What Are Retirement Goals?
Setting "retirement goals" means determining the financial resources needed to maintain your lifestyle after leaving the workforce. This process involves key decisions such as:
When you want to retire,
Where you want to live (current home, new home, and preferred location), and
How you envision your retirement (traveling, supporting family, or maintaining a specific lifestyle).
Understanding the Need
Once you define your retirement goals, the next step is estimating the capital required to achieve them.
Retirement marks a major financial transition where income from employment ceases, making it essential to have accumulated investments or alternative income sources (e.g. rental income).
With longer life expectancy and economic uncertainties, financial planning should include safety margins to help achieve long-term security and preserve wealth.
Factors to Consider in Retirement Planning
Your approach to retirement planning depends on your stage in life. While the strategies vary, one constant remains: the earlier you start planning, the more options you have to reach your retirement goals.
Rather than focusing on specific age brackets, it’s important to adapt strategies to different life stages. Those early in their careers can focus on long-term investment strategies, while individuals nearing retirement should prioritize financial security and capital preservation.
For a young person (20s, 30s):
Time horizon: With up to 40 years until retirement, you do not need precise goals, just general targets. You have ample time to achieve your goals even if they change over time.
Risk Tolerance: You can afford to take high investment risks as you have ample time to recover from market shocks.
Starting amount: A small, modest starting amount is enough. You may need capital to buy a home or pay for weddings, but you have ample time to save the required capital for retirement.
For someone approaching retirement age (late 50s, early 60s):
Time horizon: With just five to 10 years until retirement, your spending needs in retirement are clearer and more predictable.
Risk tolerance: As your capital is the main source of income during retirement, there is less scope to take risks.
Starting amount: You will need a substantial amount, but you would have already paid for the largest expenditures (e.g. home or children’s education), so you can accumulate substantial savings.
How to Invest for Retirement
The first step is saving. Putting money aside monthly is the most important part of retirement planning. The next step is to invest it to meet your financial goals.
With careful portfolio allocation, investments can help individuals accumulate the necessary capital while mitigating market risks.
In a low-interest-rate environment, a well-structured investment approach is essential. Suppose your goal is to have $1 million when you retire. If you invest in a savings account that earns 3% annually, you must save around $1,200 monthly for 38 years to meet your goal.
But if you invest in a portfolio that earns 8% annually, you can achieve your goal 16 years earlier. Alternatively, you need to save just $360 monthly over the same 38-year period and spend $860 more as you please.
How Much Do You Need to Retire?
Determining how much you need for retirement depends on various factors, including your lifestyle, expected expenses, and investment returns. Our Retirement Calculator helps you estimate the necessary capital by assessing your current assets, projected income, and financial goals. Use it to create a tailored investment strategy and stay on track to retire with confidence.
Plan Your Retirement with The Family Office
The Family Office provides tailored investment strategies to help you build a resilient retirement plan. Contact us today to explore investment solutions that align with your long-term financial aspirations.