Retiring well?
As statistic shows that 70% of the Malaysians outlive their retirement fund, retirement seems to be a far goal to be achieved. Most of the conversations pertaining to personal finance are normally around how to increase income or how to reduce debts. Hence, when the retirement topic is raised, people always think that it is too early to plan for retirement.
Remember that it is never too early to plan, as the earlier you plan, you can have more buffer for any correction on the plan. The following shows some aspects that you need to consider for your retirement planning.
- Begin with a goal and your starting point: this starts by checking your financial situation, i.e. your monthly cash flow, your assets and liabilities. Then, set the goals, e.g. how much money you are targeting when you are retiring. Once these 2 elements are determined, you will know the gap between these 2. Then, you shall know how long you need to reach your goal based on your monthly cash flow and the return you need to achieve your goal.
- Diversify your assets: when investing, we know that investment comes with risk. Hence, diversification is always required to reduce our investment risk. Diverse the assets into several sectors, geographical areas and assets classes.
- Determine your retirement drawdown strategy: during retirement period, drawdown of the investment assets is required. Hence identify how the drawdown can be used, e.g. constant drawdown from equity? Rely on dividend payout? If the drawdown from investment is required, it is better to do a pre-planning to switch the money from high volatile assets to stable assets like bond 1-2 years before the cash is required. This will prevent the withdrawal during the market correction period that may not be beneficial to the owner.
- Consider other elements in life, i.e. education funding, vacation planning, etc. Retirement is a holiday period. Hence, many elements can impact the financial aspects of the retirement. Consider what you will do during the retirement and budget for it when setting the target goal.
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