Steps to take to prepare for your second career:
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No parent has a manual on being the perfect parent and/or raising smart and successful kids. But I guess science may have an answer.
Drink, Drank, Drunk. It's the holiday cocktails!! Engaged, interested parents early in their life is what matters for kids. Talking, listening, reading to them, along with teaching them, all are important activities that will give your kid a better outcome later in life.
Also regular bedtimes are important. Leisure reading between 5 and 10, will also lead to better scores later in life. Disclaimer: This is entirely my own opinion, and I am not a trained financial consultant/ adviser. If you want me to recommend you one, I have some friends who would love to render professional financial advice. Was thinking further about Retiring and how to plan for it, and I felt I should share some of my thoughts on it. Have a Plan You've got to have a retirement plan covering the following: (a) Retirement Income CPF Life is something that most of us will have to grapple with. We've got 3 plans to choose from: Standard, Basic, Escalating. Depending on your plans for legacy planning as well as investments you have to choose. More legacy means going with the Basic plan. Dealing with inflation without using your investments would mean choosing Escalating. Beyond CPF Life, if you have some money lying around you can consider an annuity (CPF Life is essentially a pretty good annuity). There are many different kinds:
You can also consider owning property (residential, commercial, industrial) for retirement income. However, properties have hidden costs. Property tax, income tax (rental income is taxable), maintenance fees (or S&C charges), sinking fund fees, actual maintenance of wear and tear (e.g. pest control, plumbing, aircon), and real estate agent fees. The problem is planning for retirement is that your numbers are based on averages, so if you are basing it on averages and planning to entirely draw down from savings, you might run out sooner than you think. I'm a kiasu investor so I try to leave some margin of error in my planned savings, so better add some income as well. (b) Investing after Retirement Your investing should be shifting towards a more conservative strategy. The normal rule is to use 100 (your expected maximum age) and minus your current age. So if you're 38, your holdings should be 62% in stocks and 38% in safer options like bonds and cash. You can use these asset allocation calculators to get an idea (Bankrate and CNN). Although sometimes they recommend using 110 or 120 owing to longer life expectancy. Essentially you're going to shift to blue chip high dividend stocks, REITs, and bonds to give your further income to supplement you basic CPF Life income. The goal is no longer aggressive growth but a more cautious strategy so that you do not get wiped when the market goes down. Also remember that if you buy ETFs or Mutual Funds or Unit Trusts, there are fees to be paid out. If you put $1 million in for 30 years with a 5% return, through the power compounding, you should get about $4.3 million. But with operating fees this is what you get (I did not count sales load or redemption cost):
So remember pick funds with lower fees. Otherwise you're just feeding the moral hazard machine (i.e. fund managers and banker wankers). You can do the math using this calculator. (c) Taxes Just because you are retired doesn't mean you don't have taxes to pay. Remember that CPF Life payouts are not taxable, nor are annuity payouts (unless it falls within one of the 3 conditions). Dividends are similarly non-taxable (with exceptions). It's not complicated like the US system, so be thankful (unless your a tax professional than curse away). But if you've utilised the SRS scheme or have other sources of income, you will need to account for it as a cost. Unless you can keep it under $20,000 per annum. Then you're good. (d) Health matter We sometimes to forget to calculate healthcare into old age. But it is inevitable. Outside of the Critical Illnesses riders that insurers like to push on you (which may or may not be good), there are also other things to consider. Medishield Life premiums have to be paid. Integrated Shield plans have to be paid (see here for all available plans). Eldershield plans have to be paid. Eldershield Supplement plans have to be paid. All of these are costs, and they are really important to protect you in old age. (e) Legacy planning All that planning will go to waste if you're not looking at your legacy. Who's the money going to? The properties? Did you do a reverse mortgage/ lease buyback (i.e. no property to give)? Not only that, sometimes you have to update the plan (especially Wills). Things to consider:
This topic can take a whole other section to go through. When I have time I will try to do a quick guide to this. 3 Things to Think about to ensure lasting Financial Changes
Some things to think about as the new year roles around. Some ways to use biases to your favour in negotiation:
Buzzfeed had a list of 24 things that we should have been told about having kids. I think it's pretty true for me.
Don't do the following if we want to help our kids to succeed:
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AuthorLate 30s. Dad. Thinking about life, family, work, and retirement. Sharing those thoughts with others Categories
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May 2018
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