Retirement Planning

In Singapore the official inflation rate is 7.5 % p.a. With your bank deposit earning 1 % or less, your networth is eroded at a rate of 6.5 % p.a. Essentially, what this means is that in about 11 years, if nothing else happens, your networth or savings will be halved in value. Certainly, for those of you in my age group, ie above 50 years of age, you are facing a retirement time when your purchasing power and the value of your savings would be declining. The higher the inflation rate the faster the value of your savings will be eroded.

What options do we have to mitigate the rot?

Ask a financial planner today, and he/she will be challenged to offer you solutions which would be effective. At best, recommendations to invest would be resorted to. However, in the investment climate, we are moving towards a period of low certainty of returns and high volatilities for loss. Ask the financial planner, for returns greater than the inflation rate of 7.5 % p.a. and he/she probably cannot come up with a "feel good and sleep good" solution.

Let's look at what you CAN do. Energy and food ranks high in the contribution to inflationary costs. And the solution to slow the rate of value erosion lies here, somewhat.

In today's blog, I offer you 2 common lifestyle choices which you can exercise some power over.

If you own a car, then high oil prices will impact you. And each time you go to the pump kiosks, you can feel the pain of this. So the less frequent you need to go get a refill, the less frequent this feeling of pain. Other alternative modes of transportation will get you to your destinations, I am sure:
a. MRT
b. Buses
c. Taxis- although the fares and ERP charges would impact you nearly as much as driving your own car. However, you do not need to worry about car maintenance and depreciation costs. And so I have added this mode as a viable option.
d. motor cycle
e. bicycle
f. walk
g. various combinations of the above.
In short, what I want to convey is there are ample alternatives to cut down the impact of oil prices on the value of your hard earned savings.

On the home front, keep an eye on the use of electricity. The hidden spenders are to be found in the
a. refrigerators
b. air conditioners
c. TV
d. fish ponds and pumps
e. washing machines and dryers
f. water heaters
g. iron
h. hair dryers
i. ovens
These are heavy users of electricity and the more you have them and put them to use each day, you are spending more and you can see this in your power bill. Electricity in Singapore is affected directly by oil prices and it should come as no surprise to you, that with the rising oil prices, your electricity bill has also gone up. Perhaps, seeing the bill once a month, the hit is not as obvious. Track this on a month on month and realise.

What I am saying is that we do have some control over how much we use oil dependent vehicles and appliances. And thus, directly control how much oil price driven inflation affects you.

The other high costs relate to commodity prices including food e.g. rice, wheat, meat and vegetables. The difference between eating out and eating in (ie home cooked meals)is getting higher. That is because, the vendor is able to pass on the increased food costs to you the customer. In these type of cost plus pricing, be sure that the profit markups are there and you do pay more than the increased rate of food price rises. However, eating-in more often, reduces the impact and this period is as good as any to do more home-cooking and eating ie at Mother's or Father's.

Today's blog seeks to have you review your lifestyle and know what is eating up your wages. Saving for tomorrow becomes more difficult as more of your pay goes towards paying more for the things which you are accustomed to having. Rather than giving up, be empowered to do more.

It would be nice to hear from you, on your ideas on how better to win this fight.