Money & Power

7 Financial Commandments to Remember When You're About To Retire

Practical advice to give you the freedom to retire when you want and how you want to.
IMAGE Monica Silvestre/ PEXELS
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After years of climbing the corporate ladder or growing a business, you deserve to look forward to taking it easy when you hit the the golden years.

Sadly, with the continuing global economic downturn, financial experts have added another decade to the target retirement age of 60. If you don’t mind working until 70, then there is no cause for worry.

Better healthcare and improved lifestyle habits have increased life expectancy by as long as 30 years for most adults around the world. If people are living longer, however, their retirement savings need to last longer.

Whether you decide to stick to plan and retire at 60 or continue to build your retirement fund until 70, here are some tips that can give you the freedom to retire when you want and how you want to.

1. Live below your means.

Do not wait until retirement, but start today. With your income growing as you became more successful, no doubt you have also made adjustments to your lifestyle.  Did you move to a bigger home with more space than you need? Are you now flying first class or business class even on short flights? Maybe you upgrade to a new car every two or three years instead of five? All these add up, and they eat into potential savings you could set aside for retirement. 

2. Review your assets.

One of the classic problems of older adults is that they tend to be asset-rich but cash-poor. Best to review your assets now, as some depreciate in value or take time to liquidate. For example, do you own more than two cars? Among the affluent, having two cars has become a necessity to cope with the number-coding traffic scheme. But if you have more than two, consider losing that depreciating asset.  

3. Draw active and passive income.

With interest rates too low and inflation at an all-time high, it’s no longer enough to save. Make your money work harder for you by investing instead. Talk to a financial professional about your time horizon and risk appetite and then start building a portfolio that can fund your retirement dreams. This way, when you stop working, you only lose active income (money you make from working) but can continue to count on passive income (what you make from investments) to fund your needs as well as wants.

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4. If it’s too good to be true, it is.

Most scam operators target soon-to-be retirees because they assume you are sitting on a sizable nest egg. They also know that the lure of high returns is hard to resist for people about to retire and who want to make sure they will be comfortable for many more years. But when someone offers to pay you interest double or three times what’s available in the market, do your homework and consult professionals. It’s not enough to go by the endorsement of relatives or friends, as chances are if the scam unfolds, you will all be losing money together.

5. It’s not all about you.

Don’t plan for your retirement using tunnel vision. Instead look at the bigger picture. If you are married, make sure you and your spouse share the same vision for your golden years. Do you have kids? Do any of them expect financial support from you even after you retire? How about elderly parents? In the Philippines, extended families are the norm and grandparents stay with their families instead of moving to assisted care facilities. Maybe you should factor their living and health care costs too.

6. Learn to say no.

Success can bring on unwelcome attention, usually from friends and relatives looking for loans or handouts. While it is good to be charitable, do so to a point where you don’t put your retirement plans at risk. You don’t have to help everyone who comes to you, nor do you have to say no all the time too.  Why not set criteria in your head (and heart for that matter)? Maybe you can say no to extending loans, but you can give a modest amount with no expectation of payback. You can also choose to do so only in cases of emergencies, like when someone is ill, and not when people are just raising funds for school fairs and such.

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7. Expect the best, but prepare for the worst.

Retirement planning has been described as a three-legged stool. That’s because you draw funds from employer pensions, government benefits, and personal savings. This is great as it feels like you've covered all your bases. Unfortunately, many discover that the first two are usually not enough. You’ll find that your savings will need to make up the deficiencies and this is not a pleasant discovery to make after you retire. So it’s always good to have a fallback plan, say target to save 20 percent of your income each month but push for more whenever you can. And invest, invest, invest. With the right portfolio, you can laugh all the way to retirement.

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Aneth Ng-Lim
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