Like what you read so far on Tri-O Retirement Plan? These are the easy steps to get started.

a. Work out your monthly and annual expenses

We provide a spreadsheet to help you CALCULATE your expenses. You can divide your annual expenses by 12 to let you now how much of your salary you need to side aside monthly to take care of them. Once you worked out your expenses, you can determine the monthly savings you can get (Monthly Savings = Monthly Salary – Expenses).

One way to helping you determine your expenses is to look at past credit card and bank statements to look at your historical spend.

b. Create two more bank accounts for the RESERVES “O” and INVESTMENT “O”

The beauty of having separate bank accounts is that will save you the trouble of manually tracking how much money you have in each “O”. For some, it provides a psychological barrier to dip into these cookie jars when there is a urge to spend more money than budgeted.

Having separate accounts also help you determine if you have budgeted your expenses correctly. As savings are transferred out from the EXPENSES “O” account every month after the monthly salary is credited to RESERVES “O” and INVESTMENT “O”, if expenses is not budgeted correctly, the EXPENSES “O” bank account will go into deficit very quickly.

c. Determine how many months of monthly salary that you will like to set aside in the RESERVES “O”.

Trio Retirement Plan proposes that you top up both RESERVES “O” and INVESTMENT “O” equally from the start until you hit the desired level of RESERVES “O”. For eg, if you have $200 of monthly savings, $100 should go to RESERVES “O” and $100 should go to INVESTMENT “O”. Once the RESERVES “O” is filled up, all the monthly savings can be channeled into INVESTMENT “O”. You can park your money in the RESERVES “O” in fixed deposits, money market funds or short term government bonds. Invest in liquid or short term instruments so that you can tap on the funds when you need them.

If you receive a lump sum bonus, you can use all of it to top up your RESERVES “O” if the desired level has not been achieved. The earlier the desired level of RESERVES “O’ is achieved, more savings can be channeled into the INVESTMENT “O” subsequently.

e. For INVESTMENT “O”, work with a bank or financial institution that allows you to invest in funds and ETF using Regular Savings Plan (RSP).

We recommend that you invest 80% to 90% of your funds in your income portfolio and 10%-20% in your growth portfolio. Your bank or financial institution should have curated or be able to recommend a list of income and growth instruments. Invest in funds that are sizeable (as a guide, at least $1 billion in Asset Under Management) and with reasonable expenses (no more than 1.5% of annual expenses).

f. Monitor the dividends provided by your income portfolio in your INVESTMENT “O” annually.

This is a fulfilling exercise giving you a sense of how “your money is making money”. It will also motivate you to watch your expenses so that more savings can be channeled into INVESTMENT “O” to help you increase your dividend payouts. The dividend income may look small at the beginning when you first start. Persevere. Focus on your career and over time, your income will grow. Over the long term, this dividend payout will be sizeable and one day, it will exceed your expenses. Then you know that you are ready to retire if you choose to.

If you are already midway in your accumulation phase and will like to adopt the Trio Retirement Plan, you can still do so. The steps above are equally relevant. The only thing is you may not start with zero in your RESERVES “O” and INVESTMENT “O”. You can continue with the same discipline to build up your dividend income.

Check out our spreadsheet in CALCULATE. Besides working out your monthly savings, it can also simulate the monthly dividend you can get based on the monthly savings and the number of years in accumulation.

TRI-O RETIREMENT PLAN is a simple way to help you get started on your retirement planning. Learn the FUNDAMENTALS and HOW TO GET STARTED. There is also a spreadsheet to help you CALCULATE your monthly savings and your project monthly income at retirement. You can check out our BLOGS on topics pertaining to retirement planning. Feel free to CONTACT US if you have any questions or comments.