When you think of ‘retirement’, you’re probably thinking about having the time and opportunity to do anything and everything you’ve been wanting to do. It could be a desire to start gardening, travel to a city you’ve always wanted to visit or spend more time with loved ones. But are you financially comfortable to live your golden years comfortably?

Unfortunately, many people often overlook the importance of financial planning for retirement and don’t realise that they need to start planning for retirement until it’s too late. This leaves them with limited options and a lot of stress, which highlights the importance of financial planning for retirement. If you want to ensure a comfortable retirement, starting your retirement planning early is essential.

In this article, we dive into the importance of planning financially for your retirement early and outline our top tips for a stress-free retirement.

What is retirement planning?

Retirement planning is not just about saving money for the future; it’s about creating a plan to ensure you can maintain your current lifestyle and bask in financial security during retirement. The goal of retirement planning is to save and invest enough money during your working years to maintain your standard of living and enjoy a comfortable retirement.

Retirement planning involves determining your retirement income goals and what’s needed to achieve those goals. This includes several key steps, such as setting retirement income goals, estimating expenses, implementing a savings plan, and monitoring your plan, which we will delve deeper into later in this article.

How much should you have saved for retirement?

While there’s no one-size-fits-all answer to the question of how much you should have saved for retirement, there are a few rules of thumb to give you a better idea. Some experts suggest saving about 12 years of your pre-retirement annual income. Others recommend the 10% rule, which means you’ll need enough savings to live on 10% of your income at retirement. This means if you earn USD 50,000 a year, you should aim to save USD 5,000 annually for retirement.

However, this is just a guideline, as you may need to save more or less depending on your individual circumstances. That’s why it’s essential to consider factors such as your lifestyle, healthcare, inflation, and retirement plans when setting your savings goals. If you have a high-income job or expect significant retirement expenses, you may need to save more. On the other hand, if you’re willing to live a more modest retirement lifestyle, you may be able to get by with less. 

You can also use online calculators to estimate how much you need to save for retirement, but it is always best to consult with a financial advisor to get a more accurate estimate. For personalised guidance and financial plans on how much to save for your retirement, book a consultation with a Naluri Financial Advisor or chat 24/7 with them on Naluri Web.

When should you start saving for retirement?

The sooner you start, the better. The key reason for starting early lies in the compounding effect - the longer your money is invested, the more it will grow - which can significantly affect the amount you save over the years. By starting early, you can take advantage of compounding and grow your retirement savings at an accelerated rate.

However, many people put off retirement planning until it’s too late - don’t fall into that trap! Delaying retirement savings can significantly impact the amount you save, making it more challenging to achieve your retirement goals and potentially leading to financial difficulties during your golden years. The earlier you start saving, the more time you have to build up your retirement fund. This means you can save less each month and still reach your retirement goals.

5 steps to financially plan for your retirement

So, how do you financially plan for retirement? Here are five simple steps to get you started on your journey to a stress-free retirement:

Define your retirement goals. 

Consider where you want to live, what activities you want to pursue, and how much (and where) you want to travel. This will help you determine how much money you’ll need to save and what kind of lifestyle you can realistically expect during retirement.

Calculate your retirement expenses

Next, it’s important to estimate your expected retirement expenses. This includes housing, healthcare, utilities, transportation, and leisure activities. Don’t forget to account for unexpected expenses, emergencies and inflation, too!

The rule of 72 is a good way to calculate how long it'll take for an investment to double in value based on its rate of return and can be applied to anything that increases exponentially, such as GDP or inflation.

Assess your income sources

After you’ve calculated your retirement expenses, you need to assess your income sources. This includes any retirement savings you may have, pension, and any other sources of income you may have. It’s important to clearly understand how much money you’ll have coming in each month during your retirement. You should also consider potential sources of income, such as rental properties or part-time work, to supplement your retirement income.

Create a retirement savings plan

Now, you can start creating a retirement savings plan. This plan should outline how much money you need to save each month to achieve your retirement goals. It’s important to be realistic and set a target savings goal based on your retirement expenses and income needs. Determine an appropriate asset allocation strategy based on your risk tolerance and investment timeline.

Monitor and adjust your plan accordingly

Finally, it’s important to regularly monitor and adjust your retirement savings plan as needed. Revisit your retirement plan once or twice a year to ensure it aligns with your changing circumstances, such as income, expenses, and investment performance. Life circumstances can change, and it’s crucial to ensure you’re still on track to achieve your retirement goals. This may include adjusting your savings plan, working for a longer period of time, or finding other sources of income to supplement your retirement savings.

Planning for retirement is crucial if you want to enjoy your golden years without worrying about money. Remember, the earlier you start saving for retirement, the better.

To learn more about retirement planning, join Naluri Financial Advisor Ng Ka Hoe in our upcoming Retirement Readiness: Early Planning for Late-Life Comfort webinar. During the webinar, Ka Hoe will share his top tips to build a solid retirement plan, no matter your age.

For personalised guidance on all things finance-related, Naluri Financial Advisors are available to help you with budgeting, saving, taxes, and much more. Book a consultation or chat with a Naluri Financial Advisor today.

All the best in your journey towards a stress-free retirement!