If we live long enough, there will come a time when we will finally decide to stop working for a living, or opt for a less intensive job. Most people could, generations before, rely on their pension plans to enjoy post-retirement days. Unfortunately, the same does not hold true in the world today.
When the government of Hong Kong introduced the Mandatory Provident Fund (MPF), it was to address the fact that most of the population did not have sufficient savings to sustain themselves after retirement. While this is a step in the right direction, it was not designed to be the sole mechanism.
It is up to you to secure a comfortable retirement for yourself. With continued advancements in medical science, chances are you will be having a long post-retirement life span. I am sure you would agree that it’s preferable to be able to look forward to it.
While experts suggest that you should set at least 70 to 80 percent of your income pre-retirement as a benchmark, there are ways you can refine the accuracy of your objectives.
Keep track of your expenses, and I don’t mean for just a month or two. Identify elements that do not recur monthly, such as holiday expenses and big purchases. Determine which of these expenses are likely to disappear when you retire; they may include things such as mortgage payments and insurance premiums.
Remember to factor in inflations as they will directly impact the value worth of your currency.
It is never too early to begin preparations. Most people in their 20s would shrug it off since they had barely just stepped into work life. There are things you can do which will significantly impact the standard of life in your later years.
- Avoid debts associated with lifestyle choices
- Familiarized yourself with the features of MPF
- Watch your credit score
- Cultivate a habit of saving
- Purchase long-term insurance policies covering death and disability
The Vital Phase
As you hit your 30s, it is about time to finalize the goal setting part if you haven’t already done so. With probably another 30 years before your retirement, the doors to long-term investments are slowly closing. This is also the time when most transition into married lives, and it is crucial to make financial plans for your family so it will not delay your own retirement plans.
- Acquire your own property if possible, they are likely to become your greatest asset
- Start an endowment plan to cover educational expenses for your children
- Allocate the majority of your investment portfolio into long-term entities
Into High Gear
Sound considerations may have you allocating much of your investments in more volatile options such as the stock market earlier in your life for the possibility of higher returns. When you are about 20 years away from your retirement, it is time to rebalance the portfolio. At this point, under normal circumstances, you should be adjusting your risk profile to a lower setting.
A good tip is to substrate your age off from 110, the resulting numbers will be a good indication of the percentage you should still maintain in stocks. Transfer the rest into more conservative channels like bonds or target funds.
Check whether the conditions are favorable for you to refinance your mortgage loan for a lower interest rate. Consider this a part of an aggressive saving strategy which you will carry all the way into retirement, as you incorporate other practices to save money
A dollar saved is a dollar earned.
The Last Hurdle
At your 50s or 60s, it is time to keep risky investments to a minimal. The objective now should emphasize mainly on wealth preservation.
Focus the majority of your diversified investments into short term bond funds. You can choose to keep some stocks as long as they pay dividends. By cutting risk, it does not mean that you should start keeping your money in biscuit tins. If possible, explore short-term single deposit saving plans that offers between 2 to 5% returns. If anything, they can help you combat inflation.
Keep yourself in the labor force, or opt for a less stressful position, if you still feel comfortable working as you approach later years. The longer you can delay tapping on your long-term savings, the better.
A Happy Retirement
The truth is, there is nothing complicated about retirement planning. In essence, all you need to do is to properly plan, manage and preserve your finances.
The key difference between planning for retirement and saving for a car or a house is that the former is inevitable – you don’t really have a choice in the matter. If it makes you feel better, you have opportunities available in nearly every phase of your life to prepare for it.