Create a flexible annuity

Here is a simple way to create your own flexible annuity.

Invest your savings in a global equity fund. It should earn you between 6% to 8% per annum over the long term.

You can make a regular withdrawal of your investments, representing 6% to 10% of your principal.

Assume you invest $500,000 and you wish to withdraw 6%, ie $30,000 a year or $2,500 a month.

If your investments earn 6% or more, you capital will not deplete. In fact, it may grow after allowing for your withdrawal.

If you draw out more than the amount earned, your capital may reduce gradually. But if the excess withdrawal is small, the capital can last for a lifetime.

On death, there is a balance of the capital that can be distributed to your family.

You can have the flexibility to draw out a larger or smaller monthly sum to meet y our needs. You can also draw out an once off amount to meet medical expenses or for a vacation.

At any time, you can calculate how long your capital will last. You can make sure that it will last until you reach (say) 100 years old.

The Flexi-Link plan from NTUC Income allows you to specify a monthly withdrawal from your investments. It also allow you the change the amount.