Retire well in a high-inflation, high-interest rate environment

OVER the past month, the talk in town has been on rising interest rates and yields of fixed deposits, Singapore Savings Bonds and T-bills. This is not surprising as we have not seen such high returns from cash and near-cash instruments for a long time. And with equities taking a hit this year, financial institutions are touting their fixed deposit accounts and safer products such as retirement income and cash management plans especially to retirees and near-retirees.

But that is the problem when wealth planning is done piecemeal and in a product-based manner depending on the “flavour of the season”. Remember just a few years ago, financial institutions were pushing premium-financed insurance products when interest rates were low? Those who took a loan then and bought such plans could be regretting now. With interest rates rising, some may even find it hard to service the interest payments today.

To decide on the appropriate financial instruments to use and how much money you should allocate to it, we first need to do up an effective retirement plan. This starts with first understanding the risks that retiree and near-retirees face, their lifestyle aspirations, and the current assets they hold.