Retirement planning has always been a hot topic among financial advisors, with the traditional approach being saving money for retirement. However, in recent times, merely saving money for retirement has become increasingly inadequate as inflation rates rise, making the saved money’s value decrease over time. Therefore, it is essential to find alternative ways to increase your retirement funds to cater to the rising cost of living. In this article, we will discuss why saving alone is no longer enough and how you can increase your retirement funds with investment options.
Inflation Eats Away Your Savings
Assuming a person wants to retire at the age of 60 and their expected lifespan is up to 90 years, they would need to plan for 30 years of retirement funds. Assuming they want a monthly income of $2,000, it means they would need a total of $722,000 worth of retirement funds to retire. However, it is crucial to note that the inflation rate affects the value of the saved money. For instance, if the inflation rate is at three percent per annum, the value of $2,000 ten years later will be equivalent to $1,488 in today’s value. This means that despite having the same retirement funds, the cost of living has increased, making the money saved not enough to cater to expenses during retirement.
Investment Options for Retirement Planning
To increase your retirement funds, it is essential to invest early in life. Even if you make mistakes along the way, starting early means you have a long time to recover your losses. There are different types of investments to consider, such as stocks, bonds, cryptocurrencies, and real estate. Choose what you are familiar with and what you are willing to learn and master.
Dividend stocks are an excellent investment option for generating cash flow during retirement. When a company pays out excess cash as dividends to shareholders, it can help you generate inflow of cash every quarter or six months. There are several stocks in the Singapore market that pay around four percent dividends at the current price, such as DBS, UOB, and OCBC. Consider investing in such stocks to generate cash flow during your retirement years.
Conclusion
In conclusion, saving money for retirement is no longer enough, given the rising inflation rates. Therefore, it is crucial to explore alternative ways of increasing your retirement funds, such as investing early in life in different investment options like stocks, bonds, cryptocurrencies, and real estate. With this approach, you have a better chance of recouping any losses and generating cash flow during your retirement years.
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