You are never too young to plan for retirement.
Whenever you bring up the topic of retirement, people will always tell you that you think too far ahead or that it is too early to plan. It is never too early to plan because the sooner you plan, the easier it is. When you have a plan, you will be in a better mindset for charting a life plan in your 20s, 30s, 40s, and so on. Additionally, building up a retirement fund gets harder as your age progresses – because you have lesser time and thus a bigger amount to save up every month.
Did we plan early?
No, we did not. We were financially strained in the earlier part of our lives. We were busy putting food on the table, making sure that bills are paid, and making ends meet. But hubby has this mindset that we need to be thrifty all the time, so we watch our spending very closely. The hard times were ingrained, so we are always very careful in our spending.
Tips on retirement planning
I’m no expert in retirement planning, but I read enough about the topic to start thinking really deep into it. Here are a few tips I learn:
#1 Have a plan
Failing to plan is planning to fail. Think about the goals you want to achieve. When you have a goal in mind, it is easy to think about how much you want to put aside, what investment vehicle you want to use, and what other things you would need.
Don’t underestimate inflation and its impact on your retirement fund and purchasing power. If you want to maintain your current lifestyle, you will need at least the same amount you are spending monthly now vs when you retire. With the surge in inflation rates (non-official or official) in the last few years, the value of cash has dropped. You will need more cash to buy the same amount of goods. Think of 10 to 20 years later, and when you finally retire. Will RM10 be enough for a bowl of noodles? I don’t know the answer, but the solution lies in your planning.
#3 Save early
If you can just put a small amount aside consistently every month, it can be a substantial amount when you retire. There is always a temptation for instant gratification, so weigh your options.
I am no investment guru. Invest according to your risk appetite. Someone may have a different investment tolerance than you, so understand the risk involved before doing any form of investment.
#5 Don’t retire with a debt
It is so easy to stretch your credit past your retirement age. If you look at home loans tenure, you can actually loan up to 70 years old! But that doesn’t mean you have to delay payment till then. As you progress in your career or business, try to pay off your mortgages before your retire.
Get adequate insurance coverage when you are young and in good health. Many people would put this off at younger age either because they don’t have sufficient money to put aside or they are focusing on buying cars, houses, etc. The later you purchase, the higher the cost and they may not insure you if you have pre-existing conditions. So buy early and get an agent that can give you good advice on how to plan.
#7 End of life pre-planning
Very few people think of this but this is by far the most important element of retirement. If you have dependents, you don’t want to burden them with the thought of what to do when the time eventually comes. Get a will written to cover all aspects. Do you know that you can also purchase funeral packages, burial plots, and columbarium in advance? Buy at today’s price to hedge against future inflation, and buy from authorized agents only. We got ours from Nirvana Life Planning.
What would I do differently if I could turn back the clock?
I don’t think I made a lot of good choices when it came to money. I’ve been scammed a few times, so I lost quite a bit of money there. So when it came to investing, I’m very apprehensive. Once bitten, thrice (not twice!) shy. I am also very risk-averse, so anything that I didn’t quite understand would not be considered. But if I am given a chance to redo what I did, here are a couple of things I would do differently:
- Start saving much earlier
- Invest earlier
- Plan much earlier
If I had planned much earlier, it would have been much easier.
In my next article, I’ll be talking about how we pooled money for our retirement dream.