Retirement Planning Tips for Entrepreneurs
In our earlier blog post, some factors to be considered by entrepreneurs when planning for their retirement were discussed, so this blog post will dive straight into a few retirement planning tips that entrepreneurs in Singapore may find useful.
Tip 1: Voluntarily Contribute to CPF and SRS
Voluntarily contributing to one’s own Central Provident Fund (“CPF”) account can be a great way to kick start an entrepreneur’s retirement planning process. To maximise the returns from the funds invested into a CPF account, one may wish to consider engaging an independent financial advisory firm that provides CPF investment consulting service .
Entrepreneurs in Singapore may also consider setting aside more than what voluntary CPF contributions require via schemes such as the Supplementary Retirement Scheme (“SRS”) to boost their retirement funds. 1Similar to CPF contributions, SRS contributions allow an entrepreneur to enjoy tax reliefs.
Tip 2: Aim to Maximise CPF Life in the Retirement Plan
CPF Life is an annuity that pays out a monthly sum of money until death. The monthly amount one receives is based how much CPF amount one manages to set aside upon age 55. Even if one has his/her version of the best retirement plan in place, it is recommended to maximise one’s CPF Life because there is a chance that one may outlive his/her original plan, thus resulting in premature depletion of one’s retirement savings. Since CPF Life only halts payment upon death, one can rest assured knowing that he/she will always have some monthly income.
Tip 3: Invest in Stocks Outside One’s Own Company
Entrepreneurs may wish to seriously consider investing outside of their own company via unit trusts funds, the stock exchange and such, as the resulting diversification prevents all eggs from being contained in one basket. However, diversifying one’s portfolio comes with a number of pros and cons that one may wish to look into.
There are a number of plans available to entrepreneurs that employees may not enjoy, such as having their own business fund their retirement via dividends , or being a salaried adviser to the new business owner.
We understand the definition of ‘best retirement plan’ differs from one person to another depending on his/her preference and circumstances. Here’s an exciting mobile app you may download to explore your retirement funding requirements and options, and how best to cover any retirement funding gaps identified: Financial Compass.
Alternatively, entrepreneurs may wish to go ahead and engage the financial consulting services provided by an independent financial advisory firm to have the best retirement plan tailor-made for them.
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Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs.
Special thanks to Financial Alliance’s Corporate Development Director, MK Chan, and Wealth Management (Economy & Market Strategy) Director, Sani Hamid, and for sharing their knowledge and experience to make this article possible.
-Written by Rachel Teo, Financial Alliance Writing Team