How to not mess up your Happily Ever After - Risks to note during retirement planning
80% of people who died on Mt. Everest died not on the way up, but on the way down.
This blunt metaphor aptly shows how many of us spend our adulthood working hard to accumulate wealth to reach the top of the mountain, but have no idea how to descend safely with dependable income streams throughout retirement.
Planning a safe way down the mountain is crucial.
Throughout life, we go through several stages. We have our dependent stage before moving in to our working years, then comes wealth preservation, retirement, and your legacy. The right combination of retirement tools include both retirement accumulation and income distribution.
The importance of good retirement planning cannot be stressed enough. In this article, we talk about the risks that may derail your retirement plan.
Longevity is a multiplier to other risk factors
Many of us want to lead a long and healthy life. Here in Singapore, the number of those aged over 65 is expected to reach 900,000 by 2030, and a rising number are living to 100.
In Singapore, a rising number are living to 100 years of age.
While living to a ripe old age is supposed to be celebrated, the impact of longevity can actually be negative if this is not well taken care of.
A survey showed that 55% of Singapore residents feel that they are not ready from a health and wellness perspective to reach 100 years old.
The number of older adults who develop more than one chronic condition, called multi-morbidity, has been growing with more than half of Singapore's residents who are older than 60 falling into this category. Your expenses on healthcare and quality of life may likely increase with age.
Few understand the concept of longevity risk beyond living older as they do not realise how it multiplies the impact of every other risks out there such as deflation risk, market risk, withdrawal rate risk, healthcare risk, sequence of returns risk, long term care risk, mortality risk, inflation risk and more.
Plan for the unexpected
To ensure that your retirement plans are not derailed, it is important to cater to the unexpected risks listed below:
Personal and family risks
General examples: Employment, longevity, a change in marital status, a change in the needs of other family members
Detailed examples: Being forced into early retirement due to retrenchment exercises, experiencing an earlier-than-anticipated death of a spouse, living to a much older age than anticipated
Healthcare and housing risks
General examples: Unforeseen medical bills, the need to change living situations, and the cost of available caregivers and care facilities.
Detailed examples: Needing expensive specialised treatment for critical illnesses, having to stay in an unsubsidised eldercare facility
Financial risks
General examples: Rising inflation, fluctuating interest rates, stock market volatility, poorly performing retirement plans.
Detailed examples: Lower than expected dividend payout from stocks, unexpected default of AAA bonds, stock market crash caused by black swan events,
Public policy risks
General examples: Higher taxes, reduced benefits, changes in government retirement policies
Detailed examples: Changes in usage of MediShield Life, decrease in monthly retirement payouts from government, sudden increase in GST,
Start planning a bulletproof retirement
Relaxing post-retirement.
If you are unsure of how to start, feel free to reach out to us for a non-obligatory consultation.