Thinking of retiring? Retirement days is there to come. The sooner you welcome the idea of planning your own retirement, the better off you are in embracing your retirement days. The earlier you prepare your own retirement days, the greater opportunity you will have in realizing the retirement of your vision or dream. We elaborate the concept and steps of planning your own retirement in the NOW i KNOW ! Cikaldana newsletter number 2015-03.

1. NOW i KNOW !
Newsletter No. 03-2015
By the time it comes, you want to see
retirement as a gift you give yourself.
How well have you prepared for it?
Let us vision ourself way ahead of our time. Let us imagine
what we are at 10, 15, or even 20 years from now. What will
likely happen to us during that time. Nobody knows! Nobody
knows what the future holds, and yet to have imagination on
what our future be, is worthy to think than to be in a blank.
This article tries to bring us thinking of our life forward into
the future, to envisage one of a stage in our life many refer to
it as a “retirement period”. We are to identify what we could
possibly come to pass in that period, and to discuss what
could be prepared today to embrace that future.

2. Apart from whether we are now working in a
company, running our own business, being a
professsional, or working-at-home mom; we may
face a period where our physicals need to pace
down from working beat. A retirement period.
We can define retirement as a period of no longer
working for a company at a certain retirement age
defined by the company, let’s say at the age of 55,
60 or even 65 years old. Let us use this working
age limit as reference for our next discussion in this
article.
What will our retirement be look like?
There are at least four possible conditions on how
a person would live their retirement period.
 First, working still. This person sees work as an
unseparated part of his/her life. This person will
always work during his/her retirement period.
This type of person enjoy working so much that
they do not even consider retiring.
 Second, person who enjoy their retirement
period by doing a considerably less demanding
activities like gardening, farming, etc. Though
simple it may sound, living this kind of
retirement wouldn’t be that easy. We have to
continuously have activities that are challenging
to the physicals, intellectual and creativity.
 Third, half work half retired or part-time retired.
There are people that want to enjoy the
retirement and also want to keep working and
be satisfied with the works done. Both status
give satisfaction and balance of life for people
retiring under this category.
2
Saving for Retirement
Have a clear idea of where you are and where you want
to be in your retirement period.
 Fourth, established retirement. People retiring
under this category usually fulfill their retirement
period with voluntary activities. This type of
retirement require an established financial
conditions, that these people can work
voluntarily without expecting a pay or income.
These people get their self satisfactions by
helping others out from their workings.
Now, what kind of retirement do we want to
be? We could come up with infinite ideas of
living our retirement.
In any kind of retirement that we are envisioning,
it’s a good idea have it prepared, in particular
prepared financially. Many of us can agree that we
need to have enough savings for our retirement.
Why so? There are at least for reasons that a
retirement saving is needed by everyone:
 Increasing needs in life, which will be followed
by an increased in cost of living.
 Longer life expectancy on modern human being
as medical knowledge and technological
advances, resulting a longer retirement period.
 Higher risk to illness as people gets older.
 Want to be independent in older age, not
dependent to children or families.
If we can agree with those reasons, planning a
savings for our retirement would be one way of
preparing ourself to live our retirement. The kind of
retirement that we want to live determines the
amount of saving needs to be prepared.
2

3. Retirement Planning Concept
One of the aspects in retirement planning is the
establishment of the retirement savings or retire-
ment fund. Retirement Fund is a fund that we esta-
blish with purpose to fulfil our needs during our
retirement period.
In planning our retirement, we can recognise the
two periods in our life, which periods we will call
them as:
 The first period: Welcoming the Retirement Era
 The second period: Living the Retirement Era
23
Welcoming the Retirement Era
The first period, Welcoming the Retirement Era, is
a period between now and our retirement age. In
this period, we have two ages that we need to take
close attention to, they are our ‘current age’ and our
‘retirement age’. During this period, we are consi-
dered as a productive person, in a sense that we
are working and making income.
Welcoming the Retirement Era is a period where
we should have envisioned what kind of retirement
we want to have. A period where a retirement fund
should have been established. A period where
ideally we would have been saving for living
retirement.
The earlier that we welcome this retirement age,
the more opportunity we get to have a retirement of
our vision.
Welcoming the
Retirement Era
Living the
Retirement Era
Retirement
Age
End of Retirement
Age
Current
Age
Illustration: Two Periods in the Concept of Retirement Planning

