5 Myths About Retirement Planning That Needs To Be Debunked

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May 4, 2019
Retirement Planning Singapore

Advising on Retirement Planning

Although everyone knows about retirement and dreams about it, not all of us understand it. What’s worse is that some of us are even confused by it and still fall prey to dangerous myths about retirement planning.

Here are five common myths about retirement and let’s see if you are one of those who have fallen prey to those dangerous retirement myths. (P.S. But luckily for you, we are here to help you debunk those myths.)

Read also: 5 Phases Of Planning For Retirement

5 Myths About Retirement Planning That Needs To Be Debunked 

Myth 1: Now Is The Time For Me To Enjoy Life, Not To Worry About The Future

A rational human being always think ahead of his/her own future. For instance, it is common for Singaporeans to think about the next 5-10 years in terms of career and family planning. However, beyond that, we hardly think about it. Precisely because retirement is so far into the future, we hardly think about it. Instead, we spend our time thinking about how we can enjoy our life in this moment (YOLO of some sort).

However, the truth is that if you start planning for retirement only 10 years before you want to retire, you will not reach the finishing line. In some circumstances, planning 20 years ahead of time will not make it as well. If you want to make sure that retirement is not out of your reach, make sure you start planning for it early. As a general rule of thumb, the earlier you start, the easier retirement planning will be for you.

Not sure how to start planning for retirement? Why not check out the 3 Best Retirement Plan in Singapore

Myth 2: I’m A Saver And That Should Make Me Retirement-Ready

If you want to retire early or retire in comfort, all you need to do is to start saving as early as possible, right? Well, it turns out that saving isn’t the best possible way to be retirement-ready. But how can it be?

Due to the impact of inflation, every dollar you own today is worth much less in the future. As a result of inflation, even if you save $1,000,000 in your bank by the time you turn 65, you will still not be able to afford to retire. This is because the cost of living will go up to beyond $1,000,000 by the time you hit 65.

In order to counter the effect of inflation, you need to let your savings work hard for you. Your savings should be growing as fast as the rate of inflation, at the very least. But a smarter choice is to invest your savings in the right retirement plan that will ensure you get to grow your savings at a faster pace than the inflation rate.

Check out some of the best retirement plans you can find in the market right here.

Myth 3: My Property Will Provide For Me When I Retire

To many Singaporeans, our HDB is an asset that is always ready to supplement our retirement needs if we need. We can either choose to downgrade our HDB to encash our property or to rent out a few rooms in our HDB to earn some rental income. Unfortunately, life is not as smooth sailing as we think.

Even if you were to downgrade your property, you will never know if it can make up for the shortfall in your retirement fund. Furthermore, after the required CPF top up, you might not be left with much cash to supplement your retirement fund. Thus, don’t fall into the myth that your property will provide for your retirement. Use your property wisely as a backup plan to supplement your retirement plans, not as your retirement plan.

Myth 4: I Will Enjoy My Retirement Years In Good Health

When most of us plan for our retirement years, there is a huge assumption that we make, i.e. our retirement years will be spent in good health. However, the fact is that there is a risk of falling ill during our retirement years. Based on the Global Burden of Disease Study 2015, Singaporeans typically spend an average of eight years in ill health. That is almost 10% of a Singaporean’s average lifespan of 82. What’s even more worrying is that there is also a risk of being severely disabled when we pass the age of 65.

The cost of seeking medical treatment and taking care of our severe disability can be a huge financial burden. Sometimes, it can even cost us more than what we had planned for in our retirement plan. To avoid that sticky financial situation, we can mitigate the financial cost of falling ill by getting the right health insurance. One such example is Aviva’s My Multipay CI III, which insures you against the financial cost of early stage critical illness for a small premium.

Are you confident that you are well-insured against situations that can put a dent in your retirement finances? If you aren’t, you can arrange for an insurance review with Moneyline right here.

Myth 5: All Singaporeans Will Only Retire At 62

While there isn’t a well-defined age for retirement, Singaporeans often reference CPF withdrawal age as the magical retirement age. But that doesn’t mean that you will only retire at the age of 62. There is a growing trend of FIRE (Financial Independence, Retire Early) among the younger generation of Singaporeans. We no longer want to retire at the age of 62. Instead, some of us want to retire as early as 40 so that we can spend more time doing what we love.

One important aspect to consider when you plan to retire early is your retirement fund. Prior to 62, you will not be able to get access to your CPF savings. This means that your retirement needs to be funded by your personal savings or investments. It also means that you need to start your retirement planning early if you want to be financially independent without your CPF savings.

What do you do next?

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