Three key questions to discuss with your wealth manager when planning your retirement

AAM Three key questions to discuss with your wealth manager when planning your retirement

Question 1: How long will I live and need an income for?

It’s common practice to use government statistics when considering life expectancy. However, there is a danger in being led by averages and defaults. One approach to consider is to position the question in more relatable terms: ‘Might I live longer than expected and, if so, will my income last long enough?

No one likes to think about their death, but when they do, most under-estimate how long they may live. This presents a problem where they live longer than their money.

There are three key factors to help identify a more realistic life expectancy:

Health: What about genetics and family history?

Lifestyle: Although genetics have a major effect on life expectancy; the most important factor is your lifestyle: in particular, smoking, drinking and lack of exercise.

History: Life expectancy is increasing, and each generation is living longer than the last. The average 65 year old man in Singapore is expected to live until the age of 81, and the average woman to 85*.

You could think of retirement income in the terms of pay packets. You could work out how many you are going to get in your working life, and do the same for retirement income until death. Even if you have a realistic assumption in mind about the number of pay packets you may need to generate throughout your retired life, the implications of living longer are a whole different ball game.

AAM making it last

Question 2: How much income do I need for the retirement I want?

To answer this question, you first need to think: ‘What am I planning to do with the rest of my life?’.

Most people find it incredibly hard to understand what they actually might need. Visualising a long-term plan is hard enough on its own without having to work out what elements of the plan are going to cost along the way.

Smiling all the way

The profile of retirement income can be characterised by the ‘smile’ graph below, tracing the varying requirements at different stages of your journey in retirement. It shows how expenditure is typically higher in the early years to fund a more active lifestyle, and at the later stages when the cost of care can be a significant factor.

aam different stages of retirement

Expenditure categories

A surprising number of people approaching retirement are confused by the complexity of working out exactly what they will need in terms of an income once they have retired. Many decisions and conclusions are likely to favour the near future whilst ignoring the long term.

By breaking down costs into three manageable categories, it becomes easier to visualize both what you need and the potential consequences of trading off one expenditure for another.

hierachy of income

Question 3: Is my money going to run out….Before I do?

Most retirees are most concerned as to whether they will have enough money to live on or meet their lifestyle aspirations.

To risk or not?

Expecting a relatively high income from a relatively low-returning portfolio over a long period of time will expose you to the risk that your money will run out altogether.

It would seem natural to de-risk an investment strategy upon retirement. However, this strategy may not provide the level of return that is required to meet specific income needs over the long term.

Equities are generally seen as the most obvious asset class likely to provide a reasonable level of income over the long term. However, higher returning asset classes often come with enhanced volatility, which can expose your retirement income to a new set of risks, namely:

Sequence of returns risk: where taking an income from an investment portfolio dampens positive returns and accelerates any negative return. This makes it harder to recover from losses when markets rise.

Market risk: is the risk of when bad returns occur. The earlier they come within the lifetime of an investment, the worse they affect the investor. This effect is amplified by taking an income from the investment.

The sequence of income

However, just as important a risk as ‘sequence of returns’ is what we refer to as ‘the sequence of income;’. This brings another set of crucial considerations that could accelerate how soon your money could run out.

  • How much income is required? – Too much too soon?
  • How is it paid? – From income, capital or total returns?
  • When is it paid? – In a falling or rising market?

Your wealth manager can help determine your personalised risk strategies. Once set, the strategies will need to be reviewed regularly against your changing needs.

To increase the chances of you having a sustainable income in retirement, it’s essential that you speak to your wealth manager to find the right investment strategy for your retirement.

In an increasingly complex and competitive world, expert pensions advice is key to securing your future. So contact us today for a free financial planning consultation and get all your financial affairs in order.

*https://Www.Singstat.Gov.Sg/Find-Data/Search-By-Theme/Population/Death-And-Life-Expectancy/Latest-Data

Important information

This article is intended for general circulation and information purposes only. It may not be published, circulated, reproduced or distributed in whole or part to any other person without prior consent of AAM. This article should not be construed as an offer, solicitation of an offer, a recommendation or provision of financial advice. The information does not take into account the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a licensed financial adviser before making any decisions. Whilst we have taken all reasonable care to ensure that the information contained in this article is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness. Any opinion or estimate contained in this article is subject to change without notice. AAM Advisory Pte Ltd is licensed by the Monetary Authority of Singapore, FA Licence no. 100032.

Request a complimentary consultation



    I am interested in
    Education fee planning,Family protection and insurances,Tax effective savings and investments,Pension audit / retirement planning,Property and mortgages,Wills and estate planning,General financial review

    By submitting this form you agree to sending your information to AAM Advisory and for a representative of AAM Advisory to contact you.

    International Adviser, Best Practice Adviser Awards (Singapore)

    We were winners in the following categories:

    1. Excellence In Professional Development (2019)
    2. Best Adviser Firm, by Region (2018)
    3. Excellence In Operational Efficiency (2018)
    4. Excellence In Professional Development (2018)
    5. Excellence In Marketing & Client Engagement (2017)
    6. Excellence In Social Media (2017)
    7. Excellence In Investment Planning (2016) 
    8. Excellence In Professional Development (2016)

    Expat Living Reader’s Choice

    We were Silver Winners, winning best Financial Planning company
    AAM Expat Living Silver Winner Best Financial Planning

    Singapore Financial Advice Guide

    AAM Singapore Financial Advice Guide 2020-01

    Request our complimentary Singapore Financial Advice Guide, over 60 pages of essential information for Singapore residents and all newcomers.