Financial Snacks by Joyce Chuah
To
be able to afford to retire young is a dream held by many as it is an
indication of financial success. Early retirement usually does not mean
ceasing from work but freedom from having to work due to financial
needs. So where can we start? Grace Chuah writes:
Decide on the life-style you wish to have in retirement.
Some
have a simple lifestyle − walking, gardening, and local holidays − but
for others, enjoyment means overseas holidays, fine dining, living in
high end condos. One consideration is also whether or not you want to
continue working and earning active income during your retirement
years', though at a more relaxed pace.
Calculate how much you need in order to fund your retirement lifestyle.
Mortgage
repayments, children education and living and medical bills (ideally
covered by medical insurance) are major expenses. If you need RM5,000
spending money per month, a capital sum of RM1mil (retirement nest egg)
at a consistent dividend yield of 6% per annum will be simple enough to
cover retirement costs.
However, one needs to factor in
inflation. At 7% inflation rate, RM5,000 becomes RM7,000 and at 6%
inflation rate, a RM200,000 education fee becomes RM335,000 in five
years' time. The only way to overcome inflation is to invest.
Work out the strategy to meet the gap between what you would have and what you would need during retirement.
To
close the gap, you need to build up your nest egg, readjust your
desired retirement lifestyle or postpone your retirement to a later age.
Cut down on unnecessary spending. What matters more is how much you
save, not what you earn. Pay yourself first every month and increase
this amount as your income increases. Invest your retirement savings in a
long-term portfolio and rebalance it annually.
Take action now.
A
retirement age is an artificial finish line but nonetheless serves as a
goal-post. When we start planning early, we have the advantage of time
to enjoy the effect of compounding returns over time and to fine-tune
our investment strategies and recover from mistakes early.
Remember
the quote “Someone's sitting in the shade today because someone planted
a tree a long time ago”. Plant the tree for yourself today.
Clement Jouling ialah
Perunding Unit Amanah berlesen (Licensed Unit Trust Consultant).
Sekiranya anda berminat untuk mengetahui lebih lanjut tentang pelaburan unit amanah, boleh hubungi beliau terutamanya buat anda yang berada di Kota Kinabalu dan sekitarnya.
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