The word ‘Retirement’ has lost its flavour. That’s because when we’re feeling on top of the world, making merry, wining, dining and vacationing, it’s depressing to think about the day we’d be too old, too weak or too poor to enjoy the lifestyle that we’re used to.
We want to put off confronting our worse fears: What will my life look like after 65? What if I run out of money? Where will my income come from?
Deep down, most of us know that we will not be spending our sunset years enjoying the sunset. A January 2015 report from HSBC Research lays it out starkly: “Retirees in Singapore face 10 years of hardship after savings run out; Mortgage repayments prevent working age people from adequately saving for retirement; A third of pre-retirees do not save enough or intend to save for retirement.”
This problem is hardly unique to Singapore. According to a MONEY article, “1 in 3 Americans have saved $0 for Retirement” http://time.com/money/4258451/retirement-savings-survey/ . In another survey on the subject of retirement, 33% of retirees said that they were financially worse off after retirement http://www.channelnewsasia.com/news/singapore/1-in-3-working/2516136.html )
Every article or website on retirement planning tells us that it’s not too late to start saving and investing for one’s retirement now. Save and invest consistently and the power of compounding interest will give you a decent nest egg by age 65. These articles fail to mention some important facts:
- If you’re a reasonably healthy non-smoker, you can expect to live beyond 85 into your 90s – that’s 30 to 40 years of just depending on your savings!
- The return on your retirement savings is non-guaranteed! Yes – you heard me. Pension plan savings (including Singapore’s CPF) tend to be invested in very safe assets like bonds, which barely outperforms inflation and is also affected by the health of the global economy. There’s a real threat of inflation eating into your retirement savings – especially in our era of flat growth and zero interest rates.
- Most retirement plan calculations do not factor in the ups and downs of real life such as job loss, divorce, illness, recessions and stagnant incomes. You may find yourself drawing down your savings before retirement age, even if you don’t mean to.
- If you haven’t already started your money fitness plan to manage and invest your money by the time you are 40, you have a much shorter time frame to build up your reserves. The older you are, the less market risks you can afford to take – a small misstep in investment, or a devastating downturn can wipe you out financially. Unlike a much younger person, you don’t have the luxury of time to recover from your losses.
So what can we do, in an environment where nothing is guaranteed? We can build up our Resilience (with a capital ‘R’) in the areas that we can control. Start by asking yourself these crucial questions:
- Am I living beyond my means, taking on more debt and financial responsibilities than I should?
- Am I hoarding cash, instead of practicing asset allocation and investing wisely?
- Am I unhappy about my financial situation and career?
If you answered yes, money fitness coaching will help you get back on track, by giving you a mirror as well as a practical strategy for dealing with the fears that we all have about growing old and outliving one’s savings.
More importantly, getting your financial house in order – both mentally and emotionally – also frees you up to look at ‘Retirement’ in a whole new different way.
For starters, wipe that word from your brain. Stop worrying about saving $1 million (or any x dollar amount) for old age. Even if you are fortunate enough to have made your fortune and not have to work for the rest of your life; it is not the dollar value of what you have, but what you do that really counts.
Upgrade your skills and find something that you love to do, that gives you a new sense of purpose as well as a source (or sources) of income.
You could explore a new career or business, follow a passion and set new goals. When you set specific goals – saving or working towards it will be a joy – not a chore. This is what happened to my friend Jennifer, a single mum. At 57, she decided to leave the corporate world to pursue her interest in food – after calculating how much she would need to support herself, her son and her mother during her ‘reinvention.’
Jennifer traded in her high heels and fashionable suits for t-shirts and shorts and began her journey apprenticing a hawker at a food stall. Then she decided to pour some of her savings into getting a culinary degree. She didn’t care that she was the oldest student in her class; or that she has to spend hours peeling potatoes while learning on the job. She loves every minute of it and dreams of opening her own restaurant one day.
Reinvention could also mean choosing a different lifestyle – one that is more selfless and less competitive. Joan, a sales manager who’s single, loves to mentor and care for children. In her fifties she finally had enough of her stressful job and decided to ‘downshift.’ She became a part-time baby sitter for her friends’ children. She became such an effective ‘Mary Poppins’ that word spread among other parents. Today she makes a decent living doing what she loves.
It takes courage and effort to chart a different course – not to mention a great deal of soul searching. But choosing Reinvention over Retirement almost always guarantees that you’ll celebrate a happier, healthier and more meaningful old age. For most of us, it’s the only choice we have.