Planning for a retirement income

Hi Mr Tan.

I am 37 years old. If I save $20,000 a year for next 18 years at 5% return, I would accummulate about $500,000 when I reach 55 years old.

With this amount being place in an annuity for next 25 years at 3%, I would only be getting about $2,000 a month from 55 to 80 years old.

With inflation, the real value of the annuity will be less than $2,000 and may not be sufficient for life beyond 55 years old.

How realistic is the return of 5%? Many funds have mentioned returns of higher than 5%, but there are possibilities that the funds may not generate such a return, as there are always up's and down's.

------------------------------------

My reply:

You can read the FAQ in my website, www.tankinlian.com/faq. You can get some useful information that will answer your questions.

I suggest that you re-calculate the figures on the following assumptions:

* the retirement age should be 65 (instead of 55)
* the investment return can be increased to 6% per annum

With the revised assumptions, you will be able to get a higher annuity payment on your retirement. Even after deducting for the effect of inflation (say at 2% per annum), your annuity income should be quite adequate.

You can visit the business center of NTUC Income and talk to an insurance consultant.