Preparing Well Financially For Your Future › ... › retirement-planning-slide… · THE...

Preparing Well Financially

For Your Future M. Salim

© 2017 Avallis Financial Pte Ltd. Private & Confidential.

RETIREMENT

When your actual purpose in life changes from making an income to pursuing a life


WHAT IS RETIREMENT

Cessation of active work to pursue income earning objective in life

Beginning of fulfilling one’s dream

Growing older – physically

and mentally



3 GENERATIONS’ PERSPECTIVES

BABY BOOMER Born Between

1946 – 1964 Age Between

53 – 71

GENERATION X Born Between

1965 – 1980 Age Between

37 - 52

MILLENNIALS Born Between

1981 - 2000 Age Between

17 - 36

BABY BOOMERS

• Encountered & changed many new societal rules • Re- learning & training

• Many expect to continue working in retirement, at least on a part-time basis - much due to income or health benefits.

• Tend to rely on CPF - Higher CPF contributions in early years has help built CPF savings

• More conservative approach to retirement planning

Source: Transamerica Institute®, 2016 - Perspectives on Retirement: Baby Boomers, Generation X, and Millennials © 2017 Avallis Financial Pte Ltd. Private & Confidential.

GENERATION X

• Entered into sandwich years • Many in the midst of raising kids & caring aging parents

• Juggling their jobs.

• Find it hard to invest in their own retirement

• Much of CPF have been used for properties

• Know they are behind on their retirement savings

• Started Saving in the late 20s


MILLENNIALS

• Have heard the need to save for retirement much earlier

• Hungry for information

• Do-it-yourself generation of retirement savers

• Most likely to use digital technology to assist in planning

• Tend to discuss topic on saving, investing & planning for retirement with family and friends more than Generation X and Baby Boomer

• Started Saving in the early 20s


Millennials Generation X Baby

Boomer

Expect standard of living to decrease

17% 37% 40%

Confident about retiring well

18% 12% 15%

Want to receive info & advice on retirement planning

75% 68% 55%

Have plan for retirement planning

65% 60% 64%

DIFFERENCES IN OPINION


SO WHAT DO MOST PEOPLE LOOK OUT

FOR IN RETIREMENT?


65

56

49

27

13 12 11

7 4

Traveling Spending more

time with family

& Friends

Pursuing

hobbies

Doing

volunteer work

Pursuing an

encore career

Continue

working in the

Same field

Starting a business Other None of the above

HOW DO YOU DREAM OF SPENDING YOUR RETIREMENT?

Net Working =25


51

47 45

42

35

32

19 19 19

7

Outliving my savings and

investment

Social services will be reduced

Declining health that requires

Not being able to meet the basic

financial needs

Cognitive decline, dementia,

Lack of access to adequate

Being laid off -- not being able

Finding meaningful ways

Feeling isolated and alone

None of the above

or cease to exist long-term care Alzheimer’s and affordable to retire on my to spend time & in the future of my family Disease healthcare own terms stay involved

WHAT ARE YOUR GREATEST FEAR IN RETIREMENT?


Retirement Checklist A PRACTICAL APPROACH How much would I need

when I retire to maintain my lifestyle?


HOW MUCH WOULD ONE NEED ON RETIREMENT? • Personal & spouse expenditure

• Household expenditure

• Outstanding debts after retirement

• Insurance premiums

• Amenities – travel, courses, etc

• Cost of renewal & maintenance for big ticket items

• Healthcare & medical

• How will Inflation affect me


HOW WILL INFLATION AFFECT YOUR COST OF LIVING? Mr Lim aged 45 will be retiring at age 65.

He would like to provide for a monthly expenditure of $3,500 based on current value for him & his spouse’s retirement.

Inflation Rate 3% 4% 5%

Monthly Expenditure at Age 65

$6,320 $7,670 $9,290

Annual Expenditure at Age 65

$75,800 $92,040 $111,480


HOWEVER INFLATION DOES NOT END WHEN YOU RETIRE…..

