Many of us would retire either voluntarily or involuntarily due to the circumstances that we are in. Retirement Planning to Abundant Life Planners is not about stopping work entirely. To us, it is Refire-ment Planning. Perhaps there could have been dreams and priorities that you weren’t able to pursue when you were younger; or perhaps you wanted to live a life of significance and pass on your years of experience to the next generation. You could also be wanting to ensure that your golden years are well spent helping others in need or who are less fortunate than us. Refire-ment Planning is about being able to choose whether to work. Refire-ment Planning is about having a continuous stream of income for as long as I live not needing to worry that I would outlive my savings.
Yes, you may have savings and properties collecting rental income. However, in retirement, the importance is not only on the number of passive income streams that you have but rather on the number of guaranteed passive income streams.
Why is guaranteed passive income streams so important, you may ask? The biggest reason is that whether we are retired or refired, there will be fixed expenses that we would have to foot on a monthly basis. With the guaranteed passive income stream, we can be guaranteed of that amount monthly despite market performance.
So, what are some of the examples of guaranteed passive income instruments?
- CPF Lifelong Income For The Elderly (CPF LIFE) Scheme
- Lifelong Annuities – This allows for guaranteed income above CPF LIFE
Let’s deep dive into each of the instruments.
CPF LIFE Scheme is a national longevity annuity insurance scheme that insures you against running out of your retirement savings, by providing you with a monthly pay-out no matter how long you live.
Lifelong Annuities are instruments whereby the monthly pay-out is guaranteed for as long as you live. There are some instruments in the market whereby it’s not lifelong but for a limited tenure. Personally, we would recommend lifelong annuities instead of limited time annuities as the life expectancy in Singapore increases.
There are other passive income instruments available. These can be used as a part of your portfolio for your other discretionary expenses and travel, due to the fact that these financial instruments are not guaranteed. When the market is up, you may have more discretional allowance; however when the market is down, you need not worry as the fixed expenses are all taken care of.
- Investments (E.g., shares, unit trusts)
- Fixed Deposits
- Supplementary Retirement Scheme
- Property Rental Income
- Part – Time Employment
- Cash savings
- Cash proceeds from down-sizing to a smaller home
- Inheritance
It has been wonderful to debunk the myths around retirement planning and Abundant Life Planners hope that we have helped you retire in style!
