When you’re 12 years old, you can’t wait to be a teenager. When you’re a teenager, you long to go to university. When you’re in university, you look forward to graduating. And when you’re working year after year in your job, you long for the day when you can finally slow down and retire.
If you plan well your retirement could be a time of great happiness and contentment. You will finally have the time to enjoy being with your grandchildren; to learn new skills and hobbies; or to get together with friends to travel to new destinations. Below are a few questions to consider when planning for retirement.
How many years will you have in retirement?
Statics have shown that people are living longer these days. On average, 65-year-old men can now expect to live until they’re 86, and 65-year-old women until they’re 88. In the future, we’ll probably live even longer. Let’s say you plan to retire at 60. You need to save or have another plan to provide the income you want for 25 years or more. And remember, things may not go the way you hope. For example, you may get sick or have some other reason for not working as long as you expect to.
What kind of budget will you need?
If you’re close to retirement, it’s time to work out a detailed budget. Take basics into account, such as insurance, maintaining your house and car, or replacing a major appliance. Add in some funds for the unexpected. Think about the big things you might need to pay for later on – like a new car, a major home repair or helping your children financially. Paying off your mortgage before you retire should also be a priority but make sure that it is not your only retirement plan.
There are risks in leaving serious retirement saving until after you’ve got rid of your mortgage. You may end up having a mortgage for longer than you expect, due to changes in your circumstances such as ill health or loss of work that reduce your ability to make repayments.
Even if it seems a long way off, it pays to plan for your retirement as early as possible. How much you’ll need to save will depend on your own circumstances, but the sooner you start, the more you will have.
What sort of retirement lifestyle do you want?
What will your cost of living be in retirement? Some of your costs may increase (like healthcare) while others (such as education, clothing and housing) may decrease. If you have children, they will probably be financially independent. You also need to think about what your goals might be in retirement – travelling to new places?
Will you live in your own home or rent?
If you rent, you’ll need more savings to cover the cost – but on the other hand, you won’t have money tied up in a home. However, owning the place you live in will reduce the risk of rent increases or being asked to find a new place to live. You will have more control over your finances, but you will have to take care of maintenance and other costs. Being mortgage-free by retirement is a great goal to aim for. The reason many people currently in retirement are able to manage financially is because they no longer have the burden of mortgage repayments.
At AIA we know that retirement can be one of the most enjoyable periods of your life if you plan ahead. You could take up a new hobby, travel the world or even take up a second career without the demands of pressing financial commitments. AIA understands how important it is and has the breadth and depth of expertise to provide the best products and services to matching individual needs. You can choose from our wide range of products including endowment plans and annuities that coincide with your retirement.
This advice on retirement planning is made possible with support from