As you journey through life, the phases of your retirement planning process should progress with you. However, many retirement planning instruments available are meant for the earlier stages. Near-retirees are sold products that may never help them reach their nest egg requirement.
Watch this video as Eleanor Ng, Client Adviser at Providend, shares the different phases of retirement planning and the problem retirees are encountering while planning for their retirement in Singapore.
1. What Are The Phases In Retirement Planning?
Retirement planning consists of two phases.
The first phase is the Accumulation Phase, this typically applies to a person who is in his 40s or 50s. And because he has got a couple more years to his retirement, he would invest his available resources and income surplus to build up a bigger lump sum for his retirement.
The second phase is the Consumption or the Draw-down Phase, this typically applies to someone who has retired or stopped working. And because of that, he needs to have an immediate consumption, coming down from his accumulated resources to fund for his retirement lifestyle.
2. What Is The Problem With The Typical Retirement Planning Methodology In Singapore?
The problem with retirement planning methodology in Singapore is a large focus is on accumulation phase such that the draw-down phase is largely ignored.
In the wealth management industry, there are three key players. There are the product manufacturers, the distributors, and the consumers. The key driver of this is essentially the distributors.
How wealth management is being played is largely depends on the competence of the advisers, the compensation and the product availability to these advisers.
3. What Are The Common Retirement Income Products Sold To Mass Affluent Individuals In Singapore?
At the mass affluent level, these are largely served by the financial advisory firm. The advisers will have access to products like unit trusts and these typically require a growth period of about 5 to 10 years. As such, it is not suitable for an immediate draw-down.
Investments that go into these portfolios typically goes into active fund management.
A study has shown that over a 15 years’ time horizon, these funds do not perform better than the benchmark. In fact, the probability of outperforming the benchmark is less than 20%.
4. How Is Providend Able To Help?
As a fee-only advisory firm, Providend specializes in retirement planning.
Our clients are affluent individuals. Having worked 20 years with retirees, we understand the concerns of retirees, which is essentially the reliability of income stream rather than returns of investments. As such, we came out with this planning methodology, we called it RetireWell.
This methodology focuses on optimising a client’s available resources to provide a reliable income stream according to the needs of the client.
This uses a bucket system, whereby the client’s resources are allocated into different retirement buckets according to the needs of the client, using instruments to provide the different growth potential over varying time horizons.
So, if you are looking at optimizing your available resources to provide a reliable income stream for your retirement, come and talk to us.
We can design a plan that will give you a reliable income stream with provisions for legacy in the event of demise, so you can live up your retirement with a peace of mind.
If you have accumulated different assets and are looking forward to optimise it to drawdown for retirement or interested to have an honest second opinion on your current retirement plan, reach out to us for an exploratory session today!
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