Retirement: 2 Important Questions to Start With

Retirement has always been a challenging topic in my trade. People come to me every now and then to work out a viable and visible retirement plan, and how to navigate in the seas of investment. I will begin with 2 very basic premises highlighted below.

Whether or not you're ready to retire depends on the answers to two questions. One is emotional; the other is financial.

The emotional question is, "Do you know how you want to spend your time after you stop defining yourself by your career and start identifying yourself by who you are?" Thinking this through is more difficult than most people imagine. Please give it a lot of thought.

Now to the financial part. Since the average life expectancy of a person in good health extends in to the late 80's, many will spend more years in retirement than we spent working. For you, right now, retirement might mean a period of 30 to 35 years or longer. So the following question has to be asked and answered:
How long will your retirement income last?
Will it last for 45 years if you're one of those people who live into their 100s?
Twenty-five years from now, will you and your wife still be able to live on a combined CPF payout income, plus the conservatively estimated interest income that can be taken from your investments?
I say that this interest income must be "conservatively estimated" because I want you to calculate your future income based on interest from very safe investments, and also to be sure that you project a level of interest that it's realistic to believe you can obtain. In this environment, I would not project above 6 percent a year. Please also be sure that you won't have to invade your principal. Calculate your true living expenses today and what you project into the future. Remember to add in expenses that you may not be incurring now, such as medications, additional help around the house, etc., and take into consideration future inflation of at least three percent a year. Next calculate your income and expenses if one of you should die.
Bottom line: If the surviving spouse or life partner has more than enough money to meet the bills today and 30 years or more into the future, happy retirement, my friend! If not, keep working and saving. Good new is: It is really not that scary to prepare for retirement, if you have a plan. Just don't leave it on auto-pilot mode.