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Saturday, December 6, 2014

THE FUNDAMENTAL QUESTIONS ON RETIREMENT?



In life, a lot of us are aiming for more wealth, so that we can live a better and more comfortable life, as we work towards our retirement age.

But there was a report, launched on Tuesday, that was commissioned by the United Nations Development Programme (UNDP): revealed that 90% and 86% of rural and urban households, respectively, had no savings, while the majority of households at 88% had zero earnings from their savings.

And because of this, we feel it's important to talk more about RETIREMENT in our upcoming posts, because we believe that's the goal at the end of the day.


RETIREMENT: What's your game plan?


Generally, financial planners look at life in 2 phase:


The 2 phases in Life

In short, the game plan is simple:

1) ACCUMULATE

2) DISTRIBUTE

It is interesting that while the game plan is simple, it is rarely practical in REAL LIFE, unless of course, if you come from a rather wealthy family to start with.

Being someone who studied Statistics, I always remember a simple yet true quote: ALWAYS ACCOUNT FOR VARIABLE CHANGE

Life is definitely full of uncertainty. It leaves a lot of people under saved and there is no cushion to fall back on if you live an exceptionally long life, or a shift in your retirement goals. There might also be the setbacks financially or health issues. The changes in your passion etc. All of these contributing to how much money is needed for retirement.

Most people are in the guessing game, especially if you're in your 30s or 40s. But when you reach the age of 50, reality sets in and it might be a little too late. 

Well, let's get back to basics then...we know the track that we're in. We know to a certain degree the resources that we have and what we could make do with....so while we still have time, maybe it's time to look at adjustments in life. There is time yet to save more, spend less, postpone your retirement date and even reset your expectations.

For those of us who are already on this journey, facing with all these variable changes, here are 2 FUNDAMENTAL QUESTIONS I believe we should ask when we want to talk about retirement.

1) WHAT'S YOUR DREAM?




Everyone has a different dream. Some dream of buying a boat and sailing the high seas when they retire, while others are content spending their days on the golf course or with their family. And what about travel around the world? 

This is where it all start...it's not about thinking of how much you have to save or how to do it; but what you want in life.

Because if you know what your dream is, then the rest of your life will be adjusted in accordance to that dream.

Take for example: if your dream is to spend your days in the golf course and with your family, it make sense to invest more in a good property. Because you will spend a lot of time there. But if your dream is to travel around the world, maybe you might not need such a BIG HOME? By deciding what your dream retirement would look like, you can shape the rest of your plans to make it work.

2) HOW MUCH MONEY DO YOU NEED?

It's always great to have a goal, dream and aim in life, but there is also the need to be realistic:

BACK TO REALITY: HOW MUCH MONEY DO YOU NEED?

HOW MUCH MONEY DO YOU NEED?

Rather than living based on hope, it's better to do your own research. Determine your future expenses and whether you'll have enough money to live comfortably and enjoy your retirement years.

Financial planners have been arguing and trying to come out with the right figure for retirement: some say you'll need 60 to 80% of your pre-retirement income annually in order to maintain your lifestyle. There are others like the Mr Money Moustache who believe in frugal living and aim for early retirement. It doesn't matter which sides you are on, at the end of the day, it's your life and you have to decide....the rest are just estimates. 

If your dream is to travel around the world, you may want to consider the travelling expenses and see if it's enough to pay your bills and other expenses....some adjustment to your dream might have to be made while some expense might have to be reduced....say, maybe a smaller home?

Regardless of what your dream is, look at how much money is needed and how you gonna work towards it.


Honestly, I believe there are more questions that we should ask when it comes to retirement, because the variable changes that come with this planning. But I believe these 2 are the core questions that we should ask ourselves. Only then does it make sense to look at how you gonna work towards these dreams. 

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