When an individual falls into retirement age, it would means that no more consistent income coming into our bank account every month. Have you ever wonder how’s life will be after reach retirement age ? Is been human nature that we always look forward for a better tomorrow. We visualized great things and events that would happen when we retired. When retire, most of us hope to travel around the world, play with grandchildren and worry free financially. In fact, one need to plan ahead to make this prefect scene comes true.
What happen in reality is, when one reaches their retirement, living financially free sometimes made impossible. One of the reason is they fail to manage their risk. As an individual gets older, their health may be at risk. Health conditions such as high blood pressure, diabetes, cataract, dementia and so on might slowly take it’s place in our body. These conditions have stop us from living great during old age. What’s more concern is one do not have a medical insurance to cover these out of pocket expenses.
Secondly, a retiree is at risk financially if he do not plan ahead to cover the period of no income. Most of us think that during old age our expenses is lesser. Indeed is true because our child has grown up and our mortgages commitment already settled. But in reality we still need money to maintain our current lifestyle (eg: travelling local & abroad, buy some goodies to grandchildren, searching for great food delicacies), car and house maintenance (eg: car service, plumbing, water leaking, utility bills and so on) and health maintenance too (eg: supplements, medicine, minor illness). Without saving enough, a retiree need to live frugally. They rather choose to spend less, avoid going to doctor during sickness and would rather save the money for their kids or grandkids.
Thirdly, a retiree are at risk of not able to manage their money efficiently during old age due to less connection to current market condition or due to major illness like dementia. If you unable to manage your money, who else have you assigned to take over this job ? Will you be fully secure placing your trust on the person who manage the money for you? Try to use some financial tools to help manage the money. Setting up a Trust is one of the solution.
Looking at the above circumstances, one should plan early to cater the future risk ahead. First, get covered with a medical plan. Medical expenses is not cheap and it is keep on increasing year on year. Debts and expenses shall not pause to wait for your illness to recovered. By the time you intend to buy a medical plan, it may be too late because insurance only cover healthy individuals.
If you fail to get a medical plan, you may need to draw a large chuck of your saving should unexpected illness occur. What if the illness force you from continue working and hence cut down your recurring income as well ? How well can your savings to withstand the income shock ? Which pocket shall you withdraw to pay for monthly expenses ?
Second, save as early as possible to let the power of compounding takes its place. The earlier you save, the better the compounding effect. But wait, I have no money to save ? This boils down to what do you want to achieve in life. Sometimes, we work so hard that by the end month where the salary payout, we want to buy some stuffs to compensate our hard work, right? Yes, indeed you need to do so because you did the hard work. But plan wisely and let saving as part of your monthly expenses too. Trust me, when you inculcate the discipline to save every month, you will tend to spend more freely.
Create few baskets of saving. One for emergency, one for investment and one for retirement purposes. Emergency basket is to cater for emergency solutions like finding a new job or being fired by company unexpectedly. This amount should be at least 6-12 months of your monthly income. Place some of your saving to investment. Why? You do not want to work forever so make sure the money you save works hard for you. There are many types of investment out there for examples Unit Trust, equities, bond, robo advisor, equity crowdfunding and many more. While investment comes with risk, do place some money into a safe haven financial instrument for retirement purpose. It’s best if money save for retirement is capital protected and able to give you recurring income payout consistently when retirement age come in place. Remember, retire means no more income coming in.
Third, do set up a Trust to protect yourself and your assets. When one gets old, they may be at risk of dementia or incapacitated. When this happen, no one would have the right to manage your assets if you do not set up a Trust. Who can withdraw the money from your bank account? Many tends to open a joint account with their kids in order for the kids to withdraw the money when they unable to do so. Yes, you may do so but what if the money withdrawn being squander by other parties? What is it left for you then ? Have you read news which highlighted how parents being kicked out from house and force to linger on the street?
The more safer method is to set up a Trust, place all your liquid assets into it, pre set a condition on how these liquid assets will be used should unexpected events happen. Take control over your money while you still alive in this planet and you can always write a Will to will away all your belongings upon demise. Sometimes, give too much too soon may not be a wise solution.
In conclusion, one have to plan their retirement planning as early as possible looking at the above risk and possibilities. Is never too late to start your planning now. Have a talk with us now!