AgeLiving cost at 3%

inflation rateAge

Living cost at 3%

inflation rate

65 $75,852 78 $111,391

66 $78,128 79 $114,733

67 $80,471 80 $118,175

68 $82,886 81 $121,720

69 $85,372 82 $125,372

70 $87,933 83 $129,133

71 $90,571 84 $133,007

72 $93,288 85 $136,997

73 $96,087 86 $141,107

74 $98,970 87 $145,340

75 $101,939 88 $149,700

76 $104,997 89 $154,191

77 $108,147 90 $158,817© 2017 Avallis Financial Pte Ltd. Private & Confidential.

HOWEVER INFLATION DOES NOT END WHEN YOU RETIRE…..

In short, if you are 45 & intend to retire at 65

with a monthly income of $3,500 today, you

would be spending in retirement a total of

$2,924,000 based on

3% inflation rate $0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

6 5 6 6 6 7 6 8 6 9 7 0 7 1 7 2 7 3 7 4 7 5 7 6 7 7 7 8 7 9 8 0 8 1 8 2 8 3 8 4 8 5 8 6 8 7 8 8 8 9 9 0

WITH 3% INFLATION RATE

Annual living cost at 3% inflation rate


RETIREMENT CHECKLIST A PRACTICAL APPROACH • How much would I need when I retire,

to maintain my ideal lifestyle?

• Would I be debt free?

• How long will I live?


MORTALITY OF RESIDENTS AGE 65

Female 86 Years Old

Male 84 Years Old



to maintain my lifestyle?



• How do I handle my medical cost?



to maintain my lifestyle?



• How do I handle my medical cost?

• Would I be financially independent?


THE RETIREMENT CYCLE Phases Age range Principal activities Spending level

Pre- retirement 5 to 10 yrs

from retirement

Still active at work & play, and perhaps a glimpse of retiring one day

Moderate increment in real $ spending

Early Retirement From Age

60/65 to Age 75/80

“Doing years” - actively pursuing what you’ve been wanting to do all these years – travel, hobbies, “adventure”

Real $ tend to reduce slightly but remain stable

Intermediate Retirement

From Age 75/80

to Age 85/90

Consolidation years - time to choose fun things, develop old skills or fresh talents and focus on relationships.

Real $ would reduce somewhat

Advanced Retirement

From Age 85/90 onwards

More sedentary lifestyle due limited physical ability & finances. Making the most of old memories and cherishing old relationships.

Significant reduction in real $ spending


EXPENDITURE PATTERN IN RETIREMENT

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

6 5 6 6 6 7 6 8 6 9 7 0 7 1 7 2 7 3 7 4 7 5 7 6 7 7 7 8 7 9 8 0 8 1 8 2 8 3 8 4 8 5 8 6 8 7 8 8 8 9 9 0

WITH 3% INFLATION RATE

Annual living cost at 3% inflation rate


$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

6 5 6 6 6 7 6 8 6 9 7 0 7 1 7 2 7 3 7 4 7 5 7 6 7 7 7 8 7 9 8 0 8 1 8 2 8 3 8 4 8 5 8 6 8 7 8 8 8 9 9 0

REDUCING LIVING COST WITH 3% INFLATION RATE

Reducing living cost with inflation rate

Early retirement Intermediate retirement

Advanced retirement

EXPENDITURE PATTERN IN RETIREMENT


HOW MUCH WOULD MR LIM NEED TO PROVIDE FOR HIS RETIREMENT? • Assuming he has CPF life monthly income

of $1,000

• Expects to accumulate up to $1,000,000 in cash from his CPF, insurance policies, cash savings etc


Age

Linving

Expenses

needed

CPF life monthly

income

Balance living

exp needed

65 $75,852 $16,000 $59,852

66 $78,128 $16,000 $62,128

67 $80,471 $16,000 $64,471

68 $82,886 $16,000 $66,886

69 $85,372 $16,000 $69,372

70 $86,209 $16,000 $70,209

71 $87,054 $16,000 $71,054

72 $87,908 $16,000 $71,908

73 $88,770 $16,000 $72,770

74 $89,640 $16,000 $73,640

75 $89,640 $16,000 $73,640

76 $89,640 $16,000 $73,640

77 $89,640 $16,000 $73,640

78 $89,640 $16,000 $73,640

79 $89,640 $16,000 $73,640

80 $87,932 $16,000 $71,932

81 $86,258 $16,000 $70,258

82 $84,615 $16,000 $68,615

83 $83,003 $16,000 $67,003

84 $81,422 $16,000 $65,422

85 $78,378 $16,000 $62,378

Total $1,792,096 $1,456,096

METHODS TO FUND MY RETIREMENT

EXPENSE

Assume $1m available at

Age 65 in DEPOSITS


METHODS TO FUND MY RETIREMENT EXPENSE • Capitalise on your CPF Life & SRS

• Bank Deposits

• Bonds

• Property

• Start investing with a robust asset allocation strategy that is tested with time.

