Ageing is inevitable. Once it catches up, it means retiring from your job. However, bills keep coming. You got to pay for your food, transport, healthcare and some clear the outstanding mortgage. Do you have a retirement plan? When is the best time to start? Where is your money safest? Is there any risk with retirement plans? Those are some of the questions most Singaporeans encounter whenever they plan to begin their retirement benefits scheme. In this article, we shall address those question to ensure you make the most informed decision.
First of all, let’s understand what retirement plan is. This is savings and investment plans to help provide income during retirement. This plan is created by insurance companies with terms and conditions. For example, if you pay them a certain amount of money, from now until a given age, they will guarantee you a certain amount of money per month to pay bills, loans, etc. In addition to the money they pay you, they will pay additional bonus for investment returns during the set number of years. These bonuses are called revisionary Bonus/ terminal bonus.
All retirement plans are not equal. However, any given retirement plan must have the following:
The insurance company must guarantee the retirement income for all the payout even if the economy gets bad.
The total amount of money to be given back must be more than the entire money invested.
The insurer must accept the insurance application without adding other conditions.
Why choose a retirement planning tool?
The most prominent challenge after retirement has a guaranteed income. Sure there might be jobs but at that age are you up to it? This makes retirement the best financial product that guarantees income. The process calls for disciplines where if you meet the standards, those small premiums will compound into significant returns.
Insurance retirement plan has elements required to help the beneficiary achieve his/her retirement goals. It has to be specific. The retirement plan must be specific how much you will get back to give information about the target amount. It also needs to be measurable such that both parties can easily calculate the returns from day one. A retirement plan must be actionable such that anyone with potential can start paying the premiums even if they are going through health condition. It must be realistic to know how much one needs to commit per month. Lastly, retirement plan needs to be time-bound to match the payout with the time the client retires.
Currently, Singapore population is constituted with a working age. Come 2025, the majority of people under this gap will be retiring from their work. To help you join a retirement plan, I have reviewed and chosen the best three retirement plans in Singapore market to invest your money. They include Manulife RetireReady, AXA Retire Happy and Aviva MyRetirement Plus. Why these three? Well if you mind doing a little research you will notice they share commonalities.
One is clarity. With these three companies, your payout is defined and has a guaranteed income. The amount of premium is precise with a set range. Second is flexibility. There is a range of payment allowing one to choose one that suits his/her budget. You also decide when to start receiving the monthly layout. This is if you decide to. Otherwise, you are free to leave the funds with the company and let it accumulates into more returns. Also, you can choose to withdraw a large sum or do partial withdraw as the remaining funds continue to accumulate. Third is safety. These insurer has the highest credit rating in the world. Even if they fail, your policy is re-insured making it safe.
AXA RetireHappy has an inflation-adjusted income plan. Each year, the income grow at a rate of 3.5% to combat inflation. One unique thing about this company is a very high longevity profit. For amount summing to $400,000, it will be paid when you are aged 80 years. This has its advantages and limitations. The good news is, this is good money if you live to those years. However, most people want to enjoy their earlier retirement years hence moving their maturity date forward.
Aviva MyRetiement Plus
Aviva is an innovative insurer as proved by their moratorium underwriting for Integrated Shield Plan. It was introduced in Singapore 5 years ago, and last year they introduced Aviva MyRetiement Plus which is similar to AXA’s policy adjusting retirement income up by 3.5% per year. The unique thing about their policy is that you can withdraw your accumulated revised bonuses at a time of your desire. This means you don’t have to wait for the policy to mature to access your investment plans. The only shortcoming with their plan is that there is only one payout role which stretches 20 years. Such a plan is a hurdle to a majority who do not find it fit for their retirement portfolio.
Both AXA and Aviva have longevity benefit. What happens if you need that money sooner? Manulife’s RetireReady plan is a good alternative, or a can be used as a supplement to Aviva and AXA’s plan. It has guaranteed monthly income, cash bonus and additional monthly income which is converted from bonuses before retirement.
Risk with retirement plans
The significant threat to a retirement plan is inflation which is unavoidable. Consumer Price Index (CPI) is the commonly use method to measure inflation. In Singapore, the inflation rate is 3% per year. Thus the thumb rule is your retirement fund plan should beat the inflation rate by 2%. In Singapore majority of plans have a 5% returns per year but down to 3% if you have already retired.
Just to be on the safe side, make sure you are debt free before you put your working tools down. Ongoing debts always outpace retirement fund. For such reasons, paying up your mortgage before then and other liabilities is wise. This is possible if you switch to lower interest debts.
KBB Credit SD Pte Ltd
KBB Credit SD Pte Ltd is the best money lender you will be able to find. We will be able to help you with all your cash needs. Talk to us and we will do our best to help you. Give us a call and find out what we can do for you. Our number is +65 6255 6998.