Financial planning can be confusing

Hi, Mr. Tan,
I spent two hours with an insurance agent to do a financial planning exercise. We went through many projections using different rates of inflation and insurance products. I find the projections to be quite confusing as they produce different results.

To meet my target of retiring at age 60 with a monthly income of $x (adjusted for inflation), I have to save $y (about 30% of my salary) each month. I cannot afford to save this amount. If I save a smaller sum, I need to invest my savings more agressively to earn 10% per year. Is this realistic? Can you advice?

REPLY
I find this approach to be quite speculative. The results differ according to the assumptions on:
a) inflation
b) investment return
c) period of investment (or retirement age)

Here are my general tips:
a) Save 10% to 15% of your monthly salary, if your budget is tight
b) Save more, if your regular expenses take a smaller share of your salary (for singles and high earners)
c) Invest your savings in a low cost, diversified fund
d) Buy low cost insurance, to provide a payment in event of premature death
e) Retire at an age when your accumulated savings (with yield) is sufficient to meet your future lifetime expenses
f) Be flexible on your retirement age and the amount of retirement income (i.e. live within your means)

Using my guidelines, you will be able to retire quite comfortably at the age of 65 years. You can retire earlier, if you are prepared to accept a more frugal lifestyle.

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