• Use retirement plan from insurers


AgeLinving Expenses

needed

CPF life monthly

income

Balance living

exp needed

65 $75,852 $16,000 $59,852

66 $78,128 $16,000 $62,128

67 $80,471 $16,000 $64,471

68 $82,886 $16,000 $66,886

69 $85,372 $16,000 $69,372

70 $86,209 $16,000 $70,209

71 $87,054 $16,000 $71,054

72 $87,908 $16,000 $71,908

73 $88,770 $16,000 $72,770

74 $89,640 $16,000 $73,640

75 $89,640 $16,000 $73,640

76 $89,640 $16,000 $73,640

77 $89,640 $16,000 $73,640

78 $89,640 $16,000 $73,640

79 $89,640 $16,000 $73,640

80 $87,932 $16,000 $71,932

81 $86,258 $16,000 $70,258

82 $84,615 $16,000 $68,615

83 $83,003 $16,000 $67,003

84 $81,422 $16,000 $65,422

85 $78,378 $16,000 $62,378

Total $1,792,096 $1,456,096

Bank deposit &

equivalent 1% int

$949,549

$896,917

$841,415

$782,944

$721,401

$658,406

$593,936

$527,968

$460,478

$391,443

$321,717

$251,294

$180,167

$108,329

$35,773

-$35,802

-$106,418

-$176,096

-$244,860

-$312,730

-$379,799


EXPENSE


Age 65 in BANK

DEPOSITS


AgeLinving Expenses

needed

CPF life monthly

income

Balance living

exp needed

65 $75,852 $16,000 $59,852

66 $78,128 $16,000 $62,128

67 $80,471 $16,000 $64,471

68 $82,886 $16,000 $66,886

69 $85,372 $16,000 $69,372

70 $86,209 $16,000 $70,209

71 $87,054 $16,000 $71,054

72 $87,908 $16,000 $71,908

73 $88,770 $16,000 $72,770

74 $89,640 $16,000 $73,640

75 $89,640 $16,000 $73,640

76 $89,640 $16,000 $73,640

77 $89,640 $16,000 $73,640

78 $89,640 $16,000 $73,640

79 $89,640 $16,000 $73,640

80 $87,932 $16,000 $71,932

81 $86,258 $16,000 $70,258

82 $84,615 $16,000 $68,615

83 $83,003 $16,000 $67,003

84 $81,422 $16,000 $65,422

85 $78,378 $16,000 $62,378

Total $1,792,096 $1,456,096

Bonds 2.75%

-$32,352

-$66,980

-$103,951

-$143,336

-$185,209

-$227,918

-$271,472

-$315,880

-$361,149

-$407,289

-$453,429

-$499,569

-$545,709

-$591,849

-$637,988

-$682,421

-$725,178

-$766,293

-$805,796

-$843,718

-$878,596

$1,000,000


EXPENSE


Age 65 in BONDS


AgeLinving Expenses

needed

CPF life monthly

income

Balance living

exp needed

65 $75,852 $16,000 $59,852

66 $78,128 $16,000 $62,128

67 $80,471 $16,000 $64,471

68 $82,886 $16,000 $66,886

69 $85,372 $16,000 $69,372

70 $86,209 $16,000 $70,209

71 $87,054 $16,000 $71,054

72 $87,908 $16,000 $71,908

73 $88,770 $16,000 $72,770

74 $89,640 $16,000 $73,640

75 $89,640 $16,000 $73,640

76 $89,640 $16,000 $73,640

77 $89,640 $16,000 $73,640

78 $89,640 $16,000 $73,640

79 $89,640 $16,000 $73,640

80 $87,932 $16,000 $71,932

81 $86,258 $16,000 $70,258

82 $84,615 $16,000 $68,615

83 $83,003 $16,000 $67,003

84 $81,422 $16,000 $65,422

85 $78,378 $16,000 $62,378

Total $1,792,096 $1,456,096

Property rental

yield 3%

-$29,852

-$61,980

-$96,451

-$133,336

-$172,709

-$212,918

-$253,972

-$295,880

-$338,649

