According to Aviva’s Survey on Consumers Attitudes to Saving (February 2010 to November 2011), fewer members meet CPF’s Minimum Sum requirement of S$131,000 each year.
Even if you do have $131,000 CASH at your retirement age, based on CPF Minimum Sum Payout Calculator, you will merely receive a monthly payout of S$1,100 for about 20 years, from age 65 onwards.
By the time you turn 65, can you afford to retire? Can you sustain the lifestyle you hope for with just S$1,100?
From my experience, most people procrastinate retirement planning because they are confused by complicated financial products. Most people do want to save some money but end up paying unnecessary insurance protection charges. Worse still, the return of the policy often sour in tough financial environment and policyholders suffer from empty promises which are “Non-Guaranteed” from onset.
As a result, so many people just keep on rolling their money in fixed deposit which pays only a fraction of the inflation rate.
I am glad to see that Aviva has recently launched a new product MyRetirement which is positioned as a “Capital Guaranteed” product with Guaranteed returns up to 2.38% per annum.
Though I would not count on 2.38% as it is based on an entry age of 17 with eight years premium payment term where customer will receive monthly Guaranteed Retirement Income of S$1,000 from age 65, I do feel such disciplined saving plan with multi-year income distribution is critical for retirement planning. Moreover, the compound effect of the return can be significant as shown in the example below:
Adam Tan, age 35 would like to retire at age 65 (Age Next Birthday) and receive a monthly Guaranteed Retirement Income of S$2,000 per month, for 10 years. Since he is currently working, he would like to complete his payments quickly. He decides on the eight year premium payment term of MyRetirement. Here is how:
Adam would pay a monthly premium of S$1,378. This translates into total premiums of S$132,288 paid over 8 years (S$1,378 x 12 months x 8 years). He will receive a Total Retirement Income of S$630,591 consists of the Guaranteed Monthly Retirement Income S$240,000 and Projected Maturity Payout at 5.25% projected investment return (S$390,591).
Note The Maturity Payout is non-guaranteed. 476% is based on Projected Total Retirement Income Payouts (S$630,591) over Total Premiums Paid (S$132,288), as per the Benefits Illustration.
As a licensed financial adviser, I have spent more than 10 years helping people plan for their retirements. You can request a no-obligatory retirement discovery meeting if you fill up your desired retirement in the form below.