Most people think that the young people should have a financial plan, as they have a lifetime ahead of them. They may overlook the importance of a financial plan for a person who is approaching retirement. Having accumulated their savings, they now need to know how to invest the savings to get a good return. Is a life annuity the answer?
Here is a sample financial plan prepared for a retiree at age 60. It shows the amount that the retiree can get assuming yields at various rates of interest. You should take the yield at 4% and compare the amount, before adjusting for inflation, with the amount payable by a life annuity. If the life annuity pays an amount that is better than the payout under 4% yield, it should be all right to buy the life annuity. This assumes that the life expectancy of a person at age 65 is about 20 years, which should be quite correct.
You can also use the financial planning tool to calculate the amount that is relevant to your own personal situation.
Tan Kin Lian
Retirement planning is really a combination of an art and science. You have to estimate your expected retirement expenses and make sure you protect your retirement savings against inflation.
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