It’s surprising that most people spend more time planning their annual vacation than what may be the longest holiday of their lives—their retirement. Upon reflection, this tendency shouldn’t come as a surprise. Two key factors contribute to it.
First, consider timing. Our next vacation feels imminent, especially compared to retirement, making it much more tangible. Planning for retirement is often something we say we’ll “get around to,” and having excess income can create a false sense of security that everything will work itself out. Speaking with someone who has experienced an unexpected redundancy can quickly show how reality can shift.
Second, planning a vacation is enjoyable, for example, choosing where to stay and what to do. The timeframe is clear, the budget can be established, and the options are relatively limited. We’ve done this many times before, so we know the process. Planning for retirement, or more accurately for the option to step away from the corporate world, is much more complex, and the only certainty is that something will likely go awry. That is enough to put many people off. Why bother if there’s no guarantee?
Many of us create business plans every few years despite their potential inaccuracies. So why not apply the same approach to our personal life plans?
Beyond the perceived lack of urgency and the complexity of necessary trade-offs, there is a psychological barrier: contemplating our mortality simply doesn’t feel pleasant.
It may help to take a step back and reframe this challenge, using logic to guide our thoughts towards viewing it as a worthwhile process. Let’s begin with a few undeniable facts:
- We will all age and eventually die.
- Eventually, most of us will find it difficult, and perhaps undesirable, to maintain the energy and stress levels needed for a full-time corporate job, whether self-employed or working for someone else.
- When that time comes, having more money will provide us with greater choices.
- There are things that can be done right now to help make this reality more achievable.
- The process becomes easier with guidance from someone experienced who has access to solutions that may not be readily available or easy to understand.
Additionally, looking ahead is just one aspect of the planning process. Consider contingency planning: what happens to me and my family if I lose my job, my health, or my life? What actions can I take now to minimise adverse impacts?
These considerations become more complex and potentially more beneficial when moving from Australia to Singapore. While we benefit from lower taxes, we no longer contribute to superannuation, which helps build a nest egg. With more disposable income, we might consider purchasing an investment property in Australia; however, banks may be reluctant to offer mortgages to those living overseas. We may have adequate life insurance, but does it cover overseas work? While we can afford childcare assistance, if something terrible happens and we’re no longer here, the state may intervene and take custody.
Any plan should account for major life events, ensuring that our nest egg isn’t depleted by property purchases (for ourselves or our children), education fees, or significant holidays. By considering the likely, though not exact, timing of these events, we can create separate savings buckets to cover them. If unused, these funds can be allocated to other purposes or added to the ultimate retirement pot.
For couples, it’s essential to consider the desires and wishes of both partners in the planning process, as these can differ. It’s best to have this conversation sooner rather than later. I have witnessed some intriguing discussions between couples planning to retire in different countries.
Beyond the accumulation and retirement phases, it’s also important to consider your legacy. Even if one plans to “spend it all,” no one knows when their final day will arrive. It’s likely there will be money left over, and it’s preferable to have a say in where that money goes.
There are many uncertainties. We don’t know how long we’ll live, how our lives will unfold, or how global economies and financial markets will behave.
However, we can control our savings, spending, risk tolerance, and how and where we invest our money. We can estimate how much we may need in the future (more is always better) and establish a plan to achieve that, making reasonable assumptions about returns. All boring stuff, but so worth it.
We can mitigate risk and exposure to volatility by diversifying our investments, avoiding precarious assets, ensuring we aren’t locked into investments we might want to exit, and maximising any tax advantages available while living offshore (and there are several).
As the global population grows and technological advancements enhance efficiency, markets will likely continue to rise. It’s amusing to see journalists express disbelief when markets hit new highs, often warning “beware, the sky is falling!” It’s simple maths: markets fluctuate but they tend to rise more than they fall, and no one can accurately predict corrections.
Interestingly, while a significant part of my job involves helping clients define and implement a plan, ensuring efficient execution, maximising tax allowances, and conducting effective asset allocation and regular portfolio rebalancing, over half of it is behavioural—preventing clients from reacting to short-term news “shocks,” maintaining a long-term focus, serving as a sounding board, and emphasising the necessary trade-offs.
With proper planning, we can all have anything, but maybe not everything.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances. You are advised to seek independent tax advice from suitably qualified professionals before making any decision as to the tax implications of any investment.