5 Must-Dos To Avoid Ever Outliving Your Financial Nest Egg

Have you ever wondered if you have sufficient money to last your lifetime? Or the magic number seems so elusive?

Thanks to healthcare advancement and access to quality medical care, the average life expectancy in Singapore has been increasing over the years. As of 2019, the average life expectancy at birth in Singapore was 83.6.

While a longer expected lifespan is never bad news, it also comes with major implications for our retirement plans. After all, if you are living longer lives, it’s logical that you will need more in your nest egg.

To ensure you have sufficient to last your lifetime, here are 5 must-dos while you are still young.

1. Ensure the lease of your home is sufficient for the rest of your lives

In Singapore, more than 9 out of 10 resident households own their homes. This is great because it means that even during your retirement, you have a place to live and not worry about recurring rental cost.

Besides ensuring that your homes are fully paid up, there is another concern you can’t ignore – the remaining lease on your homes.

HDB flats are sold with a 99-year lease. If you are buying a new flat, you don’t run the risk of outliving your lease. However, if you buy an older resale flat, there is a possibility that you may outlive the lease of your home.

Your home may not give you any direct income, but have sufficient lease gives you the option to monetise it and move to a smaller unit so you have extra cash later.

2. Protect yourself and your spouse with suitable medical insurance

Growing old comes with a higher chance of you falling ill, whether due to a critical illness or an accident. Your recovery may also take longer and be more expensive.

That’s why it’s so important to be sufficiently insured to help you mitigate risks.

Common insurance policies that you can consider include a private integrated shield plan (IP), a personal accident (PA) plan and a critical illness plan.

Premiums for insurance policies tend to become more expensive as you age. To offset these costs, here are a few things you can do.

Consider buying a limited-pay whole life insurance policies such as a whole life critical illness plan during your younger days. For example, you could buy a plan that allows you to pay the premiums for 20 years, while we are still working. After which, you enjoy coverage for life. This way, you have the needed coverage in your later years without worrying about paying the annual premiums.

You can also tap on your MediSave money to pay for the premiums of national healthcare schemes such as MediShield Life and CareShield Life. This reduces the out of pocket expenses that you need to fork out during your retirement.

3. Utilising CPF LIFE to its fullest

When it comes to making sure that you have lifelong income during our retirement, there is possibly no better solution for Singaporeans and Permanent Residents (PRs) than to utilise your CPF LIFE plans to its fullest.

CPF members who want to receive higher monthly payouts during their retirement can opt to set aside the Enhanced Retirement Sum (ERS), which is 1.5x the normal Full Retirement Sum (FRS). This act can put you in a position of safety – knowing you have higher guaranteed monthly payouts, compared to the FRS or BRS, for the rest of your lives.

The good thing about CPF LIFE is that it is risk free and you don’t have to be afraid of outliving our retirement savings since the monthly payout is for life.

* Figures accurate as of January 2021

4. Have an investment portfolio that provides you with stable dividend and interest income during your retirement

When you are young, you have the financial runway to take risks and, you may prefer stocks and other assets that can give you high growth.

However, when you stopped work, you may prefer your investment portfolio to give you a stable dividend and interest income each year to supplement your retirement income from CPF. This means you would want to invest in companies that can pay out stable dividends and other interest-paying assets such as government and corporate bonds.

As you grow older, you might become less risk-tolerant, at least with your core portfolio. As 2020 has shown, the financial markets are highly exposed to volatility. If you invest only in equities, you may find ourselves holding an investment portfolio that is more volatile than you can stomach. So it’s important that your investment portfolio include less risky assets such as government bonds and high-quality corporate bonds.

Building a portfolio that pays you stable dividends and interest income gives you the extra that you can indulge on without drawing down your principal investment. That financial freedom is priceless.

5. Work past the retirement age if you can

If you truly enjoy what you do, it’s a good idea to stay economically active beyond your retirement age. It gives you the social connection that is so important for your mental health. After all, it’s always good to build your reserves.

In Singapore, the retirement and re-employment age are set to increase to 65 and 70, from 62 and 67 respectively. Nevertheless, it can be inevitable that not all senior workers will be retained in the workforce. This is where you must take the individual responsibility to upskill yourselves to remain relevant.

As we hit the retirement home stretch, you may also want to think about monetising your time in other ways. Taking on more meaningful roles, albeit with lower pay, at social organisations. Depending on the skills and expertise you have, you can also choose to take more control over your time by working part-time or to freelance.

Staying On Top of Your Finances

By staying on top of your finances, you will have a snapshot of how well you are faring and where your shortfalls are. This can be important to track improvements or deterioration in your personal finances over time.

You can leverage on Autumn to give you a bird’s eye view of your personal financial standing. Using Autumn, you can be kept abreast of your net worth, your savings across bank accounts, your CPF balances and your investments as well as equip you with the information and knowledge to make confident financial decisions.

This also keeps you accountable to your future-self, who will be relying on your current self to save and invest for a comfortable retirement.

Download Autumn now and start embarking on the journey with us, to create your best retirement.

*The information in this article is not intended to be and does not constitute financial advice, investment advice, trading advice, or recommendation of any sort offered or endorsed by Autumn.