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ADJUSTING FOR THE SHORTFALL IN RETIREMENT PLANNING

1) Defer Retirement
By post phoning on retirement, you have a longer earning curve thus increasing your saving propensity and reducing your spending.
Besides when you are working, you can travel on company expenses and reimburse by company medical plans when you are sick.

2) Save more before retirement
Increasing the level of savings can help in reducing the shortfall in retirement planning.
Make a commitment to save even more and if that is not possible from your current employment, look for some part-time job or business.

3) Invest for better returns
To enhance your portfolio returns, consider taking a slightly higher risk. Assess the various investment vehicles that can enhance your returns without departing too much from your risk profile.
Some technique you can use include arbitraging. For example, instead of putting your money into fixed deposit in a bank account at 4% per annum, you may consider putting your money into a fixed income fund which may return say 8% per annum.

4) Generate additional income
One way to reduce the shortfall in retirement planning is to increase the sources of income. We called this; multiple sources of income. Sometime you can even rent some of the rooms in your house, if you are not using them, to generate additional income. If you are retired or about to retire, you can also adjust for the shortfall in retirement income by having a Reverse Annuity Mortgage on your house. It is a strategy that is the reverse of the home Mortgage. It involves the house owner who sell the house to the buyer who would pay him in monthly installment. The house would revert to the buyer when the house owner dies. This way, it assist in adjusting for the shortfall and the house owner gets to stay till he dies.

5) Save smarter with tax efficient plans
One of the keys to enhance your retirement income is by going for qualified plans. Qualified plans are tax efficient and enhance total returns. By qualified plans, we mean plans that have tax advantages, favouring the employees and the employers as well as meeting the Inland Revenue Board tax specifications.
Capital gain is usually prefer over revenue item.

6) Spend less at retirement
The general rule in retirement income computation is that you should try to achieve at least 80% of your final average income. By final average salary are mean the last three years income average.
For example, at retirement age of 55 the salary was RM 120,000 and the year before was RM 100,000 and the year preceding was RM 80,000, thus the final average salary is RM 100,000.
According to the general rule, he should have an annual retirement income of at least RM 80,000 per annum. That is RM 100,000 multiple by 80%.

7) Work part-time on retirement
Most people who retired at age 55 years are still healthy. At such, most can continue working to adjust for the shortfall in retirement working. Consider to be an advisor lecturer or any avocation you have experience in.

Jeffrey Chiew Kim Chwee
ChFC, RFC(USA), CLU, LUTCF


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