Wednesday, October 24, 2007

Balance flexibility and security

In a TV interview, an elderly person said that a life annuity locks up his money. He prefers to keep the money in an account, so that he has the flexibility to use it to meet special needs.

Here are my views.

1. You can aim for flexibility, if you have more than adequate funds to last beyond your lifetime.

2. If you have limited savings, it is important that your limited funds be spread throughout your lifetime. This can be done through a life annuity.

3. If you spend your lifetime savings too quickly or make some bad investments, you may deplete your savings and have nothing left to live on.

4. With limited savings, you should use 80% to buy a life annuity and keep the remaining 20% as a flexible source of money to drawn down for your special needs.
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2 comments:

Khiat Han Hwee Adrian said...

The problem most people prefer not to get annuity is lack of security when Cash in not at hand and that the current annuity rates offered by Insurance Companies are not attractive enough.

If the person have only $20k for retirement, its hard for him to get the annuity.
If the person have $120k, then he will consider putting $100k in annuity and $20k for special needs.
If the person have $220k, then he can invest $100k, annuity $100k and special needs $20k.

The conclusion is: You have more choices with more money. We must accumulate and plan for retirement while we still can.

October 25, 2007 12:34 AM
Thomas Phua's Blog said...

Spread one's fund and diversify.

I have single premium endowment, regular premium endowments, and other plans and regular premium ILP.

I have some in diversifies funds, and some in narrowly focused fund.

Last two weeks, I liquidated some Technology funds.

I could see the part withdrawal of funds as what Mr Tan advocates, is quite practical.

I imagine I am now a retiree, the amount sold on the Tech fund is quite good.

Latter part of life other plans matured will give me stability.

Funds may give good values over long term, endowment plans gives peace of mind, so a mix is good with fix return instrument and investing in funds combined.

October 27, 2007 9:32 AM

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