 19%5.
But this economic outlook also raises questions. How can you stretch your dollar further, and continue to stay on track with your retirement plans? Here are a few baby steps to take now and make a big impact on your retirement later.
Keep your short- and long-term goals in mind
As with any planning, goals come to mind first. Consider the stage of life you are currently at, and determine the short and long term goals you want to achieve moving forward to retirement.
For short term goals, how much will you need for yourself and your loved ones in the near future?
- Are you purchasing a house soon?
- Are you thinking of starting a family?
- Are there older family members you will need to take care of financially in the next few years?
- Is your retirement imminent?
For long term goals, will you have what you’ll need?
- Will your current health insurance be able to protect you sufficiently when you grow older?
- What kind of lifestyle do you want to live in retirement?
- Are you expecting to rely on loved ones then?
- Are you planning to engage in part-time work that might give you a little monthly income?
Based on your answers for the above, make any changes or include new plans to your financial portfolio so you can gradually build up your finances and reap the benefits for retirement.
Build a (more) solid foundation for your financial wellbeing
You should also work on reinforcing the foundation of your finances now. For example, emergency savings. These are funds set aside for a rainy day that should amount to approximately 6 months’ worth of expenses6. To make it easily accessible in times of need, these funds should be liquid and stored in savings accounts.
Ensure you are adequately protected now and for the long term too, as you and your loved ones go through different life stages and have different protection needs. Review your needs regularly and keep your coverage updated.
Beyond health, think about protecting your wealth as well. Inflation can take a bite out of our savings7, and as living expenses rise, your cash flow will start to decrease. So, start saving as soon as you can, however small the amount might be.
Where you can, planning early can give you greater peace of mind – you need not worry in events of unforeseen medical or life circumstances.
Adjust your portfolio as needed and manage risk
Investments may be risky, but a zero-risk appetite for any form of savings and investments is in fact the biggest risk. If your savings aren’t growing at the same rate as inflation – which is increasing at an even higher rate now – you’re actually losing money.
Grow your money with investments but do consider your risk preferences and ensure that your financial portfolio is diversified8. The idea is to harvest a broad set of returns, so even if some investments perform sub-optimally, others may still bring profit.
Take advantage of safer investments too, like government schemes: CPF and the Supplementary Retirement Scheme (SRS). Although these investments are not liquid, they will definitely come in handy in your retirement.
You can even maximise your nest egg (or that of your loved ones) further by topping up CPF accounts to leverage attractive interest rates and the power of compounding.
Whatever you do, be sure to review your portfolio regularly and make any adjustments if necessary.
Take action, take control
It’s important that you make prudent financial choices with careful monitoring and advanced planning now, so you can enjoy your retirement later. Should you want even more protection for yourself and your wealth, you can also consider insurance savings plans.
Our highly customisable retirement insurance plan PRUActive Retirement II
is designed to weather market volatility and provide policyholders with a steady cumulative retirement income – so that they can enjoy their golden years with peace of mind. Speak to a Prudential Financial consultant
to find out more about retirement planning today.
This article is for your information only and does not have regard to the specific investment objectives, financial situation and particular needs of any persons. Please seek advice from a qualified Financial Consultant for a financial analysis before purchasing a policy suitable to meet your needs.
This policy is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact your insurer or visit the GIA/LIA or SDIC web-sites (www.gia.org.sg
This advertisement has not been reviewed by the Monetary Authority of Singapore.
For more information, speak to your Prudential Financial Consultant or visit www.prudential.com.sg