4 types of plans to boost your retirement income (Part 1)

NAV TL;DR

If you don’t have time to read through the whole article, you can check out our short version below:

You can boost your retirement income with the right insurance plan. Here are four types of plans to consider:

A Traditional Annuity plan like CPF LIFE will require you to pay a one-time single premium or a series of payments over an agreed period. You will then get regular payouts for life.

A Retirement Income Insurance plan can also cover you for life, and it offers a wider range of components like payout periods and additional cover for long-term care.

A Whole Life Insurance plan is a life insurance policy that incorporates a savings element that can be drawn upon surrendering the policy.

Endowment Policies combine protection, savings and investment.

Many Singaporeans are waking up to the harsh reality that retiring is “expensive”. With the likely escalating cost of funding your golden years - no thanks to inflation and higher living standards - the need for adequate income during retirement is a concern and priority.

To better enjoy the years when we are still healthy and physically mobile, we are likely to want to travel more when retired. This is typical in the first 10 to 20 years after stopping work. And with more free time, it is natural to look for activities to occupy us, which could add to expenses.

Retirement survey findings indicate that the top three bucket list retirement activities to be travel, spending quality time with friends and family, and pursuing hobbies. Not a lot of that comes cheap.

Here are four types of insurance that can contribute to cash flows to fund your retirement.

An annuity provides monthly or yearly payouts for as long as you live. It involves paying an insurer a one-time single premium or a series of payments over an agreed period. The premiums are invested to provide you with the regular income which is usually guaranteed.

As most retirees worry about outliving their financial resources, the annuity’s regular payouts–especially if they are guaranteed and for life–oer them a peace of mind. Such a policy is often part of a retirement plan’s building block to generate retirement income flows. Should the insured pass away prematurely, the balance cash value, if any, will be distributed to his/her beneficiaries.

The Central Provident Fund (CPF) LIFE (which stands for Lifelong Income for The Elderly) is a national annuity scheme that offers Singaporeans a monthly payout for as long as they live. The earliest that you can commence your CPF Life payouts is at age 65. You can also opt to defer them till age 70. The monthly payouts depend on how much you set aside in your Retirement Account.

You can boost your retirement income by purchasing an annuity from an insurer. Furthermore, remember that CPF Life payouts start at 65. So,if you desire an earlier income flow, you may consider an immediate annuity that is designed to pay an income soon after it is bought.

With retirement insurance cover, you can decide on the income amount and desired retirement age to commence payments over a chosen period. The premium will vary, depending on your age and the selected options.

Besides the option of lifetime income, some of these plans allow the customer to select other income payout periods, such as five, 10, 15 and 20 years starting from age 55.

Regular payouts from a retirement insurance plan comprise guaranteed and non-guaranteed components. The flow of guaranteed monthly income provides a form of assurance for your golden years. The non-guaranteed portion offers a potential upside for a higher payout, depending on the performance of the fund in which the premium is invested.

Some retirement insurance plans offer additional cover for long-term care. For instance, it may offer an additional income payout if you lose the ability to perform two out of six “activities of daily living” (ADLs) such as washing, feeding, dressing, toileting, mobility and transferring independently.

Here are some questions to ask when shopping for a retirement insurance plan:

How much payout do you need?

What are the guaranteed and non-guaranteed income components? Note that the higher the guaranteed amount, the more sustainable the income payout.

When do you want to start the payout?

Do you want payouts over a limited number of years or a lifetime?

Do you want fixed or variable payouts?

Is there an additional payout (bonus) during and/or at the end of the policy term?

Is the premium payment over a limited period or is it a single payment?

Do you have the flexibility of changing the income payout period if there is a change in your retirement needs? Being able to make changes after you have bought the plan is useful as you can reduce or extend the payout period according to your health or living conditions.

Is there protection cover and an additional payout in the event of a disability?

What is the payout upon death?

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