[Finance 101] Retirement Planning

  • Community Manager

    In this second post as part of the Finance 101 series, we look at the concept of Financial Planning, which is one of the applications of the Time Value of Money.

    Retirement and Child Education Planning is a majorly overlooked application of the Time Value concept. As covered in a Straits Times article from 2014, Singaporeans need to be better retirement planners. The article quotes ‘The survey also found that while providing for retirement is a priority for 76 per cent of respondents, only 49 per cent have a financial plan’

    Some of the factors that should be taken into consideration for Retirement Planning are:

    • Age of retirement
    • Current savings
    • Monthly savings
    • Rate of inflation
    • Rate of returns of all investments
    • Estimated Monthly/Annual Retirement expenses

    For example, you can estimate the Future Value of your annual investment at the investment return rate till the age of retirement.
    Annual investment = $60,000
    Time till retirement = 30 years
    Investment return rate = 10%
    The Future Value after 30 years will be $1,046,964

    Similarly, you can estimate the Future Value of your current savings at the rate of inflation till the age of retirement.
    Current Savings = $50,000
    Time till retirement = 30 years
    Inflation rate = 5%
    The Future Value after 30 years will be $216,097

    Adding the two above values will give an estimate of the funds available to you at the time of retirement. This will help you plan your retirement expenses accordingly.

    Unsure of what Future Value means? Check out the previous post in the series here.

  • Community Manager

    Thanks for this post @abhishek-bhardwaj 🎉

    The power of looking at absolute cash in terms of its future value is that it reminds us to never underestimate the smallest bit of expenditure or investment. The sooner we start acting on them, the earlier we get to reap the potential benefits.

    Hope this helps fellow investors who're still fresh and getting accustomed to investing & retirement planning!

    Wish to take our understanding of future value further? Show us what you've got!

    Cheers & happy investing :)

  • I want to retire from my main job full time and concentrate on my sides. So that means that effective retirement age will not likely to stop me


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