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Is it too late to plan for retirement at age 57?

Tuesday, November 10, 2015

This is in reply to a reader's comment: here.

Hi hosea,

Welcome to my blog. :)

I am not allowed to give advice to individuals and I don't. ;)

However, if I were 57, I must recognise that I cannot be too adventurous with my money. I need to be more conservative.

Being more conservative, the returns might be lower but there is less chance of a massive or total loss of capital which a senior can ill afford. 

I want to consider investment grade bonds which includes Singapore Savings Bonds and also possibly maxing out my CPF-RA to benefit from a risk free 4% to 6% per annum return. This will provide a guaranteed monthly income in future.

Of course, I would have to make sure that my lifestyle is adjusted according to how much I expect to have coming in at retirement. 

It is not just how much we have coming in that is important. It is also how much is the outflow.

Now, at 57, if I think there is going to be a mismatch in what I need and what I would have coming in, then, postponing retirement to a later age beyond 62, which is only 5 years away from now, might have to be considered. This will also allow my CPF savings to continue growing.

What about investments? 

Well, I could consider blue chips which are less volatile and which have a good dividend paying history. 

I might want to consider ST Engineering, SATS and VICOM, for examples. 

I might have a few REITs which are more conservatively geared in my portfolio but I wouldn't want them to be a major part of my portfolio because I might not have the resources to take part in rights issues if they should happen.

If I have a HDB flat, there are many ways to monetise my flat. I could sell some of the remaining lease to HDB or I could rent out a spare room or two. I could choose to downsize too.

Finally, I remember that I have some savings in my SRS account which I can start drawing from at age 62 over a 10 years period. As long as I must pay income tax, I want to consider continuing to make contributions to my SRS account to pay less in tax.

I don't think it is too late to plan for retirement at age 57 but we have to be realistic with the options which are available. 

Related posts:

1. NDR 2014: Retirement adequacy.
2. Tea with Matthew Seah: Lifelong income with SRS.
3. CPF Life Payout estimator.


Tiger said...

I think you have given good advice.
I would also add - keep working as much as you can and as long as you can.

AK71 said...

Hi Tiger,

Alamak? Where got? Don't liddat say. I was only talking to myself. -.-"

hosea said...

Hi, AK, nice to hear your opinions at 57. Fully understood. Recently I took up Aspial bond cause attracted to the 5.25% and have also put in some 5k to oxley. True, I should not expect to go into high risk portfolio as I will not have much time to recover. I really enjoy reading your blog and telling my son to follow it cause he is now 20, he should read and get a feel of investment, unlike myself, I do not not have it during my time. I just grope my way and loss $$.

Thank you Ak for the blog. Something for me to read and learn now.

AK71 said...

Hi hosea,

The bonds issued by Aspial and Oxley are unrated and are probably closer to junk status. We don't want a large exposure to these.

For example, if we want 30% of our portfolio in bonds, we should not have these two bonds making up that 30%. When it comes to junk bonds, it is truly nibbles and never gobbles.

I wrote a piece on bonds recently: Why have bonds in our portfolio?

Hope your son enjoys my blog too. :)

AK71 said...

Hi AK I was reading through your blog and some other available CPF resources. While others are asking about how soon they can withdraw their CPF money, I can't seem to find any explicit information how How long I can keep my money in SA or RA to earn the 4% interest. Is it possible to actually keep the money till like age 75 or 80 and just live off the interest generated?

If you don't need your money, you can leave the money in the CPF to earn interest, of course. 😉

Ah I see. I always thought that the OA and SA will cease to exist after RA is created. So we can transfer the required amount to RA and continue to use OA for housing and withdraw any amount from SA any time.
Thanks for the clarifications. Its really quite a wonderful system

I like. ;)

AK71 said...

I always say that we should start working towards financial freedom as early as possible. So, start young! What about those who are older? Well, I always say "never late, only later".

Do the right things today and you will be in better shape financially 10 or 20 years later. It doesn't matter what your age is.

Today, I shared this blog with a new older reader. :)

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