-$382,289

-$425,929

-$469,569

-$513,209

-$556,849

-$600,488

-$642,421

-$682,678

-$721,293

-$758,296

-$793,718

-$826,096

$1,000,000


EXPENSE


Age 65 in PROPERTY


AgeLinving Expenses

needed

CPF life monthly

income

Balance living

exp needed

65 $75,852 $16,000 $59,852

66 $78,128 $16,000 $62,128

67 $80,471 $16,000 $64,471

68 $82,886 $16,000 $66,886

69 $85,372 $16,000 $69,372

70 $86,209 $16,000 $70,209

71 $87,054 $16,000 $71,054

72 $87,908 $16,000 $71,908

73 $88,770 $16,000 $72,770

74 $89,640 $16,000 $73,640

75 $89,640 $16,000 $73,640

76 $89,640 $16,000 $73,640

77 $89,640 $16,000 $73,640

78 $89,640 $16,000 $73,640

79 $89,640 $16,000 $73,640

80 $87,932 $16,000 $71,932

81 $86,258 $16,000 $70,258

82 $84,615 $16,000 $68,615

83 $83,003 $16,000 $67,003

84 $81,422 $16,000 $65,422

85 $78,378 $16,000 $62,378

Total $1,792,096 $1,456,096

Portfolio of

funds to achieve

5% ROI

$987,155

$974,386

$958,634

$939,680

$917,292

$892,947

$866,540

$837,959

$807,088

$773,802

$738,853

$694,767

$648,918

$601,234

$551,644

$501,777

$451,591

$401,040

$350,079

$298,660

$248,228


EXPENSE


Age 65 in PORTFOLIO

OF FUNDS


AgeLinving Expenses

needed

CPF life monthly

income

Balance living

exp needed

65 $75,852 $16,000 $59,852

66 $78,128 $16,000 $62,128

67 $80,471 $16,000 $64,471

68 $82,886 $16,000 $66,886

69 $85,372 $16,000 $69,372

70 $86,209 $16,000 $70,209

71 $87,054 $16,000 $71,054

72 $87,908 $16,000 $71,908

73 $88,770 $16,000 $72,770

74 $89,640 $16,000 $73,640

75 $89,640 $16,000 $73,640

76 $89,640 $16,000 $73,640

77 $89,640 $16,000 $73,640

78 $89,640 $16,000 $73,640

79 $89,640 $16,000 $73,640

80 $87,932 $16,000 $71,932

81 $86,258 $16,000 $70,258

82 $84,615 $16,000 $68,615

83 $83,003 $16,000 $67,003

84 $81,422 $16,000 $65,422

85 $78,378 $16,000 $62,378

Total $1,792,096 $1,456,096

Retirement

plans - Annuity

-$2,052

-$6,380

-$13,051

-$22,136

-$33,709

-$46,118

-$59,372

-$73,480

-$88,449

-$104,289

-$120,129

-$135,969

-$151,809

-$167,649

-$183,488

-$197,621

-$210,078

-$220,893

-$230,096

-$237,718

-$242,296

$647,000


EXPENSE


Age 65 in RETIREMENT

ANNUITY


FINANCIAL ABILITY & LIMITATIONS DURING RETIREMENT • Risk taking propensity reduces

• Limited ability to recover any substantial loss

• Need for income stream

• Financial wisdom decreases

• Fear of physical / mental impairment


A GOOD RETIREMENT PLAN

• Stable & constant income stream

• Simplicity in the plan

• Diversify adequately

• Employ a guided investment advisory service to cater for higher inflationary condition

• Reliable financial advisory services

• Develop personal financial knowledge


WHEN IS THE BEST TIME TO GET PREPARED?

As soon as you can!



Thank you very much


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