A Retiree In Singapore? Now, What Are The Steps To A Sound Investment Plan?
12 Jun 2017, Monday

So you’re retired. Now what?

It is no secret that retiring in Singapore isn’t cheap.
So, what does it take to retire in this country, or anywhere in the world?
How can you be sure that your investments will give you a good retirement, and a secure one for that matter?

First, take a look at these shocking statistics extracted from our local news reports.

Why Are Singaporean Retirees Not Actively Growing Their Money?
21% of interviewed local respondents felt that it was pointless to invest for the future as they will “never know what those investments will be worth”.

The hesitation of retirees to make investments generally owe to an overall lack of market knowledge or the insecurity of the risk and integrity of various investments.

In a straits times’ article survey, only a quarter are following a financial plan for retirement needs.
Another quarter are in the midst of working out a plan while the rest do not have concrete ideas.
These statistical findings are astounding; and the sad truth is that most retiring Singaporeans are still hesitant to embark on an investment plan and journey.

In the face of challenging global economic conditions, making the right investment choices matters more than ever.

This article unravels 3 important factors you have to consider when planning an investment for your retirement.

3 Crucial Tips To Making A Sound Retirement Investment Plan

1. Know Yourself And What You Are Investing For

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Knowing yourself and the clear purpose of your investment is the key to finding one that works and earns for you.
The reason many have made bad investment choices and end up losing money when they have failed, is a lack of understanding of their investment choices and the suitability of them. Plenty of retiree investors are not well educated on what is at stake when putting out an amount to invest. Often, this leads up to an impulsive and impetuous investment decision that results undesirably.

Are you an active or passive investor?
Most of us retirees are only interested in making and growing sound investments. We are not too keen on monitoring them like the stock market each month to keep up to date with the daily economics and company news. Neither will we be want to be attending company financial reports consistently or be kept up analysing them at night.
Thus, be kept up to date with the various latest types and styles of passive investing(see below).

2. Formulate A Plan, Build An Investment Portfolio


Mr Dennis Khoo, UOB's head of personal financial services in Singapore, says investors should always adopt an investment strategy they are comfortable with.

The key to creating a well-balanced retirement investment portfolio with a few funds is- to keep it simple.

What are you investing for?

Many retirees have a sum of monetary savings and they just want to invest. It is important to make our money work for us. How? Fundamentally, we need to know what we are investing for, instead of the mere recognition of its importance.

What is passive investing?

Passive investing means an investor is least concerned about market prices, they just invest for a certain term length and earn the market return.

Today we shall unravel why investors should be utilizing this formidable investment method.

What are some of the advantages of passive investing?
1. No need to monitor portfolio or market entries aggressively

2. Less human errors

3. Lower potential loss in major market downturn eg. stock market down turns due to bonds price fluctuations

4. Flexibility to sell off bonds that are doing well in exchange for buying cheap stocks in larger quantity.

5. Long term returns with lower risk (compared to pure equity portfolio).

Just beginning to think about what you need to do may be the hardest step.

In our 50s nearing retirement, we might think of having a total break from the market and ignoring our retirement portfolio. That would not be the best idea.


3 Tips for foolproofing a retirement investment portfolio

a. Identify & compare your income and expenses to determine any shortfalls or surpluses

b. Automatic rebalancing
Now that we’re retired, our priority should be ensuring that our money is working at the highest possible pace. Hence, we need to continue selling high and buying low- which is what automatic rebalancing is about. A target date fund will rebalance automatically.

c. Don’t be afraid to ask for help
If you are in or nearing retirement, engage the services of a financial advisor. The best financial advisor will ensure that all of your retirement financial planning is built on the foundation of your personal priorities and goals.

Action steps to building your retirement portfolio

  • Determine your tolerance for risk
    Vanguard's free risk tolerance-asset allocation questionnaire
  • Consider a diversified portfolio
  • Use CPF retirement savings interactive calculator
    (CPF is a social security savings plan that has provided the working Singaporeans with confidence and a sense of security for their retirement years. They offer online guides and resources such as the Retirement Savings Interactive Calculator. This calculator allows you to assign values for your current age, desired retirement age, desired retirement income, return of investment, etc.- Money Digest)

3. Adjust Your Retirement Investment Strategies Appropriately


Mr Marc Lansonneur, DBS Bank's head of investment products in Singapore, says: "Investment strategies should be based on some key guidelines that apply to any investment in general."

What can we do to adjust our retirement investment strategies and make sure they are on track with Singapore’s inflation forecast for the year?

a. Define your investment objectives (see point 1)

b. Be sure to plan and keep track of the time horizon of different types of investments

  1. Aim for your overall retirement savings in proper alignment with Singapore’s inflation rate
  2. Assess your risk
  3. Add small or undervalued company stocks to increase return

c. Be a passive investor but have an active ownership of your investments. This means rebalancing periodically and bringing your retirement investment portfolio back to its intended allocation. You should be constantly aiming to reduce portfolio volatility.

In 2014, a DBS bank surveyshowed that over 76% of the participants quipped that their long-term financial goal is to have sufficient for retirement.
Whether you're entering retirement, or already retired there are key investing decisions to make.

Today, we outlined and covered the fundamental basics to a sound retirement investment plan; we hope you see its importance and are ready to embark on one.

Good luck!

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