Written by: Siew Yean Lim
As professionals approach the later stages of their careers, financial planning becomes increasingly vital. With retirement on the horizon, the decisions made during these years can significantly impact financial security in the years to come. Here’s a guide to help late-career professionals to navigate through this phase.
1. Assess Your Current Financial Situation
Conducting a thorough assessment of your current financial health is important. Financial needs differ in different stages of life. For some of us, children may have grown and financially independent while others may still be supporting children in higher education. Assessing current financial situation includes:
- Calculate Net Worth: List all assets, such as savings, investments, real estate, and personal property, and subtract liabilities like mortgages, loans, and credit card debts. Personally, I suggest not to include car as asset. Treat it like a handphone or laptop which depreciates and expense off at the end of its useful life cycle. This will give you a clear picture of your net worth.
- Review Income and Expenses: Analyze your income sources; salary, bonuses, rental, dividends and track monthly expenses. Understanding your cash flow may help identify areas for potential savings.
2. Set Clear Financial Goals
Consider your desired lifestyle in retirement to help you set a clear, achievable financial goal. Estimate how much money you’ll need annually in retirement. Consider factors like travel, healthcare, and hobbies. Decide when you wish to retire officially and how many years you have left. This timeline will influence your savings and investment strategy.
3. Make the Most of Your CPF Accounts
Most professionals may be too busy focusing on their careers all these years instead of spending time to strategize CPF accounts for retirement. It is time to review, catch up on maximizing contributions and review which is the more appropriate plan (Full Retirement Sum or Enhanced Retirement Sum) for your retirement needs. You can also consider diversifying your investment for any excess money.
4. Consider Health Care Costs
With escalating health care cost and being the most significant expenses as one ages, financial planning for retirement must take hospitalization, medical and caregiving cost into consideration. We have Medisave and MediShield to cover basic health care cost. Depending on one’s needs and health care expectation, you can take up additional insurance coverage or consider ElderShield and CareShield.
5. Develop a Withdrawal and Passive Income Strategies
As we transition into retirement, having a solid withdrawal and passive income strategies are essential to ensure our savings last and have consistent income to fund expenses.
- The 4% Rule: A common rule of thumb is to withdraw 4% of retirement savings annually. This can help provide a steady income while preserving the principal amount.
- Passive Income: Apart from CPF payout, there are a few other ways to build passive income if you have not done so. Rental from property and dividend from investment are some of the common strategies. You can also consider selling digital products online; eBook on Amazon, digital design on Etsy and course on Udemy. You only need a low initial start-up cost to reap long term passive income in years to come.
6. Prepare for Retirement Adequacy Career/Job
A job not only provides us with financial reward but also defines our purpose as well as maintain social connection. Though we may not need to work when we reach retirement, some of us prefer to continue to work. We can consider taking up roles according to our needs at this stage of life; lesser workload and stress but stay connected in the market. You may want to start planning for a career switch before retirement or engage with The Courage Chapter to find an appropriate role. Earning income doing side hustle during retirement years.
7. Stay Informed and Adapt
The financial landscape is always evolving, with changes in investment opportunities, and market conditions. Staying informed about these changes will enable you to adapt your financial plan accordingly.
Navigating the complexities of late-career financial planning with retirement in mind can be daunting. Start now to take control of your financial future. You can ensure peace of mind and a comfortable lifestyle during your golden years.
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