Retirement is pictured as an idyllic time when you can finally kick back and relax after years of hard work.
Not only can you pursue your hobbies and passions, but you also have time for building strong social relationships that will provide happiness and fulfilment.
If you wish to achieve this ideal state, you must plan for your retirement.
With recent news headlines talking about inflation and economic uncertainty, it’s not unusual to feel worried that your dream retirement may be at risk.
Inflation will erode the value of your savings while an economic downturn may lead to job losses and a chance that your investments will decline in value.
To make things worse, surging interest rates are also another bugbear, causing mortgages to cost much more than they did a year ago.
If you’re wondering if you can ever retire comfortably, read on to find out.
Rubbing sandpaper over your money
I remember my Design and Technology class in secondary school when I had to work with wood to design a large keychain.
To ensure the wood was smooth, we sandpapered the surface multiple times.
Inflation is similar to running sandpaper over your money as it erodes the value of its purchasing power.
Core inflation is running at 5.5% in January this year and has hit a 14-year high.
For 2023, the central bank and ministry of trade and industry expect core inflation to remain elevated at between 3.5% and 4.5%.
Keeping your money in the bank earns you a pittance of interest income.
Instead, you should consider investing your money in a mix of growth and dividend-paying stocks.
By doing so, you will not only ensure that your wealth can keep pace with inflation, but you can also grow it to a sizable sum in preparation for your golden years.
Disciplined and patient growth
The great thing about investing is that you can decide how much you wish to allocate at any point in time, giving you the flexibility to carry out your investment plan.
You should select reliable businesses that you understand well to provide you with peace of mind and comfort.
And when it comes to growth, there is no lack of choices out there, depending on where you wish to park your money.
Storied names such as sporting giant Nike (NYSE: NKE), global coffee chain Starbucks (NASDAQ: SBUX) and social media giant Meta Platforms (NASDAQ: META) are some examples of US growth stocks.
Back home, you can seek out strong blue-chip names such as OCBC Ltd (SGX: O39), CapitaLand Investment Limited (SGX: 9CI) and Venture Corporation Limited (SGX: V03).
If you are more adventurous, you can target smaller companies that could grow faster, such as iFAST Corporation Limited (SGX: AIY) and AEM Holdings (SGX: AWX).
By allocating money regularly to some of these names, you can slowly but surely grow your investment portfolio to a sizable sum.
Building a resilient income stream
Aside from building and growing your cash stash, it’s also important to build a passive income stream that can sustain your retirement years.
Here is where dividend-paying stocks come in.
By parking some money in dependable dividend stocks and REITs, you can start generating a stream of cash that will flow directly into your bank account.
REITs, in particular, are perfect for income-seeking investors as they are required to pay out at least 90% of their profits as distributions.
Some examples of well-managed REITs with strong track records include Parkway Life REIT (SGX: C2PU), Mapletree Logistics Trust (SGX: M44U), Keppel DC REIT (SGX: AJBU) and Frasers Centrepoint Trust (SGX: J69U).
Some REITs pay out quarterly distributions while others dole them out half-yearly.
If you are looking to diversify your portfolio into dividend-paying non-REIT stocks, you can look at companies such as VICOM Limited (SGX: WJP), Boustead Singapore Limited (SGX: F9D) or UMS Holdings (SGX: 558).
Get Smart: Take action to prepare yourself
Investing is not without its risks.
Some of your investments may decline in value while companies and REITs can reduce their dividends during tough times.
Investing is, however, one of the best methods for you to beat inflation and prepare yourself for a comfortable retirement.
If you invest diligently and have the patience to do so over years, you will be surprised at the wealth you can generate.
All it takes is that first step to start putting your money in stocks and to ensure you have the discipline and tenacity to keep at it over months and years.
Want to know what to expect in the stock market in 2023? Which were the best performing stocks and blue chips in the Singapore market in 2022? Be prepared for 2023 with our special FREE report. Click HERE to download “Year in Review 2022”
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Disclosure: Royston Yang owns shares of Nike, Starbucks, Meta Platforms, Keppel DC REIT and iFAST Corporation.