How much do you have your your CPF account now?
Do you think it is enough for you to retire by relying solely on your CPF account at age 65??
"Those in the lower income group are especially at risk as their CPF will not provide sufficient savings for them in their retirement, and the situation is made worse by major withdrawals such as housing purchases", said Professor Hui Weng Tat, associate professor at the Lee Kuan Yew School of Public Policy.
Assuming that HDB purchases made at age 30 at the maximum price supportable by CPF contributions with two spouses contributing to mortgage payments, the income replacement ratio would drop to between 17 and 28 per cent for the different wage groups, at the retirement age of 65.
This would mean that a person with post secondary education earning $1,500 as his starting pay at 22 years old can only expect to live on 45 per cent of their last drawn pay when they retire. If only one spouse is working and repaying mortgage, the effect would be doubled.
So I would strongly advise everyone to do a proper financial planning and take up retirement savings plan to have a better retirement future. And the best age to start retirement savings is now, the earlier the better. Everyone can start when they just started working at age 25 after their university, and earn the power of compounding interest.
Source from Yahoo! Newsroom
Monday, February 13, 2012
Tuesday, February 7, 2012
My Term Insurance
I got myself a Term insurance for my life due to my budget and needs.
With my age, to get a ILP or whole life will need at least $150-200 a month for a $100K payout. So a $100K payout for my 2 kids are way too little, so ILP or whole life is definitely out of my range. I need a minimal of e.g.$450k to support my kids till they are age 21 if I were to die now. So my agent advised me to get a term life and the rest for accident, education and retirement plans.
I do not need a plan with cash value as I will not want to cancel my life policy when I cant afford at a later stage of my life, so my objective is to be able to provide eg.$450K to my family if I was to leave the world, without the need to struggle to pay the premium and at risk of terminating it at the end of it.
For Term of $450,000 Death and TPD payout,
For age 21, female (non smoker) , it costs $22.50 a month
For age 27, female (non smoker), it costs $27 a month
For age 33, female (non smoker), it costs $45 a month
Premium is determined by age and payout.
For ILP of $450,000 Death and TPD payout,
For age 21, female (non smoker) , it costs $183 a month
For age 27, female (non smoker), it costs $215 a month
For age 33, female (non smoker), it costs $259 a month
Premium is determined by age and payout.
To fulfil our needs and provide adequate coverage, we must know our budget. For a 21 year old female (non smoker), annual premium paid is $270 vs $2196. That is a big price difference. Unless you have the extra budget, ILP would be a good choice too. ILP is flexible. You could withdraw partial money out in near future for holidays/school or late future for retirement when you no longer need to provide a living for your kids or family.
So all in all, to weigh what is your goal and objective is very important.
With my age, to get a ILP or whole life will need at least $150-200 a month for a $100K payout. So a $100K payout for my 2 kids are way too little, so ILP or whole life is definitely out of my range. I need a minimal of e.g.$450k to support my kids till they are age 21 if I were to die now. So my agent advised me to get a term life and the rest for accident, education and retirement plans.
I do not need a plan with cash value as I will not want to cancel my life policy when I cant afford at a later stage of my life, so my objective is to be able to provide eg.$450K to my family if I was to leave the world, without the need to struggle to pay the premium and at risk of terminating it at the end of it.
For Term of $450,000 Death and TPD payout,
For age 21, female (non smoker) , it costs $22.50 a month
For age 27, female (non smoker), it costs $27 a month
For age 33, female (non smoker), it costs $45 a month
Premium is determined by age and payout.
For ILP of $450,000 Death and TPD payout,
For age 21, female (non smoker) , it costs $183 a month
For age 27, female (non smoker), it costs $215 a month
For age 33, female (non smoker), it costs $259 a month
Premium is determined by age and payout.
To fulfil our needs and provide adequate coverage, we must know our budget. For a 21 year old female (non smoker), annual premium paid is $270 vs $2196. That is a big price difference. Unless you have the extra budget, ILP would be a good choice too. ILP is flexible. You could withdraw partial money out in near future for holidays/school or late future for retirement when you no longer need to provide a living for your kids or family.
So all in all, to weigh what is your goal and objective is very important.
Term Life Policy vs Investment Linked Policies
In The Edge Magazine Personal Wealth, it discussed that in a 2011 AIA Singapore Nationwide Protection Survey, it highlighted that only one in 10 Singaporeans is deemed to be adequately insured while nearly one in 4 perceived insurance is too costly.
To buy term or ILP depends alot on budget, needs and getting the best overall protection.
