Are you financially on track for retirement?

I chanced upon this over the weekend and think it is interesting enough to share.

Source: JP Morgan Asset Management

So, according to this, if we are 40 years old and making $75,000 a year, we should have $120,000 put aside for retirement by now.

By putting aside, it doesn't mean just stashing the money in a mattress or a mooncake tin, it means having money in investments which are producing a 7% annual return.

I thought of tweaking this so that it takes into consideration CPF savings. After all, a Singaporean who is 40 years old could have been working for 15 to 20 years already. There could be quite a bit of savings in his CPF account.

Then, I decided not to bother because most Singaporeans will use their CPF savings to pay for their home. How much of their CPF would they utilise and whether they would monetise their home now or in the future is hard to say.

Anyway, this table also assumes that there is a 2.5% annual wage increment (and no chance of any job promotion). There are also the assumptions that the retirement age is 65 and that the accumulated money must last for 30 years of retirement (i.e. till age 95).

In case you are wondering, Singaporean females have a life expectancy of 85 years and males have a life expectancy of 80 years. So, 95 seems to be generously realistic.

Of course, there are probably quite a few holes we can poke in the table above. However, I feel that this table is useful as a wake up call for people who do not have at least what it says we should have in liquid assets at this current point in time earmarked for retirement, excluding CPF savings and emergency funds.

They are probably not saving enough and should take action to improve their financial health quite rapidly. The earlier they realise this, the better. The longer they have to save and invest, the better. If we know of such people and if we could give them a nudge in the right direction, the better.

Related posts:
1. To retire by age 45, start with a plan.
2. How to have a comfortable retirement?
3. IPS Forum on CPF: Housing and the CPF.
4. 5 points you ignore at your own risk.
6. SRS: A brief analysis.

Spotting the next OSIM?

This is freshly taken from TheFinance's wall in FB. I made a few comments and I think this is substantial enough to share with readers who do not follow me on FB:

I have to go out in a while.

Have a good Sunday, everyone.

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