In Q1 this year, Manulife released the results of its retirement survey. The goal of the survey is…
Singaporeans are among the hardest workers in the world. Many of us put in more hours than what is stipulated in our contract. So, why do Singaporeans work so hard? We believe that the reason why Singaporeans work so hard is because of the idea of working hard early so that we can have an early retirement. The harder we work now and save, the more years of retirement we can enjoy.
In recent years, more and more Singaporeans are seeking early retirement. In order to retire, the 3 basic things that you need are: Home, insurance and regular monthly income. Most Singaporeans would already have settled the first 2 requirements by our desired age of early retirement. The more problematic one? Regular monthly income.
There are multiple reasons why planning for our monthly income during retirement is often the biggest concern. In order to make the right plans for our monthly income, not only do we have to consider the amount, we also need to consider our longevity. But the truth is that nobody can predict how long we are alive for. This makes planning for retirement difficult unless you know how to leverage the right financial tools.
One of the smart ways to plan for a regular monthly income is to use an income plan. An income plan not only helps you save, it also helps you grow your money and make sure that you will not run out of money in your retirement years.
Here are 3 key reasons why an income plan can help you achieve your desired early retirement.
The basic foundation of any good financial planning is a good saving discipline. Without a good saving discipline, you do not have the money to do any financial planning at all. But developing a good saving discipline can be challenging for some of us. There are so many things asking for our attention that we might neglect the importance of developing a good saving discipline. At the same time, there are so many temptations trying to get us to spend our money.
If you are looking to develop a good saving discipline, investing in an income plan can help. When you invest in an income plan, it becomes part of your monthly bill cycle. This lets you create a forced savings mechanism to put aside money (as savings in your income plan) before you spend the rest of your salary. You will be surprised by how much money you can save with an income plan by making a regular contribution to the income plan.
If you have already developed your own saving discipline, that’s great. However, here lies another potential pitfall, i.e. thinking that having good saving discipline is enough for your financial goals.
The truth is that the invisible force of inflation is constantly working against us. If you haven’t already realized, things are getting more expensive by the day. This is because of the effect of inflation, which is working against us quietly.
The cost of car ownership in the 1990s used to be $15k. In today’s context, you might not even get your COE with that kind of money. Another perfect example of inflation is the cost of housing. In the 1990s, a BTO HDB flat is unlikely to cost you more than $100k. However, in 2019, even the cheapest HDB will cost you at least $200k in a non-mature estate after the HDB grants. And if you didn’t know, inflation is also THE reason why your CPF minimum sum continues to increase every year.
While developing the discipline of saving is crucial, just saving alone will not help you achieve your financial goals. You need to make sure that your money is working hard for you so that your savings don’t get diminished by the effect of inflation.
And that’s exactly what an income plan does for you. Instead of letting your savings sit idly in the bank and earn that meagre 0.05% interest, income plans grow your savings at 2.1-2.2%. You are also entitled to a non-guaranteed growth (~2%) in your savings every year. By saving with an income plan, you can easily beat inflation by 2 to 3 folds.
Did you know that Singaporeans are falling behind on our retirement plans? According to a new financial wellness index released by OCBC, 65% of Singaporeans aren’t prepared for retirement. Many Singaporeans are worried that they won’t be able to enjoy retirement as they had planned.
One of the key problems Singaporeans face when preparing for retirement is over-relying on savings. Retiring on savings alone can be scary. You won’t know whether you will have enough savings to last you throughout your retirement years. What happens if your savings deplete before you complete the last lap of your life? Who is going to take care of you? Will your children have to take up that additional financial burden?
With an income plan, you can alleviate that worry. An income plan provides you with a healthy cash flow for life. So, even if you live till age 100, you can still continue to receive cash from your income plan every year. You won’t have to worry about whether you will have enough cash in your savings anymore.
There are various types of income plan that are currently available for you to consider in the market. To help you understand and compare different income plans, we wrote a review on the best lifetime income plans in Singapore. This article will give you all you need to know about income plans and the unique selling point of each income plan.
For some of us who have already started on building a retirement portfolio, you can arrange for a complete retirement portfolio review session with a licensed financial planner. The review session with our adviser will include retirement gap analysis and an in-depth understanding of how each type of income plan fits into your current retirement portfolio.