If I have $200 a month to spare I could get ILP and all e necessary full protection package. But if I have $100 a month to spare, term will be a better choice than ILP, as you need other parts of the cash for critical illness, accident and hospitalisation plans etc.
When I asked my friends do you think you are fully insured for health protection, most of them will say yes. But when I were to sit down and take a paper and summarise their coverage, all of them are way under-insured.
Within this group of friends I asked, alot of them got ILP from companies like Prudential, AXA etc. And it cost them $120-180 a month, the higher end due to the critical illness rider, but death coverage maybe just $50-100K. Is 50-100K enough for your family? With average annual income of $30K, $100K will be depleted in 3-5 years.
Even if I were to recommend an additional $50 a month to cover all the places they are lacking, they are also unwilling to make any changes, even if they have additional $1000 surplus a month from their salaries.
I asked them why not pay another $50 for basic full protection coverage, much better than what you have now? Then they will reply they are reluctant to do anything to change their situations, do not want to spend much on insurance. As nothing has ever happened to them yet, so they cant see the importance. To make things worse, some want to have better coverage but can't cancel the ILPs as they will make a loss, so they are like stuck for at least 20 years to make some profit from the plans and then see how. Some really do not have additional $50 budget.
This left me thinking, hopefully in 20 years time, when they reach 45-50 years old, no accidents or illness strike them and they are still in their pink of health to get the plans they are lacking all along.
I always feel the agents who approached my friends are not doing their jobs well enough, they never really ensured my friends are fully protected anot with that budget, so I feel they only care about selling something which they could earn the most out of it.
Some people even complained to me they are not being offered the other options in the first place. We are underinsured because cost of living is going up, but it could also be due to some of the insurance agents' main objective is geared towards filling their wallets and secondly to make sure the client’s needs are fulfilled.
My personal agent is the only agent I met so far who is concerned about my needs and coverage first, last his salary. He always makes sure that I gain the best coverage with my limited budget, and all available choices are presented and explained to me. No one has ever go to this extent, I am truly thankful for all he has done for me, my family, my friends and all people who have given him a chance to be customers aka partners.
My rule of thumb is to always get the best overall protection with the budget and needs you have.
To buy term or ILP depends alot on budget, needs and getting the best overall protection.
If I have $200 a month to spare I could get ILP and all e necessary full protection package. But if I have $100 a month to spare, term will be a better choice than ILP, as you need other parts of the cash for critical illness, accident and hospitalisation plans etc.
When I asked my friends do you think you are fully insured for health protection, most of them will say yes. But when I were to sit down and take a paper and summarise their coverage, all of them are way under-insured.
Within this group of friends I asked, alot of them got ILP from companies like Prudential, AXA etc. And it cost them $120-180 a month, the higher end due to the critical illness rider, but death coverage maybe just $50-100K. Is 50-100K enough for your family? With average annual income of $30K, $100K will be depleted in 3-5 years.
Even if I were to recommend an additional $50 a month to cover all the places they are lacking, they are also unwilling to make any changes, even if they have additional $1000 surplus a month from their salaries.
I asked them why not pay another $50 for basic full protection coverage, much better than what you have now? Then they will reply they are reluctant to do anything to change their situations, do not want to spend much on insurance. As nothing has ever happened to them yet, so they cant see the importance. To make things worse, some want to have better coverage but can't cancel the ILPs as they will make a loss, so they are like stuck for at least 20 years to make some profit from the plans and then see how. Some really do not have additional $50 budget.
This left me thinking, hopefully in 20 years time, when they reach 45-50 years old, no accidents or illness strike them and they are still in their pink of health to get the plans they are lacking all along.
I always feel the agents who approached my friends are not doing their jobs well enough, they never really ensured my friends are fully protected anot with that budget, so I feel they only care about selling something which they could earn the most out of it.
Some people even complained to me they are not being offered the other options in the first place. We are underinsured because cost of living is going up, but it could also be due to some of the insurance agents' main objective is geared towards filling their wallets and secondly to make sure the client’s needs are fulfilled.
My personal agent is the only agent I met so far who is concerned about my needs and coverage first, last his salary. He always makes sure that I gain the best coverage with my limited budget, and all available choices are presented and explained to me. No one has ever go to this extent, I am truly thankful for all he has done for me, my family, my friends and all people who have given him a chance to be customers aka partners.
My rule of thumb is to always get the best overall protection with the budget and needs you have.
POWER of COMPOUNDING
The mention of compound interest will usually arouse knowing nods in the room. However, if everyone seriously understood what compound interest is, then there wouldn’t be as many people falling into the depths of bankruptcy due to credit card debts.By taking note of how credit cards employ this very principle on our debts would be a prudent first step.
