Play golf? That's not a retirement plan

The lifestyle you want to lead, your needs and your wants, and your sources of income are some areas that have to be sorted out

Many of us believe that retiring is going to be tough, yet few of us have actually started planning for it.

That was the conclusion of a poll of 100 participants at a talk I gave at the National Library in May, which focused on the question: "Can I afford to retire in Singapore?"

The event was part of a series of monthly talks hosted by the National Library Board in collaboration with The Straits Times and its correspondents.

Over the years, there have been changes in retirement planning approaches.

For some in the older generation like my parents - Dad is 81 and Mum is 76 - their children are their retirement plan.


Well, times have changed. How many of us plan to rely solely on our children these days? It's a bonus if our children can support us financially, but if we can be self-reliant, isn't it better and more sustainable?

Planning for retirement is not easy and it takes discipline.

To start, we all need to visualise in some detail what our retirement is going to look like. It is not enough to say we are going to visit the library, watch a movie, exercise or play golf every day during retirement.

We need to ask questions like where will I live - will I retire in Singapore or will I be overseas for some parts of the year? How will I spend my free time, what hobbies do I want to pursue?

A recent UBS survey highlighted that there are three distinct phases in retirement - cutting back on your work hours (age 50s to 60s); more travel and leisure activities (age 60s to 80s); relaxation and time with family (age 80s to 90s).

So if you have set aside a travel budget and plan to travel around while you are still physically able and mobile, where will you go and how often?

And do you desire to pursue a second degree or set up a business now that you have the savings and the time to pursue the dream that you had previously put on the back burner?

More importantly, will you be responsible for supporting any of your family members?

In my case, I am my parents' retirement plan and they are totally reliant on my brother and me for financial support. This has significant implications when I plan my retirement. It means I will have to place their retirement needs in my priority list too.

Based on that vision, we need to create a practical retirement budget.

Some time ago, I created a spreadsheet called "Lorna NextStage", where I made a list of expenses I would be incurring during retirement. Next to the expenses, I listed the income sources that should be able to fund the expenses.

Being kiasu or proactive - depending on how you look at it - I built not one but three budgets and categorised them as Conservative, Moderate and Comfortable.

Whenever I have the time, I analyse the spreadsheet and play around with the figures. Depending on the budget that I will finally settle on, my retirement age will change.

I have to ask myself : Do I want to work longer and have a comfortable retirement? What if I lose my job? If I'm forced to retire prematurely, do I need part-time income to supplement the retirement budget? What are my options?

I'm sure we agree that it's prudent to plan earlier, and be in a position to be able to make changes and modify our retirement plan while we are still employable.

Let's assume we have reflected on our retirement lifestyle and estimated the expenses and cashflow required. The next step is to identify what are our needs (must have) and what are our wants (nice to have). For example, my parents' financial needs would come under my needs too.

I would want to ensure that my needs are matched with guaranteed income sources. These are the resources we can count on no matter how good or bad the economy is. You wouldn't want to be buying vegetables in the market and thinking about stock prices. The income sources should also be there regardless of how long we live.

Surveys have shown that people tend to underestimate how long they will be in retirement. We want to avoid this danger of depleting our nest-egg. To do so, we need to create reliable income streams throughout our retirement.

For the things that are nice to have (our wants) and that we can do without if need be, such as fine dining, we can match them with income we generate from our investments. These may have higher upside potential but are unfortunately not guaranteed.

So generally, we want a combination of guaranteed lifetime income and income from investments. These income flows will be used to fund our needs and wants.

What are our likely income sources? I like to use the analogy of an "income sandwich" to describe my sources.

In Singapore when we talk about retirement, we have to include our Central Provident Fund (CPF) savings. So when I think of my income sources as the layers that make up a sandwich, my CPF Life funds would be the base upon which I build the rest of my income sources to fund my needs and wants.

They would include private annuities, the Supplementary Retirement Scheme, Singapore Savings Bond, bank savings, insurance plans, dividend stocks, rental properties, shares, unit trusts, alternative investments, and so on.

In addition, retirement priorities include making the effort to minimise or avoid financial liabilities and mistakes particularly as we move closer to retirement. For instance, I would aim to pay off the mortgage on my residential home and rental properties before I retire.

Regardless of your age, aim to upgrade your financial literacy and keep abreast of the changing financial landscape, and the products and services available in the market.

Another area is to ensure you have considered your estate planning. I will be writing more about this in the coming months.

For a holistic retirement, we need to make efforts to prepare for it not just financially, but also physically and mentally. This means keeping healthy as well as taking time to consider what activities we can engage in purposefully and meaningfully during our golden years.

Surveys have shown that people tend to underestimate how long they will be in retirement. We want to avoid this danger of depleting our nest-egg. To do so, we need to create reliable income streams throughout our retirement.

A version of this article appeared in the print edition of The Sunday Times on July 10, 2016, with the headline 'Play golf? That's not a retirement plan'. Print Edition | Subscribe