Debugging Myths About Retirement Planning


Debugging Myths About Retirement Planning

Approach retirement without a plan at your own peril. We tap the experience of Shikha Gaur, Executive Director of Aon Hewitt Wealth Management, to learn the safe way to plan for your golden years.

Published on 19 January 2017

Tom (not his real name) is a senior executive who had spent the past 40 years working. At 55, he finally decided he was giving himself five more years before he retired. In line with his goal, he started to review his investments and plan for this next phase of his life – his “30-year holiday” ahead.

When he hit the big 6-0, he spent six months playing golf and traveling, visiting his family scattered around the world. Soon, he grew so bored, he decided to return to work. Thankfully, his previous company was glad to have him back.

“He just couldn’t deal with such a hard stop,” says Shikha Gaur, Executive Director at Aon Hewitt Wealth Management, who specialises in retirement planning. Based on experience, Shikha said that Tom’s situation is reflective of a growing trend where more and more individuals do not wish to retire – they want more options on how best to spend their golden years instead.

“When Tom came back to see us, we had to review his plan and make changes so it could accommodate this development,” says Shikha.

Tom decided he would go back to full-time work for another five years, then evaluate his options again – possibly even continuing with flexible working hours, if his company would allow it. It turned out that his previous company was supportive of his decision.

According to Shikha, this is one of the more positive examples of the trials and tribulations of retirement planning. But for every happy story, there are many unhappy ones – the result of lack of awareness of and planning for what is needed to facilitate this process.

Which is why the services offered by organisations in the likes of Aon Hewitt are important. The company is a global provider of risk management, reinsurance and human resources solutions including retirement consulting for corporates, employees and individuals. Consultants working for its Asia Pacific headquarters in Singapore are experienced at dealing with local and expatriate individual client, and use proprietary internal tools that create financial planning investment roadmaps.

Here, Shikha debugs myths when it comes to preparing for the golden years.

8 Common Myths

Myth: There’s no need to draw up a plan.

Reality: Coming up with a road map is key to retirement planning. Those without one tend to make impulsive and ad-hoc investment decisions and usually end up taking too much risk and getting burnt. Instead, it is best to sit down and think about what financial independence looks to you and then work backwards from there. People are now living longer, and with different lifestyles. However, they are not planning for it. You do not want to find yourself in a situation where your money has run out and you are at an unemployable age. After that plan is drawn up, it is imperative that you have the discipline to stick to it, while at the same time, understanding that plans change and yours might need to be reviewed when necessary. If you fail to plan, you plan to fail.

Myth: I can plan later in my life.

Reality: The best time to start planning for retirement is in your 30s. In fact, remember it is never too early to devise that roadmap. Even if you are in your 20s, you can start by reading up and building an awareness of what it involves. Awareness is the beginning of the financial planning journey, and the key is to change your behaviour. If you get in the habit of saving early in life, it will grow to be a part of you. Plus, you can enjoy the impact of compounding returns year-on-year on your investments.

Myth: Retirement is a hard stop.

Reality: This is a common challenge faced by many 60-somethings. Having worked for about 40 years, what will they do next? The idea of pottering around at home sounds like a luxury but it may not be for everyone. Retirement does not have to be a hard stop. There needs to be a mindset change – it’s all about having the financial freedom to have options.

Myth: I will cut back on my spending in my golden years.

Reality: Typically, people who think they should spend less after retirement generally end up spending the same or more than before. It is likely they will maintain their current standard of living plus have additional costs. The rule of thumb is to ensure you have 75% of your last drawn income to expend every month. It is important that during the planning process you factor in the type of lifestyle you already lead, and allocate enough for your spend during your retirement years without feeling financially restricted.

Myth: Healthcare costs will not be a burden.

Reality: Here’s a scary statistic: In Asia, healthcare costs are increasing at a rate of 15 to 18% year-on-year. Failure to factor this into your retirement plan, coupled with longer life expectancies and an increase in chronic illnesses spell disaster. Never forget to set aside enough for those doctor’s fees, whether it is through health insurance products, or just a bit of cash squirreled away every month.

Myth: I can ignore national savings plan opportunities.

Reality: If you live in Singapore for example, you would have spent your entire career contributing to the national savings plan, the Central Provident Fund. Whilst it can seem to be a complicated system – take time to figure out what you can do with it to better contribute to retirement, which is essentially its main purpose.

Myth: As long as I have assets, I don’t have to worry about their allocation.

Reality: If the bulk of your money is all in cash at present, what rate of return are you attracting? In a similar vein, if all your assets are illiquid at the point of retirement, what will you live on? Be careful to balance their allocation so that some are readily available for encashment, while others can go into long-term investment solutions from which you can draw a monthly income. Having options is important and diversification of your asset base is key. For instance, you might own a lot of property in Singapore and if you needed to sell it immediately to support your income needs, what would you do if it’s not the best time to sell?

Myth: Succession planning is not essential.

Reality: Most of us do not give much or nearly enough thought to succession planning. How do you intend to distribute your hard-earned wealth? Some important questions to consider: How can I preserve my money to pass it to the next generation? If you have created a sound retirement plan, the next step is to look into succession planning.

Shikha Gaur

Executive Director, Aon Hewitt Wealth Management

Sound financial planning is about having the freedom and flexibility to make choices. It is important to understand what those choices are and work through them.


Financial advisors generally have had a bad reputation, namely around hidden, high fees. AON Hewitt are a pioneer of best practice, with transparent fees, no hidden commissions and advisors incentivised to give independent advice not sell products.