We don’t often see drivers run out of fuel on Singapore roads. That’s because we are never that far away from the next petrol forecourt. But the same can’t be said if you drive in the US, the U.K., Europe or Australia…… …….there are few things more distressing than glancing down at your car’s fuel gauge and discover that it is hovering just above the “E”. And you know the nearest garage is at least another 50 miles away. (“E” stands for “Empty”. It doesn’t mean “Enough”). Most experienced drivers will know the importance of filling up, before they set…
We don’t often see drivers run out of fuel on Singapore roads. That’s because we are never that far away from the next petrol forecourt.
But the same can’t be said if you drive in the US, the U.K., Europe or Australia……
…….there are few things more distressing than glancing down at your car’s fuel gauge and discover that it is hovering just above the “E”. And you know the nearest garage is at least another 50 miles away.
(“E” stands for “Empty”. It doesn’t mean “Enough”).
Most experienced drivers will know the importance of filling up, before they set off on a long journey. They also know that it is vital to identify the places that they can refill their tanks en route.
What about your pension?
But I wonder how many of us will do the same when we are planning for our retirement. Do we know how much fuel we will need in our pension funds when we eventually call it a day?
Will our nest eggs generate enough income to let us enjoy a comfortable retirement? Will it be adequate to provide us with at least two-thirds of our final salary?
If it does, then you can stop reading now. If not, here’s what you need to think about.
If you haven’t put anything away for your retirement, then you need to need to remember this very easy-to-use rule of thumb…..
Age divided by two
….. Take your age, and divide it by two. That is the percentage of your salary that you should, at a minimum, be putting away immediately.
If you are 30 years old, then you need to put aside 15% of your salary. If you are 50, then you should put away a quarter of your pay packet every month.
For many people, that can be a little intimidating. After all, when you are thirty-something, your money will have to stretch in all sorts of directions. I should know. I’ve been there.
But don’t let the daunting prospect put you off. It may be just the shock you need to stop you from sleepwalking into money problems later on.
And there is something else I should mention.
Many of us who are in work will have to make compulsory contributions into our retirement fund. That’s a great place to start saving.
But leaving your money to earn just 2.5% a year is unlikely to be enough. Your money will need to work a lot harder than that. An investment return of 2.5% will barely keep up with inflation.
What’s more, every dollar that is earning the paltry rate of interest will take nearly 29 years to double. So, if you are 30 year’s old today, your one dollar won’t double until you are 59.
What if I told you that it doesn’t have to be like that? What if I told you that there is way you could reach your goal sooner?
Five times more
Historically, the stock market has delivered a much higher rate of return than cash in the bank. Despite its many ups and downs, the Singapore market has generated a return of around 8% a year.
That is more than three times the return you would get from cash. It means that every dollar invested in shares should double in nine years’ time.
So in the time that it took a “cash” dollar to double to $2, a “stock” dollar could be worth nearly $10. That’s five times more.
Do you still think it is sensible to leave your money earning 2.5% a year?
Grow your money
I don’t, which is why I put every available dollar I have in my Central Provident Fund into shares.
You might say that’s because I know what I am doing. You might say I know what to buy and when to buy it. There is some truth in that.
But I want you to be able to do the same too. I don’t want to manage your money. That’s the last thing I want to do.
But I do want to help you turn your money into something more meaningful when you retire. I want to help you turn every dollar into $10.
So please let me help you. Let me show you how to do it. Just click here.
A version of this article first appeared in Take Stock Singapore.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.