Solid retirement pillars needed in the new age

Retirement planning is comparable to building a house. The fundamental features of a building are the foundation, walls and roof.

Obviously, there are details such as plumbing, electrical, and finish work, but unless the principal components are constructed properly and working together as designed, the other components can’t be expected to perform as intended.

Just like you need a blueprint to build a house, you require one for a retirement plan. That blueprint consists of the following interconnected critical components.

Income adequacy

It might appear obvious but many people fail to consider the full impact of their pay cheque ending. To maintain your pre-retirement lifestyle, you need a plan to generate reliable income for the rest of your life.

After carefully considering your income needs, form a strategy about where those funds will come from. Target a 70 percent income replacement upon retirement for living expenses. If your last paycheque was 100,000, target to have a monthly pension of 70,000 per month.

Consider inflation and unforeseen expenses. If one retires at 60 with that income, for example, inflation will erode that amount by the time they are 90. Moreover, since with new advancements in medicine people are living longer, longevity planning is also important.

And, parents are increasingly taking care of their grandchildren or the so-called boomerang kids, who had flown out of the nest but are retreating to their parents’ homes for financial support.

Social capital

Upon retirement, half of our social networks evaporates. As we age, maintaining an active social life gets harder. People that we were close to move or pass away. Family relationships and close social acquaintances play a key part in promoting health and overall well-being in retirement.

Research shows that retirees who spend time with their loved ones tend to be happier, healthier and live longer while isolation can bring about mental disability, illness, and a shorter lifespan.

Health

With rising health care costs, increased deductibles and restrictive insurance plans, a chronic illness or sudden medical emergency can lead to financial disaster. In fact, in a survey by Enwealth Financial Services in 2018, limitations of medical cover were the retirees’ biggest financial concerns.

It is a bigger worry when the retiree was used to having an occupational medical cover. However, one can now get post-retirement medical covers by making additional voluntary contributions pre-retirement.

These contributions, upon retirement, are converted to medical insurance premiums. As the pandemic taught us, medical cover is a surefire way to avoid a financial crisis and experience a lifetime of peace and good health.

Fulfilment

Perhaps you know somebody who retired only to re-enter the workforce after a rather brief period in retirement because they were bored. They retired and, because they didn’t have a plan for how they would spend their time, returned to work for a sense of gist.

Give a serious thought to your retirement vision and align your money and time to that purpose. Include activities that will give your life a real sense of ongoing meaning and purpose.

As leisure and travel have limits, incorporate personal passions, hobbies, community outreach, giving back and meaningful relationships. Undisputedly, a low-stress part-time work as part of the game plan is great.

However, going to work because you can’t find fulfilment in retirement is miserable and avoidable with a thought-out plot of how you intend to spend your sunset years. So, what is it you plan to do with your one dear life?