If you look at the life of 100 first jobbers at the age of 25 today and follow up their financial status or wealth when they reach 65 years, can you guess how many people out of 100 will achieve their financial goals? Think about the number in your mind before you see the answer.

What’s the number in your mind? Do you think all those 100 people will achieve financial success? One of most people's goals tends to be financial stuff. Everyone (if not born rich), more or less, seems to dream of wealth.

                In fact, of all 100 people* 

                Only 1 person will be rich**

                16 People gain average income higher than average people***

                45 People gain income as much as the average income of general                          people

                22 People can take care of themselves but gain lower income than                        average

               6 People are poor and still work hard, are not able to retire

                10 People have insufficient income and need help or government                          welfare

Source*: Building Financial Success was written by Paul J. Mayer

** Groups of those who are standard wealthy are counted by Financial assets, investment and savings account from 30 million baht up as follows:

1. Millionaire group: 30 – 150 MB (US$ 1 – 5 M)
 

2. High Net Worth Individual, HNWI: 150 – 1,000 MB (> US$ 5 – 30 M)

3. Ultra-HNWI: > 1,000 MB (> US$ 30 M)

*** Survey of Socio-economic conditions of Thai households over the first 6 months in 2019 found that households nationwide earned average income at 26,371 baht per month.

How do you feel when seeing those numbers? Looking back to when you were 25 years and just started working, did you expect or dream how the end of your life will be? Will you be elderly who can’t retire? Or, will you be elderly who retires with financial difficulties? Believe it or not! Nobody would ever imagine they will face financial failure at the end of life. So, what factor makes different financial success to those 100 people. Here are some reasons that people don’t have sufficient retirement money:

Too late to start saving money: Most people think that retirement is too far to plan and they still have time so they defer starting saving for their retirement. It may be close to the retirement year when they realize about saving and that will lead to insufficient money until the last day of their life. Most people think about saving for retirement at the age of 40 years up and that seems fine. Anyway, it’s better to start saving when you reach 30 years old or it’s best when you start working. When start saving money earlier, the amount of money will be less than when starting later because you will continually receive interest rate over the period of saving.

What to do if you know you start saving money too late?

Knowing it’s too late better than not knowing at all because it’s never too late to save money for retirement. However, you need to save more money if the period of saving or investment is short. Thus, you need to review your income and expenses and manage sufficient savings to achieve retirement goals. If there’s not enough, you’d better increase your income, reduce expenses to add your savings amount.

Too little savings: Most people save money as much as or not more than The Revenue Department offering tax privileges such as investing in Provident Fund 2-15% per year, investing in Retirement Mutual Fund at a maximum of 30% of annual income. Also, when combining Provident Fund, Saving Fund, and Pension Insurance, the total amount must not exceed 500,000 baht. People normally save money or invest to gain tax privilege and most of them don’t know whether all those money will be sufficient for spending after their retirement.

Our suggestion is to estimate how much money you will need to spend per month after retirement, and how many years you are able to use that retirement money. For example, you need 20,000 baht per month for 20 years after retirement, then you should have about 4.8 MB (20,000 x 12 x 20) to cover the retirement period, and that excludes inflation impact. As the calculation by adding inflation and the money value in the future is quite complicated, we recommend that you access the website of The Stocks Exchange of Thailand to study the calculation of retirement fund programs for better preparation and effective planning.

Too conservative investment: Most people tend to be afraid of taking a risk and worry about losing the principle so they take their retirement savings to invest in conservative ways like Bank, Savings Cooperatives, Government Savings Bank lottery, Bond investment, Debenture, or investment in Money Fund or Fixed Income Fund which now generates 0.25-3% profit. Those traditional investments can’t win over inflation and your retirement savings may not grow and not be sufficient.

If you basically understand the investment, you will know that long-term investment can cope with more risk. Your savings for retirement in the next 10-30 years can be invested with moderate to high risk. Investment for retirement should be at least 10-15%. Therefore, investors should not panic about risk because having insufficient money after retirement is much more threatening.

In summary, setting a retirement plan is the preparation of money to spend during your retirement period in line with the cost of living standard and particular conditions of an individual. The earlier, the better. Have you come up with any plan for your retirement?

 

Nipapun Poonsateansup CFP®, ACC

Independent Finance Planner and Public Speaker