4. 34
Living the Retirement Era
The second period, Living the Retirement Era, is a
period between the retirement age and the end-of-
retirement age. End-of-retirement age is the age
when we plan to end our retirement living, or some
others simply refer to as the age we are likely to
rest in peace.
The end of retirement age determines how long we
are living the retirement era. The longer duration of
living the retirement era, the more cost of living
retirement we would need to prepare.
Now that we know the two horizons of time in our
life above described, the two key objectives of plan-
ning the retirement fund are:
1. We need to have enough retirement fund at
retirement age, enough to cover living-cost
expenses during Living the Retirement Era;
2. We need to establish a retirement fund during
the Welcoming Retirement Era, or while we
are productive. Establishing a retirement fund
can be achieved, one way, by saving and
investing.
As we now understand the concept of retirement
planning, we can now address on how we plan for
achieving enough retirement fund.
Planning Our Retirement Fund
Assuming a living cost inflation of 8.00% per year and
applying the compounding formula, our current yearly
living-cost expenses of Rp 100 million will likely
increase to Rp 466 million when we reach the age of
60 years old.
This living-cost expenses will continue to increase
reaching to almost one-and-a-half billion rupiah,
Rp1,479 million per year, at our 75 years’ age. See
diagram below for an illustration of our living-cost
expenses’ projection.
There are two planning
stages in the retirement fund
planning. The first stage is
planning for Living the
Retirement Era; and the
second stage is planning for
Welcoming the Retirement
Era.
The key objective of the first
stage planning is to deter-
mine how much amount of fund will be needed at
retirement age, amount that is enough for us to
living the retirement era. The key objective of the
second stage planning is to determine how much
money to save, so that we can achieve that amount
of fund said at the retirement age.
First Stage, Planning for Living the
Retirement Era
We start the first stage of planning by first answering
several questions below. We are going to assume the
answer too, to enable us to calculate the numbers
later on.
1. What age are we now? (say, 40 years old).
2. What age are we going to start living in retirement
- our retirement age? (say, 60 years old).
3. When, at what age, are we planning to end living
our retirement? (say, 75 years old).
4. What is the level of our current living-cost
expenses? (say, Rp 100 million a year).
Once we have the answers to those questions, we
can calculate how much fund we need to have at our
retirement age, sufficient to cover our living-cost
expenses during our 60 to 75 years old.
Knowing the ever increasing of living-cost
expenses during our “Living the Retirement Era”,
the next thing we need to find out is how much
money we will need to have at our 60 years old,
so that amount of money will be enough to pay our
living-cost expenses until our age of 75?
100
147
216
317
466
685
1,006
1,479
40 45 50 55 60 65 70 75
Age (years old)
Living-cost Expenses Per Year, Projection by Age
(in million Rp)

5. 35
Assuming that we plan to saving or investing our
money from zero, and into investment products
with potential long-term return of 20.00% a year,
we can calculate that it is possible to achieve that
eight billion rupiah at our age of 60 years old by
investing for a lumpsum amount of about
Rp213,200,000 starting from now.
If we prefer to invest regularly and in a smaller
amount of money, alternatively we can do it also
by investing annually in an amount of about
Rp36,500,000 or by investing monthly in an
amount of about Rp2,600,000.
Assuming that the sum money we have at 60 years
old later is to be put into savings with an interest of
5.00% a year, we can calculate that the amount of
fund we need to have at our 60 years old will be
about Rp 8 billion. Yes, eight billion rupiah!
The plan’s idea is that, we would use-up that eight
billion rupiah of retirement fund during the fifteen
years’ period of our “Living the Retirement Era”,
from age 60 to 75. Starting from age 60, we will
regularly withdraw some pre-determined amount of
money from our established retirement fund
savings, to pay for our living-cost expenses.
As we spend the eight billion rupiahs, the remaining
balance of our retirement saving will decline every
year and it is planned to be completely used-up at
the age of 75, which age is our planned ‘end-of
retirement’ era. The diagram below illustrates the
balance of our retirement fund over Living the
Retirement Era.
Second Stage, Planning for Welcoming
the Retirement Era
By now, we know that we need about Rp 8 billion
(or Rp 8,170,000,000 to be more exact). The
second stage of planning is to determine on how
we are to achieve that amount of fund.
Assuming that we start preparing the retirement
fund from now - at our current age, assumed 40
years old, by calculation we have 20 years of time
to prepare the retirement fund, until our age of 60.
Preparing to achieve the needed Rp 8 billion of
retirement fund for a period of 20 years, one way is
by doing the saving activities. Saving for a 20
years’ period is considered a long term saving.
When saving for long term, general recommen-
dation is to saving into investment products which
potentially can make considerable returns to our
saving or investment.
Now we know the numbers. We also know the
options of investing amount that we can choose
from, to suit our condition or convenience. The next
step is finding out the suitable investment products
and thus execute our investing activities according
to the plan.
The concept, planning steps and calculations
elaborated in this article can be exercised using
other age assumption, other investment return
assumption, and other assumptions. Calculations
made here are all done using basic compounding
and TVM (time value of money) formulas which you
can find them easily online.
Retirement is one of a moment in life, just like birth
or marriage. The better we are prepared for it, the
closer that it could happen according to our dream.
With a strong willingness and commitment in the
planning and execution, any vision and dream on
how we are to living our retirement, is not
unachievable.
PT Cikaldana Korpora  Sovereign Plaza 21st Floor, Jl. TB Simatupang Kav.36, Jakarta 12430
P: +62 21 2939 8727  F: +62 21 2939 8898  www.cikaldana.com  E-mail: contact@cikaldana.com
By Iswin Hudiarto
The writer is Principal Financial Planner and
Director of Cikaldana Financial Advisory.
8,170 8,113 8,015 7,872 7,678
7,428
7,115
6,731
6,269
5,719
5,073
4,321
3,450
2,449
1,304
(0)
60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75
Age (years old)
Projected Balance of Our Retirement Fund, by Age (in million Rp)
Option-1 Option-2 Option-3
Lumpsum Investing Investing
Investing Annually Monthly
Rp 213,200,000 Rp 36,500,000 Rp 2,600,000
Investing Target:
Rp 8,170,000,000
investing for 20 years period, with an assumed return of 20% per year