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Retirement Planning

 

5 Steps to Retirement Planning

Step 1 - Understanding Retirement Needs Step 2 - Risk Tolerance Assessment
Step 3 - Understanding Investment Choices Step 4 - Fund Selection
Step 5 - Regular Review
 
 

Step 1 - Understanding Retirement Needs

You should always set investment goals based on your risk profile, personal needs and life stages instead of trying to time the market. To determine how much you need for retirement, consider the following:

  • Will you own a paid-up property after retirement?
  • Will you receive any income from other family members after retirement?
  • What standard of living are you seeking after retirement?
    		•

    The higher your post-retirement expenses, the more you have to save up for your retirement in an early stage.

     
     

    Step 2 - Risk Tolerance Assessment

    Risk tolerance is the level of risk and uncertainty you are willing to handle amid any negative change to the value of your portfolio. This level normally changes according to your age, financial situation and life circumstances.

    Generally, if you are relatively young and have a long investment horizon, you will have a higher tolerance to risk and you may adopt a more aggressive investment strategy. On the other hand, if you are close to the age of retirement, you will have a lower level of risk tolerance and therefore a more conservative investment strategy. For example, an investor nearing retirement generally has a lower risk tolerance than a 28-year-old manager who has a longer time frame to make up for any losses.

    To assess your own risk tolerance level, take our Risk Assessment Test to see if you are a conservative or a high risk-taker. This will help you decide on a suitable portfolio mix and give you peace of mind.

     
     

    Step 3 - Understanding Investment Choices

    Before deciding on your investments, you should understand the features of each fund option. Every fund has its own investment objectives and instruments, and it is only by understanding them that you may judge whether a particular fund is suitable for you and whether its risk levels are acceptable or not. You can then choose your fund choice according to your risk tolerance level.

    In general, investment instruments of retirement funds include mainly equities, bonds and short-term interest-bearing money market instruments. Factors such as a fund's underlying investment instruments and the markets in which it is invested will affect the fund's risk level.

     
     

    Step 4 - Fund Selection

    You may choose retirement funds that fit your needs based on your investment goals, risk tolerance level and investment horizon. For example, the longer time you have before your retirement, the higher level of risk tolerance you may have. So you may opt for a more aggressive portfolio. For those closer to retirement, they can choose a lower risk investment portfolio with the aim of preserving capital.

    Please see below for the investor profile and portfolio mix...


    Age Range 20-30
    Situation Investor Profile Investment Strategy Portfolio Mix
    Fresh graduateor those who have worked for a few years Willing to assume arelatively higher level of risk to achieve long-termcapital growth Aggressive Equity funds

     

    Age Range 31-40
    Situation Investor Profile Investment Strategy Portfolio Mix
    Planning to get married or buy a new home Willing to assume an above average level of risk to achieve higher returns Growth Mixed asset funds (e.g. 70% of assets in equities and 30% of assets in fixed income securities)

     

    Age Range 41-50
    Situation Investor Profile Investment Strategy Portfolio Mix
    Planning to send children to study overseas Willing to assume a medium level of risk to achieve stable returns Balanced Balanced funds (e.g. 50% of assets in equities and 50% of assets in fixed income securities)

     

    Age Range 51-60
    Situation Investor Profile Investment Strategy Portfolio Mix
    Children grown up and working Willing to assume a relatively low level of risk to achieve stable capital appreciation Conservative Capital stable funds (e.g. 30% of assets in equities and 70% of assets in fixed income securities)

     

    Age Range 61 or above
    Situation Investor Profile Investment Strategy Portfolio Mix
    Approaching retirement Willing to assume the lowest level of risk with primary focus on capital preservation Very conservative Conservative fund


    The above information is for reference only. You should consider your own risk tolerance level and financial circumstances before making investment choices.
     
     

    Step 5 - Regular Review

    Retirement planning is a life-long process. Each time you have reached a milestone in life – such as buying a home, getting married, having children or retiring – it is important to take a look at your portfolio and ask whether it still suits your needs.

    Changes may arise in the market to affect the returns, volatility and prospects of your investments. Regular review of your portfolio allows you to evaluate whether the existing strategy is still keeping you on track to reach your ultimate goals.




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