Retirement can seem a long way off when you’re in your 20s and 30s. Still, it’s prudent to start early – ideally when you’re starting to earn an income – as it’s easier to build a significant nest egg with time on your side.
You reap the benefits of compounding, whereby your money will grow at a faster rate as you earn interest not only on the initial principal, but also on the accrued interest from previous periods.
For example, public relations practitioner Ms. Ooi Shi Yun, 29, began planning for retirement in her mid-twenties.
“It was the perfect time to start building my wealth and planning for my retirement. Starting a full-time career was one step closer to financial freedom,” says Ms Ooi, who is currently single and plans to retire at the age of 60.
To achieve this goal, Ms. Ooi diligently sets aside around 30% of her four-figure income each month, which she uses for investing, endowment insurance premiums and supplements to the Central Provident Fund (CPF).
“We cannot increase our wealth overnight. As such, I believe we need a long-term view when it comes to building our nest egg.
Being one step ahead is all the more important with today’s rising cost of living.
The first step is to draw up a comprehensive financial plan, says Ms. Lorna Tan, financial planning manager at DBS Bank.
While it can be difficult to define precisely what a “comfortable retirement income” means while you’re young, these estimates should include a buffer to account for inflation, longevity and growth risks. health care costs.
“Most people tend to underestimate how much they really need in retirement,” says Tan.
“Start by visualizing your retirement lifestyle, meaning your needs and wants, and estimated expenses. As you travel through life, continually build and revise income streams.