Has the pandemic made you worry about retirement? Here's what you can do

During normal times, remaining disciplined in planning for our retirement is a challenge.

But we live in abnormal times.

The Covid-19 pandemic has introduced an unprecedented level of uncertainty into both financial markets and the economy.

Singapore is not immune to these strong headwinds.

Our nation’s GDP shrank at a slower pace of 7 per cent in the third quarter compared to the sharp 13.3per cent contraction in the previous quarter, but the country is not out of the woods yet.

Singapore’s unemployment rate has risen to 3.6 per cent in the same quarter, a level not seen since 2004.

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The Monetary Authority of Singapore has sounded a downbeat tone, declaring that this recession is poised to be “deeper and likely to be more protracted” than past ones.

This high level of pessimism will naturally cause worries about retirement.

Here are some steps you can take to lighten your psychological burden.

1. Be disciplined in saving

A good savings habit goes a long way to achieving financial independence.

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And there’s no better time to cut back than during this crisis.

Be sure to sock away whatever spare cash you can to prepare for more stormy days.

Savings can help to buffer you against emergencies and tide you over rough times.

The key thing to remember is to always spend less than you earn.

With more savings, you can then consider putting this money to work in sound investments.

2. Keep calm and carry on investing

It’s natural to feel worried and scared as stock markets gyrate violently due to the crisis.

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However, the key is to remain calm and carry on investing.

You should get rid of the negative emotions that hinder you from deploying your capital to earn better returns.

Remember that the best companies have been through multiple crises before and have always emerged stronger.

Thus, you should have faith that investing can allow you to continue to grow your money despite the tough challenges.

3. Aim for growth and dividends

It’s useful to target a healthy mix of growth and dividends when planning for your retirement.

Growth ensures that your investment portfolio can beat the corrosive effects of inflation over the long-term.

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Steady and consistent growth also makes your companies more valuable over time, allowing you to reap capital gains from a rising share price.

Dividends , on the other hand, represent a flow of passive income that puts cold, hard cash into your pockets.

They help to supplement your active income when you are working and can help to replace this income when you plan to retire.

By growing these dividends from a trickle into a gush over time, you are setting yourself up for a healthy inflow of cash during your golden years.

An investment portfolio consisting of an equal mix of growth and dividend stocks represents an attractive two-prong approach for any investor.

4. Diversify and compound

Diversification is important to ensure that you spread out your risks .

Being too concentrated in a particular industry or sector can have severe consequences, as this pandemic has painfully demonstrated.

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Badly-hit industries such as tourism and airlines may take a longer than expected period to recover.

By diversifying, you can also capture growth opportunities in myriad industries rather than confining yourself to just several.

Last but not least, you should continuously seek to compound your investments.

Compounding is the process whereby you reinvest the profits or dividends from your investments into even more investments.

By rinsing and repeating, your investment portfolio will grow into a sizable amount in due course, while your passive income spigot will increase substantially.

Get smart: A bumpy road ahead

Make no mistake, it’s going to be a very bumpy road ahead.

More countries may have to go into lockdown, causing more suffering and financial stress, before we see the light at the end of the tunnel.

You need to dig in, persevere and have the patience to get through these tough times.

The steps above represent a clear roadmap on how you can navigate these challenges and emerge unscathed.

The journey may be arduous, but the rewards are worth gunning for.

This article was first published in The Smart Investor. Disclaimer: Royston Yang does not own shares in any of the companies mentioned.