Retirement is one of the most important financial goals anyone could have. Unfortunately, not many of us are doing much to ensure our golden years will live up to its name. Sure, we have our compulsory savings for retirement – but is it really enough?
Many of us would inadvertently withdraw huge sums from the Account 2 of our EPF to fund our first home, send our children overseas, or even for medical emergencies, leaving pretty much nothing when we finally leave employment. And the escalating inflation is not really helping the matter.
There really is no way around it. To achieve a secure and comfortable retirement, you need to plan your finances as early as possible. Socking away 10% to 15% of your salary every month in your savings account isn’t going to cut it anymore.
To prepare for a sustainable retirement, you will need to plan for your retirement carefully. It is important to consider the investment options that will help you achieve your goal. The earlier you start planning, the more time and options you will have. With the right strategy, you can save enough for the lifestyle you want in retirement.
Here’s what your investment portfolio should hold according to your age in order to achieve a comfortable retirement in your golden years
Setting the right foundation in your 30s
Starting a family and establishing your first home can be expensive, and it’s easy to forget to prioritise retirement as your financial goal when you are in your 30s. But it doesn’t mean that’s the right, or smart thing to do.
The key to keeping your retirement game strong from the start of your career is to set the right investment foundation so your money will work hard for you. You don’t have to reach all of your goals at once but retirement should remain your top priority. This means you’ll have to work hard to balance spending and saving.
As you are relatively young and have many more years to your career, it doesn’t hurt to be a little more aggressive in your investment. Remember, it’s not enough just saving, you’d also need to keep an eye on existing retirement assets to ensure you’re not squandering opportunities for growth.
Someone in their 30s needs to invest aggressively, allocating up to 90% of assets to a diverse array of equities. In your 30s, time is your biggest advantage.
Strengthening your portfolio at 40s
At this age, you may be burdened with your child’s tertiary education fees, or even be side-tracked by the common mid-life crisis. However, if you have a strong foundation set up when you were in your 30s, your retirement plan should be shaping up nicely.
The key is to find a balance in your hectic lives of spending and debt by staying true to your financial priorities.
Assets allocation and diversification remain as important as ever. At 40 you’re still a long way from retirement, so don’t rush to play it too safe. At this point, you may be at the peak of your earning power too. It’s important for you to monitor and rebalance your portfolio regularly, if needed.
The last leg of your retirement planning at 50s
With about 10 years or less to the day you retire, it’s crucial for you to tie up all loose ends for your retirement planning. However, this can be challenging as you should also be rebalancing your portfolio as you can’t afford to be as aggressive as before.
Instead of pushing your investment to be overly aggressive, start your trial run of a more frugal lifestyle that you may need to adopt in your retirement years. You’ll definitely save more and faster by reducing spending. It’s a reality check for your planning and helps you accustom to life after retirement, where you will have little to no income on a consistent basis.
The level of risk you were comfortable with in your 30s or 40s may not work for you as you move into your 50s. This would be the time that you skew your investments towards conservative holdings like bonds and play safe as you are running out on time to reverse any major investment losses.
Retirement planning is a long-term game plan, and things may change along the way. Perhaps an early retirement may not be in the book after a career change. This is why it’s extremely crucial to regularly monitor your retirement plan, and after every significant life event, such as welcoming another child, or even the demise of a spouse. This will help you see how well you’re doing and consider whether you need to make any changes.
Whichever way you look at it, time is your best friend when it comes to retirement planning. Planning ahead will make saving and investing much more manageable and also allow you more room for any unforeseen and unavoidable financial mistakes. When the time comes for you to bid farewell to the workforce, you will be able to truly enjoy the fruits of your labour.
Aged Care Group (ACG) is an organisation engaged in the business of elevating the aged care industry in Malaysia. Our vision is to innovate and transform the perception of ageing in Malaysia. For more information visit us at www.agedcare.com.my or contact us at 03 – 2142 1666.
Disclaimer: The following is the opinion of the writer and the recipient acknowledges that Aged Care Group Sdn Bhd and its associated companies are unable to exercise control to ensure or guarantee the integrity of/over the contents of the information contained.