? Awesome Tips To Try For Retirement Planning For All Ages

by | Jul 22, 2018 | Portfolio Investment

“Life is a marathon, not a sprint” That saying applies to retirement planning as well. However, all too often we race through the nitty-gritty details of our finances and yet neglect to focus on crucial elements – especially on savings for retirement – until it’s almost too late. Sure, we are overwhelmed by the idea of trying to save because of the multitude of financial commitments. So here’s a decade-by-decade plan that I hope will guide you on track for a more sustainable retirement.

20s

Now that you’re out of school, the world is full of discovery, adventure, and opportunities. With your new-found freedom, don’t get carried away and overstretch your paycheck on an expensive lifestyle. Retirement may seem a million years away but it is never too early to start saving. As time is on your side, even a small amount every month can add up to a big payoff at retirement. So, don’t miss the unique opportunity to maximize the power of compounding.

 

  • Establish Good Money Habits: create a budget and track your expenses. Then test it out for several months to make sure it is realistic and adjust it along the way. Also, don’t spend beyond your means.

 

  • Tackle Credit Card Debt: don’t use credit card unnecessarily. Try to pay off the full amount monthly. Most folks don’t pay much attention to their credit card debt. By just making minimum payments monthly and letting the outstanding balance rollover on hefty interest, you lock yourself in perpetual debt.

  • Pay Your Student Loan: In Malaysia, we are lucky to have only 1 percent interest on PTPTN. Just pay the amount you’re supposed to – as stated in the agreement – and you’ll be fine. Don’t set aside too much to pay for this. Any extra money should go to investments.

 

  • Create Emergency Fund: While busy paying down your debt, remember to build up an emergency fund. Ideally, you should aim to have an amount equal to six months of take-home pay. If that seems too much, start with one month and build from there.

 

  • Set Aside A Retirement Fund: Contribute a small percentage of your income that you feel is reasonable. You can start with 5% contribution monthly, then add 1% bi-yearly. If you earn a salary of RM2,000, 5% would be RM100 a month.

 

30s

During this decade, you likely have more money coming in than you did in your 20s, but that’s not a good reason to spend it. Your financial goals are likely to get a bit more complicated in your 30s. Many people are still paying off credit card debt and student loans, working on building emergency savings and kicking retirement savings into higher gear, while also saving for a house down payment, and perhaps thinking about starting a family. So how do you juggle it all and still make your retirement plan work?

Prioritize on your three biggest goals. If you haven’t mastered the big three – paying off credit card debt, building an emergency fund, and putting aside money for your retirement savings – then those should automatically be your top priorities. Once you’ve addressed your basic financial security needs, you can start contributing to other goals like saving down payment for a house or kids’ education fund. Try to wipe out debts that are most expensive first; the highest-interest debts.

  • Reassess Insurance Needs: Big life events – getting married, having kids, buying a house – can be trigger points for examining whether your insurance needs are being appropriately met.

  • Retirement Planning: You have been setting aside about 5% of your salary for retirement savings in your 20s. In your 30s, you should increase the percentage to about 10% or more. On top of that, consider adding your bonuses to your retirement savings as well. You might have been investing in PRS, unit trusts, stocks, etc. Now you can afford to choose more aggressive investments while you are young to bring bigger gains in the long run.

 

40s

This decade can be challenging for people with families who must provide for both aging parents and growing children. With 10 to 20 years left to retirement, it is crucial to understand how much you should save for retirement. Sit down with a financial planner to go through your overall retirement goals and address the financial gaps.

 

 

  • Focus Your Investments: 40s is typically your high-earning years, which makes it a good time to become more thoughtful about whether you are investing in the right way. It is important to invest with a purpose and goal, and invest with a time horizon and risk tolerance assigned to each goal.

 

50s

Retirement is drawing closer. By now, the mortgage that you took up in your 30s should be paid off soon. If not, focus on that to be one of goals in your 50s as you don’t want a big financial commitment to burden you in your retirement years. Your emergency fund is in place and debts are all paid off. With most of your financial goals materialized, you can begin to cut yourself some slack to go on a dream vacation. But ensure that your retirement plan is still on track.

 

  • Turbo Charge Your Retirement Savings: If you have been setting aside about 10% of salary in your 30s and about 15% in your 40s for retirement, consider ramping up the percentages to 20%-25% or saving as aggressively as you can. This is to make up for the years when you couldn’t save enough.

 

  • Reducing Expenses: You might consider downgrading your lifestyle and get into the habit of living on a fixed income and saving the extra money. This helps one to get ready for managing spending in retirement.

 

  • Evaluate Your Retirement Plan: Review and update your retirement plan to make sure you know how much you should be saving and ensure your investment and asset allocation strategy is aligned with your goals. It’s also a good time to shift your investment portfolio from growth to a combination of growth and income to reduce taking too much risk as retirement approaches.

  • Bulk Up Emergency Savings: As you get closer to retirement, ensure your emergency funds equal to one to two years of cash. This way, if an economic downturn hits the time you retire, you can just spend cash without liquidating your investments at a loss. The secret to long-term retirement planning is quite simple – learning to budget early in life, sticking with it, saving aggressively during your peak earning years and investing your money wisely and diversely. If you adopt a marathon approach to retirement planning, it allows you to take a holistic view on your overall financial picture and see how decisions made in your 20s, 30s, 40s, and 50s can impact your golden years.