5 things to check off before you retire

1. Calculate the monthly expenses you will need in retirement

It is important to calculate how much you will need each month when you retire. Once you retire, it is generally quite difficult to get back to the workforce so do ensure you avoid retiring too early and find that you do not have enough for retirement due to a miscalculation of the amount you need for a comfortable retirement.

The amount you need for your retirement can be broken down into two key areas:

• a)Essentials: This is how much you need in order to live comfortably in Singapore and it includes the amount you will need to spend on your accommodation, meals, utilities, groceries, transport and basic telecommunication needs.
• b)Discretionary: This is how much you need to have the freedom to pursue your interests and passions such as traveling around the world, picking up a new hobby or simply keeping yourself active by signing up for sports classes. It is important to know how much you are willing to set aside for this so that you do not end up over spending.

By calculating the cost of the above, you will have a good gauge for how much you need for a comfortable retirement.

2. Find out how much you will receive from CPF LIFE

The main source of retirement income for majority of Singaporeans will be CPF LIFE (Lifelong Income For the Elderly). CPF LIFE is our national annuity plan that provides a lifelong monthly payout for Singaporeans, aged 65 and above. The exact amount that you receive each month will depend on the following two factors:

• a)Amount you have in your Retirement Account (RA) at time of retirement
  The more you have in your RA, the higher your monthly payout will be. To enjoy bigger monthly payouts when you retire, you can consider making lump-sum top ups to your RA in the years leading up to retirement when you are still in the work force.
• b)Choice of CPF LIFE plan
  There are 3 types of CPF LIFE plans available which will give you different monthly payouts and amounts that you would leave for your loved ones. The Standard Plan will give you higher monthly payouts but if you would prefer to leave more for your loved ones, you can opt for the Basic Plan. Alternatively, there is also the Escalating Plan which provides an annual increment of 2% for your monthly payouts.

It is important to know how much you will be able to receive from your CPF LIFE each month, and whether the amount is sufficient for your expected monthly expenditure to support the lifestyle you prefer. As the payouts for CPF LIFE only start from age 65, you should consider other sources of income to make up for the difference if you choose to retire before 65 years old.

3. Understand how your investments will fund your retirement

You may have started building a diverse investment portfolio early on in your career and your portfolio might include stocks or bonds that you have invested in, investment properties or even financial plans. After calculating the amount you need each month against your CPF LIFE payouts and identifying the shortfalls, you should have a plan on how your investments can also help fund your retirement and make the necessary adjustments if required. Keeping in mind how your investments can fund your retirement is important because not all investments are liquid or provide regular payouts and you might need to review them along the way. You can speak to a banker for advice if you need help on allocating your investments to best suit your retirement goals.

4. Be prepared for unexpected medical costs

As we cannot foresee the future and aging is an inevitable course of life, it is important to ensure that we are always well-prepared for the unexpected and have sufficient health insurance coverage so that in the event the need arises, we do not have to worry about the additional costs that might be incurred. There are health insurance plans that are MediSave-approved by AIA that you can consider if you do not already have existing coverage.

5. Think about estate planning

Last but not least, estate planning is also an important part of financial and retirement planning, since it concerns how our assets will be distributed among our loved ones when we are no longer around. It is never too early to prepare for the future and you would want to ensure that your retirement planning matters are well taken care of so that you can be confident today knowing that you are prepared for anything life throws at you.