Essentially, it’s interest generated on top of interest plus the principal sum over a length of time.
A financial instrument with a higher rate of return could help you to achieve the same goal with a smaller amount of savings every year.
And the earlier you start saving,the more wealth you can grow. However, any form of investment will carry a certain degree of risk.
Do you know that if you want to have $50,000 in 20 years' time, you need to set aside $187.50 per month if you invest in an instrument that gives you an annual rate of return of 1%? However, if you only start saving 10 years later, you will need to save $395 per month! So start to set aside savings early.
Conclusively, compound interest works better for us if it happens more frequently. Which is to say, twice yearly is better than yearly and quarterly is definitely better than twice yearly and so forth.
Therefore ideal investment plans should have these features:
- Returns of at least 5%
- Compounding on a monthly basis
- Low risk with high winning percentage
- Flexible withdrawal for liquidity (i.e. one is able to stop anytime)
The Investment Linked Plans (ILP) I got for myself has such benefits too. I hope I could get more in return in 20 years with such plans, than if I were to put the money in fixed deposits or bank.
Essentially, it’s interest generated on top of interest plus the principal sum over a length of time.
A financial instrument with a higher rate of return could help you to achieve the same goal with a smaller amount of savings every year.
And the earlier you start saving,the more wealth you can grow. However, any form of investment will carry a certain degree of risk.
Do you know that if you want to have $50,000 in 20 years' time, you need to set aside $187.50 per month if you invest in an instrument that gives you an annual rate of return of 1%? However, if you only start saving 10 years later, you will need to save $395 per month! So start to set aside savings early.
Conclusively, compound interest works better for us if it happens more frequently. Which is to say, twice yearly is better than yearly and quarterly is definitely better than twice yearly and so forth.
Therefore ideal investment plans should have these features:
- Returns of at least 5%
- Compounding on a monthly basis
- Low risk with high winning percentage
- Flexible withdrawal for liquidity (i.e. one is able to stop anytime)
The Investment Linked Plans (ILP) I got for myself has such benefits too. I hope I could get more in return in 20 years with such plans, than if I were to put the money in fixed deposits or bank.
Don't put off taking up Integrated Shield Plan with rider
From article: Prevention is Better
Healthcare costs are among the most worrisome of financial needs, and it is a need that should not be ignored. As we know, risk of illness rises with age. It is often said that the bulk of one expenses in their retirement occurs in the last few years of one's life when health begins to fail.
One very important way to cover the cost of health care is through insurance.
You can tap your Medisave for limited amounts for inpatient and outpatient expenses, and even for day sugeries and maternity expenses. But it is important that Medisave should be prudently used. Should you retire or cease working and your contribution stops, cash in Medisave could run out fairly quickly given high healthcare costs.
Insurance is a far more efficient way to cover major health expenses.
Hospital and surgical (H&S) plans are one of the most basic of health covers, and are a must for most people unless you have enough wealth to self pay. It is also important to take up H&S plan for your children.
Many people put off taking up a H&S plan because their employers may offer very good and comprehensive cover. But you will need a private plan should you stop working.
Waiting until retirement to take up one is untenable because at a later age you may develop conditions that make you uninsurable.
Please feel free to share with me how u have benefit from healthcare insurance or suffer without it, so we are all able to learn through realistic experience.
Healthcare costs are among the most worrisome of financial needs, and it is a need that should not be ignored. As we know, risk of illness rises with age. It is often said that the bulk of one expenses in their retirement occurs in the last few years of one's life when health begins to fail.
One very important way to cover the cost of health care is through insurance.
You can tap your Medisave for limited amounts for inpatient and outpatient expenses, and even for day sugeries and maternity expenses. But it is important that Medisave should be prudently used. Should you retire or cease working and your contribution stops, cash in Medisave could run out fairly quickly given high healthcare costs.
Insurance is a far more efficient way to cover major health expenses.
Hospital and surgical (H&S) plans are one of the most basic of health covers, and are a must for most people unless you have enough wealth to self pay. It is also important to take up H&S plan for your children.
Many people put off taking up a H&S plan because their employers may offer very good and comprehensive cover. But you will need a private plan should you stop working.
Waiting until retirement to take up one is untenable because at a later age you may develop conditions that make you uninsurable.
Please feel free to share with me how u have benefit from healthcare insurance or suffer without it, so we are all able to learn through realistic experience.
Subscribe to:
Posts (Atom)