When To Start Saving For Retirement?

Retirement carries a different meaning at different ages.

For the young adult starting to work in their 20s, retirement is something that probably does not carry much meaning. Something their parents are transiting into and has nothing to do with them. First and foremost on their minds will be landing that dream career, falling in love, getting married, purchasing all the "wants" with their first year paycheck, etc.

Next stage is the 30s, life has moved on for most from singlehood to setting up a family unit. Focus will be to stop job hopping, stablize a career to support the mortgages and plan for the first child. Even those single usually start taking care of their parents who have started making retirement plans.

Moving on to the age 40s, those with children start fussing over primary school entry or the dreaded PSLE. Some planning for the child's future tertiary education would also start buying some endowments for them. For those single, they will probably start worrying that they will need to take care of their parents and themselves moving forward.

Finally, reaching the 50s, life seems to have passed by in a flash and retirement is in the horizon. A quick check on the retirement plan, which is usually the CPF balance, shows it has been all been used for servicing the mortgage and children education. By now, most would have been jolted awake and awareness to plan for retirement begins.

This is a common scenario and it will be too late as less than 10 years is left to build that retirement nest egg.

So, back to the topic, when to start planning?

The cliche answer most commission based financial planners would say is "as soon as possible, start young for a longer time horizon." Start this ILP or 20 year endowment plan, start saving for the long term when you are still young in your 20s/30s. However, this is not very practical as because one is young, the demand for funds is more immediate. First, a liquid emergency fund savings needs to be established, wedding banquet cost/honeymoon, downpayment/COV for a residential property/renovation/furnishings, etc.

My opinion is planning with retirement in mind should begin as soon as possible but practical action will probably begin around 40 years old.

What I mean by planning is that retirement age must be taken into consideration early, i.e. when taking up that home mortgage, lifestyle expectations with spouse, family commitments, age to have children, investment strategies, etc. However, actual savings towards the retirement goal will probably start at about 40, to have about 20 years to save and grow those funds.

So, what are you going to do with that Ang Pao money?