Tan Kin Lian's Blog: Financial planning at a late age

Friday, September 11, 2009

Financial planning at a late age

Dear Mr. Tan.
By chance, I come to know about FiSCA through the news media and I must say that the articles therein are very very useful.

I write to seek some advice. I am nearly 60 years old and lost my job a few years ago. I tried to start a business, but was unsuccessful. I stopped all my insurance policies ealier. I have just sold off my property, and after repaying the loan from the bank, I have about $300,000 cash.

Is it too late for me to make a financial plan? What insurance policies should I take up now? My children are all working now. I need $1,500 a month for myself and my wife.

REPLY
You can buy the MediShield to cover yourself and your wife. There is no need to buy any other insurance policy. Read this FAQ.

You can put as much as is allowed in CPF to earn 4% per annum, and invest the rest in long term government bonds to earn 2% to 2.5%. If you wish to earn a higher return, you can consider the suggestion set out in this FAQ.

If you earn 2% pa on your money and you draw out $1,500 a month, the $300,000 will last you about 20 years.

11 comments:

Anonymous said...: Good advice Mr Tan. I suspect banks and insurance companies would have told this 60 year old to invest in higher risk equity and bond funds and endowment plans.; September 11, 2009 9:02 PM
Anonymous said...: Mr Tan, Is it too close, to put some money into the CPF life annuity?; September 11, 2009 9:32 PM
Anonymous said...: If you invest in a very conservative fund made up of 80% bond and 20% equity this portfolio should give at least 5%. At 5% your $300000 should generate you an monthly income of $2000 or more for next 20 years.
Please get an adviser with an investment and retirement planning skill to help you.DON"T use an insurance agent or a fund salesman, your fund will go up in smoke.; September 11, 2009 9:57 PM
Tan Kin Lian said...: It is difficult to earn 5% on a portfolio of 80% bond and 20% equity, due to the current low interest rate. To get this type of return, the risk has to be high, rather than conservative. A conservative porfolio can give a return of 3% only, in today's environment (i.e. 1% above government bonds).; September 11, 2009 10:22 PM
Anonymous said...: Mr Tan,
For those who born in 1954 & older,
Which of the following is better?
1. maintain retiree account
2. convert retiree account to CPFLife
Thanks.; September 11, 2009 11:04 PM
Anonymous said...: It is NOT too late to join the CPFLife. In fact it is now open to those who are born before 1957 to join the scheme.
As for you if you join now you can start enjoying the payouts at age 62. If you put in $134K and choose the non refund the payout is $800-$850 monthly for life time. You should approach CPF to get more info and decide.
For the rest of your money you can invest in a low risk conservative fund to earn 4-5% return. Assuming you invest $150K your draw down at 4% is about $900 for next 20 years.
All the best to you.; September 11, 2009 11:10 PM
Anonymous said...: Which one is better depends on your family history. Can you live beyond 90 years old? If you cant' leave it with CPF and draw down and enjoy high payouts after 65 .
Warning:::: don't fall prey to ntuc agents. They are lurking around ready to pounce on you by surprise and con you into buying their stupid annuity.I pity you if you should become victim.; September 12, 2009 12:43 AM
Anonymous said...: After salvage from MINIBOND and GE GLC, I don't beleive in any funds in whatever name. Go learn some knowledge on stock market and put some money in REITs (about 6 to 15% return) and STI ETF(about 4-5% return).
It is low cost, better return and quite safe.; September 12, 2009 12:44 AM
Raymond T said...: Why not buy an annuity and CPF Life?; September 12, 2009 7:08 AM
Parka said...: If I have that much money, I'll rather go for government bonds. Let's say the interest rate is 2%, you'll still get $500 per month for your $300K investment.

Your only risk is of Singapore collapsing.

Again, it really depends on how much you need to spend each month.; September 12, 2009 3:02 PM
Anonymous said...: Parka,
this should not be the way to approach. It is product selling. You are selling the bond but $500 may not be enough for him and his wife and he is not leaving a legacy upon maturity of the bond.; September 12, 2009 5:03 PM