Dennis Ng, founder of housingloansg.com and masteryourfinance.com wrote an article for MyPaper on 11 Aug 10. I have translated it into English here. For the mandarin version, pls refer to the attached pdf file: 为退休准备，不能延迟了
“I’m still young, why worry about retirement?” This is a rather common answer. Do you have the same thinking?
Suppose you are 30 years old now and intend to retire at age 60. Given that the average life expectancy is about 80 years old, you would have about 30 years to accumulate wealth and live the rest of the 20 years without working.
30 years is a short time and you better start to build your retirement fund. You must remember the mantra, “you are the young person that can take care of yourself at old age”.
All the resources you'll ever need as an investor
We've gone ahead and done the work. Compiled here are all the resources you'll need as an investor.
Nowadays, Singaporeans are mostly having 1 or 2 children. Given that the standard of living will increase in the future, it is getting harder for our children to survive and take care of us when we turn old. It is not sensible to depend on our government too. Hence, the best way is to prepare now, so that we can enjoy our old age without worries.
2 common errors for retirement planning
Procastination – If you start to save $600 every month from 30 years old, and grow your money at 6% every year, you would have a fortune of $600,000 at age 60. If you start from 45 years old, you would need $2060 every month to grow to the same amount of $600,000! This is the price of starting late!
No ‘real’ savings – Almost 99% of the people will say that they have savings. But is it true? Based on my observation, most people would spend their monthly salary on necessities like food, clothes, travel etc. The remaining money, if any, would be saved. If required, the surplus from previous months would be withdrawn to meet spending needs. Hence, the truth is that this “money” cannot be considered as savings, but simply an emergency fund. It is also not wise to practice consumptive savings, saying that you are saving for a holiday trip at the end of the year. The correct way to save is to really set aside money consistently, and only use it during retirement.
3 common errors for saving
Save too little – Many people save around $100-200 per month. This is not sufficient if we want to retire at 50, and living a decent lifestyle (travel once a year and eat out once a week). If you save $200/month for 30 years at 6% growth per year, you would only have $200,000.
Start too late – When we are in our 20s, we save for marriage and children. In our 30s, we save for our children’s education. It is only when our children are much older, we begin to start saving for retirement. By this time, we are likely to be in 50s. Even if we begin at 40s, we may have to risk our savings for higher yielding investment to meet our financial goal. If not managed properly, we may even lose our savings.
Playing it too safe or too risky – If you keep our money in the bank, the interests paid are not sufficient to beat inflation. Hence, your money is actually shrinking. On the other hand, if you do not know how to invest but just went ahead playing the stock market, you are likely to lose a lot of money. There is a product in the market that has capital guarantee and yet giving returns around 4-8% per year. It is known as UK Endowment Policy. Recently, it has become more attractive as UK pounds is at its 30-year low against Singapore dollar. Hence, you should choose such products that are safe and provide decent returns.