Worrying About Retirement?

I read about this write-up in the Sunday Times about a saving method which you can apply when you are planning your retirement.

I find it useful and am putting it here just in case you gave it a miss. This write-up was extracted from the book titled Savvy Savings Guide - SAVING FOR RETIREMENT by Paul Westbrook.

You are young and you want a simple answer. You want to know how much you need to save to retire on time, so here it is :-

The 10-12-15 per cent solution.

* age 25 : save 10% of your salary
* age 30 : save 12%
* age 40 : save 15%

If you are just starting your career and are, say between 20 and 25, save 10% of your salary until you retire.

If you are 30 and have not yet begun to put money away, save 12% of your salary.

If you are 40 and have US$50K [S$76K] in retirement investments, save 15% of your salary. If you are 40 and have zero retirement savings, you will either need to push back your plans for retirement or save a whopping 22% a year.

If you are in this bind, however, you might need to resort to retiring on a shoestring.

This 10-12-15% savings rate is the most important retirement action you can take early in your career.

Simply start and continue a systematic savings and investment programme. It will, in general, allow you to retire at age 65. It also allows for an emergency or two that requires you to dip into some of the money.

It not only prescribes your retirement savings target, but also allows you to have financial flexibility for life's uncertainties.

These calculations assume that you will live to age 90 and that you will enjoy a 25-year retirement. If you are married and your spouse also works and earns the same salary as you, then you will have US$2 million between the two of you.

The rates also assume there will be no employer to match your investments, like a 401[k] plan, and you will have no pensions. With any of these additions, you retirement will be more comfortable.

These rates do assume you will get a 3% salary increase each year and that you will need about 65% of your then salary at retirement to maintain your lifestyle.

If your salary grows faster, or slower, you will still contribute 10%, 12%, 15% of it to retirement investments.

Lower taxes, no work expenses and not having to save for retirement anymore are the prime reasons that explain the lower financial requirement of 65%.

NTUC INCOME has some excellent investment plans that may help you to fulfill your retirement goals. Do let stay in touch with me if I can be of assistance to you.