1. If you have to invest your retirement savings, the following options are available:
a) Retirement account of CPF - 4% plus 1%
b) Government bonds - 3%
c) Bank deposits - 1.5%
d) Life Annuity -5% plus bonus
e) Unit trust - 5% (average for long term)
f) Foreign currency - 4% with currency risk
2. If you have limited savings, say less than $500,000, you should invest as follows:
a) Keep the maximum allowed in CPF (say $150,000 at 65)
b) Use $200,000 to buy a life annuity at 65 to pay about $900 plus bonus each month
c) Invest the balance in government bonds or a unit trust
Use the monthly income from CPF and the annuity to meet your regular expenses. You can draw down on your other investments for emergency cash needs, e.g. large medical bills or education expenses.
If the monthly income is not sufficient for your expenses, you can do part-time work basis to earn a supplementary income.
If the monthly income is more than sufficent for your expenses, you can save and re-invest the balance.
Lesson: choose investments that have low expense charges, so that you can keep most of the yield (instead of giving it away to the intermediary or financial institutions).
1. For the 5% return by Annuity, which company has delivered such return in past year?
ReplyDelete2. Is there a risk to invest in an Annuity? What happened , for instance, if INCOME collapse due to whatever reason?
Planning your retirement may appear easy but not so. Mr. Tan's tips are for the savvies. Following his tips and keep close may help you a little bit but at least much better than leaving it to the insurance agents.
ReplyDeleteSalesmen don't plan for you. They sell you what you don't need. At best the agents help you to stay poor. That is keeping status quo.Not bad !!. At least they don't make you poorer than you were 30 years ago.They are proud of it. That is why ntuc agents like to sell you Growth, endowment and the likes.But sometimes they make you poorer by selling you Prucash, revosave, smartsavers, moneybacks.
These products are for the agents' retirement because they carry high commission.
For the agents it is zero sum game. They get richer , you get poorer.
So remember, don't make mistakes by engaging insurance agents to plan your retirement. It is like having
a buaya taking care of your chickens.
I thought leaving the CPF minimum sum for draw down because of more stable and reasonable interest is a good option.
ReplyDeleteNow with the CPFLife introduced, draw down with R80 or R90 seems ideal but draw down starts at age 65 which is quite fine with lifetime income.
Now I have to think of covering the gap between age 55 and 65 , if I choose to want to retire early or to take it easy.
An Annuity draw down from 55 onwards looks attractive to start with, on top of other savings and investments.
CPFLife definitely is good as it helps us to see the retirement years clearer.
Some time we think that it is better to do a defered annuity, but I would think immediate annuity is better, if one has already decided.
Example if one is age 59 and has $100,000 to place in Annuity, immediate annuity will draw down $420 per month immediate the following month.
If at age 59, one defer to age 65 and draw $500 per month , one would have lost out the 6 years of draw down ( 6 X 12 X $420 ). So defered annuity may not be as attractive as it seems, if one has already decided on an annuity, should start it immediate.
what more some annnuity plans like are participating and the annuity payment will increase over the years.
- Thomas Phua
SINGAPORE GOVERNMENT BOND RETURN
ReplyDelete12 December 2003
5year Bond 2.71%
10year Bond 3.74%
15year Bond 4.20%
26 March 2008
5.26year Bond 1.68%
10.42year Bond 2.41%
14.42year Bond 2.97%
(Source: Fundsupermart.com)