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Every time when we talk about retirement, we will surely touch on the financial part of retirement.

If we have not prepared and saved well in our early working life to prepare for a healthy and sustainable retirement, we will face a lot of money issues in our retirement.

The main challenge is how to manage our retirement money when we retire.

If we have not prepared well in our earlier working life in investing well our money and setting aside enough for our retirement, we will face question of whether we have enough in our bank to last for our retirement,

Assuming we are retiring at the age of 60 and the average life expectancy is 85, which mean we will have to make sure we have enough savings to last 25 years of retirement life.

1. To Determine and Allocate How Much Is Required For Retirement.

With the life expectancy of 85 years and with at least 25 years to live in retirement, we have to plan for this next phase of life.

One of the things a retiree needs to assess if how much he and his life partner spend in their normal daily life and how much they expect to spend in the retiring years ahead.

If we can maintain a record of our daily spending and summarize monthly expenses will help in our planning for our retirement.

2. Ensure Flexibility In Our Planning. 

A financial plan must be able to adjust in accordance with the situation and the need when necessary, if we do not have a flexible financial plan, we will encounter difficulty and frustration later on when we are faced with some situation and realize the plan does not work.

Some of us may just give up, actually if we have ensured we can adjust the plan accordingly, we will be able to move on and continue our enjoyment of retirement.

The main reason to have a flexible financial planning is to adjust the daily spending in retirement and the cash requirement as time go on in our retirement.

3. Must Have Some Cash Surplus Or Cushion

Since we are not able to control the return on our investment for the cash we have had for our retirement due to the volatile market condition if we invest our retirement fund in certain market and hope for good return, even the best portfolio manager may not be able to generate the kind of returns we desire.

Therefore, we must have a cash surplus to cushion our expenses for at least 5 to 8 years of our living expenses, managing our daily expenses and ensuring the return on investment, which is pretty much depending on how much risk we are willing to take.

Once we establish the level of cash surplus cushion we are comfortable with, we can plan accordingly in term of our investment and adjust the portfolio accordingly.

4. Allocation Of Cash Reserve.

When we retire, we must allocate our cash reserve into three main categories, mainly:

  1. Short term requirement.
  2. Medium term requirement.
  3. Long term requirement.

A. Short Term Requirement.

The short term planning requires us to set aside the cash which we need in our immediate and short term use, hence the amount of liquid cash we place to generate return will be very competitive and we need to shop around for a good return.

B. Medium Term Requirement.

The medium term requirement is to set aside our cash requirement within the 6th year to 10 years and we must plan for the return for this cash to ensure it generates enough return for our use from 6ht year onward

C. Long Term Requirement.

Since this is the long term cash requirement which we will set aside beyond the 10th years which we only touch the reserve on the 11th year, since it is a long term requirement, we can take a more moderate investment risk on this cash.

5. Investment Porfolio Mix : Income vs Risk.

Normally for people who have low investment risk, they will prefer to just put the money in the bank as fixed deposit and collect fixed deposit income, this may be a good money management if the bank interest rate is high as in the early 1980s.

In this low bank interest environment, it is not a very good way to manage the fund for retirement as the interest generated may not be enough for our retirement needs.

We may have to consider investment in government bond which offer a better rate than the bank deposit interest and also allocate our portfolio and investment mix in accordance with our planning.

Assets allocation for retirement involves a very detailed study and we may have to engage a professional to discuss and plan with them on the needs and how best to allocate the funds for investment so as to generate the type of returns we are looking for.

6. Shall We Invest In Stocks?

The fund which we are not going to dip into for a number of years can be considered as a mix of equity and fixed income investment.

The fixed income portion is to act as the cushion and some sort of safety nest in the volatile equity market.

If we can engage a good fund manager to help to invest our long term fund with high quality, dividend paying equity and some other high quality instrument in the financial and capital market, this will be quite an ideal situation.

7. Consolidate our investment and income streams.

After we have done all our three steps of cash allocation and investment based on our risk adverse profile, we have to take stock of our income and to determine how to shift and re balance our investment portfolio, as I mentioned earlier, we need to have a flexible plan, this is one of the method to ensure all our investment's income.

We have to ensure a reasonable growth of our investment and do not try to outperform and aim for some investment goal and ended up taking unnecessary risk on our investment.

Once we are comfortable with the rate of returns we are achieving for our three investment funds, we should be able to live out our retirement in a worried free and sustainable life style we are looking for.

For those who are eager to learn more about how to manage retirement money, and if you do not want to engage a professional, you may like to find some books to read up, these books are readily available at Amazon.
If you have any questions or suggestion, please feel free to leave your comments and suggestion below and I will be more than happy to answer and help out whatever way I can.