Endowment plans?

[iwanthp]

Hi there been starting to notice an research on endowment plans! Any advice coz i saw have mainly 2 kinds, a lump sum payment or those pay annually and get payouts annually too! Any tips for a guy who mainly more concerned with the guaranteed amount that will get back?

And also regarding the non-guaranteed returns, heard that normally if really kena 4.75%, actually we only receive maybe 2%? So if say i see a plan illustration say Tan Ah Kao will get 50,000 guaranteed + 25,000 non-guaranteed at mayurity, can estimate that will get at least 10,000 non-guaranteed in reality?

 

[Thoreldan]

Buy term invest the rest..no ?

 

[BBCWatcher]

Very rarely an insurance company will sell a fixed deposit-like endowment plan that, for example, allows you to pay a single premium of $X and get back $X+$Y — guaranteed by the insurer — at the end of 3 years. Then the policy terminates. Sometimes those fixed deposit-like endowment plans are OK, assuming you are looking for a place to park funds for that particular length of time, such as funds for a down payment on a home, a wedding, or an upcoming big bill like university tuition.

I recommend you otherwise avoid endowment plans.

 

[Memories123]

I believe the 4.75% you are referring is required by MAS to put in their benefit illustrations. Same goes for 3.25% so yeah you are not likely to receive that amount.

 

[tangent314]

And also regarding the non-guaranteed returns, heard that normally if really kena 4.75%, actually we only receive maybe 2%? So if say i see a plan illustration say Tan Ah Kao will get 50,000 guaranteed + 25,000 non-guaranteed at mayurity, can estimate that will get at least 10,000 non-guaranteed in reality?

The total returns, assuming plans are held to maturity would generally be about 4.0% if the PAR fund performs at 4.75%.

 

[htngwilliam]

The total returns, assuming plans are held to maturity would generally be about 4.0% if the PAR fund performs at 4.75%.

Actually not bad if u compare to deposits/ fixed deposit but sucks if u compare to funding. Nevertheless, ok if u want to build up ur pot but typically may lose to inflation

 

[iwanthp]

Very rarely an insurance company will sell a fixed deposit-like endowment plan that, for example, allows you to pay a single premium of $X and get back $X+$Y — guaranteed by the insurer — at the end of 3 years. Then the policy terminates. Sometimes those fixed deposit-like endowment plans are OK, assuming you are looking for a place to park funds for that particular length of time, such as funds for a down payment on a home, a wedding, or an upcoming big bill like university tuition.

I recommend you otherwise avoid endowment plans.

I see, then other than endowment plans, what would you recommend for someone like me, just starting out at a fulltime job? Other than stocks coz bot that confirdent in them hahah!

 

[BBCWatcher]

I see, then other than endowment plans, what would you recommend for someone like me, just starting out at a fulltime job? Other than stocks coz bot that confirdent in them hahah!

That's what an insurance company would do: invest in a basket of stocks and other securities. The only problem is that you pay a significant markup if you hire an insurance company to handle your money.

What makes you not confident in investing/saving? Let's start with that issue and see if that can be helped.

 

[Thoreldan]

Ts, you can start looking at dca'ing into local + global etf based on an amount you're comfortable with.

 

[iwanthp]

That's what an insurance company would do: invest in a basket of stocks and other securities. The only problem is that you pay a significant markup if you hire an insurance company to handle your money.

What makes you not confident in investing/saving? Let's start with that issue and see if that can be helped.

Oh i see hmm well ive tried to dabble in alittle of stocks and crypto, havent been doing that well, lost a few thousands (sounds little but for me who’s starting out kinda hurts hahah)

So thats why i came to research about endowment plans/savings plans whoch at least have a guaranteed return! Maybe in doing something wrong idk hahah

Ts, you can start looking at dca'ing into local + global etf based on an amount you're comfortable with.

Dca is it direct crediting? Like ETFs tih dividends like Nikko/STI is it? Hahaha

 

[maple96]

Ts, you can start looking at dca'ing into local + global etf based on an amount you're comfortable with.

ts dun get yourself burnt again with this, I read in one of the "club" thread someone "complaining" dca into sti etf for the past one year, every mth in the red

 

[tangent314]

So thats why i came to research about endowment plans/savings plans whoch at least have a guaranteed return! Maybe in doing something wrong idk hahah

When you buy an endowment, they take your money and pay their agents, pay themselves some fees, put part of it into the insurance pool, and the rest of it goes into the investing in their PAR fund.


The PAR fund is a large fund that is a mixture of bonds and equities.


You can of course, cut out the middle man and invest in bonds and equities yourself, ideally through ETFs.

 

[Thoreldan]

ts dun get yourself burnt again with this, I read in one of the "club" thread someone "complaining" dca into sti etf for the past one year, every mth in the red

Dca/etf is not for people with 1yr investment horizon.

It's for long term, for retirement

 

[iwanthp]

When you buy an endowment, they take your money and pay their agents, pay themselves some fees, put part of it into the insurance pool, and the rest of it goes into the investing in their PAR fund.


The PAR fund is a large fund that is a mixture of bonds and equities.


You can of course, cut out the middle man and invest in bonds and equities yourself, ideally through ETFs.

I see! any bonds or ETFs to recommend? Like for stability and saving hahah

 

[heamen_5]

Wealth Investment Plan

Hi , I actually need some advice on this subject matter. I am looking to do a monthly investment with a insurance company. I had met up with a insurance agent recently from AIA who had shared with me a 100% investment plan, the minimum for me to invest on a yearly basis is $2400. I will pay for the 1st 12 years and after the 13th year, AIA will pump in another 5% from their share which will add up to 105%. If I were to make any cash withdrawals before the 12th year, there will be a penalty charge. I was wondering if anyone can advice me if this is a good investment to begin with. If not, which company would be a better fit in terms of the flexibility.

 

[BBCWatcher]

No. The costs are very high, and you can do much the same thing ($200/month or $2400/year) without the high costs of the middlemen.

....But here's the key question: will you doggedly save and prudently invest on a long-term basis? Or will you treat this as a gambling exercise, or as something you'll do for about 3 months and then stop doing? There are some people that psychologically need the "magic black box" of middlemen who are nagging them for premiums, even if those middlemen are very high cost.

The vast majority of saving and investing that I do is entirely on autopilot, and it has been for many, many years. All I need to do is to make sure there are enough funds in my ordinary bank account, and then it all happens automatically, without any high cost middlemen. There are several Regular Savings Plans available in Singapore, and then you can add a global stock index fund (e.g. IWDA or VWRD), and you're all set. The IWDA or VWRD isn’t quite completely automatic, but it can be partially automatic. Just schedule a regular monthly (or bimonthly or quarterly, for lower dollar levels) "push" of Singapore dollar funds from your bank account to your broker, and then just buy the same fund every month (or every two months, or every quarter). That's it! Simple.

None of this dog track nonsense. Just replicate essentially what the insurance companies do (well diversified stock and bond investing from regular premiums), but do it in a far lower cost way, that's all. And, as you think you can sustain higher monthly savings flows -- with salary increases, for example -- periodically jack up the amount, and keep doggedly saving some of your income. Simple!

 

[iwanthp]

No. The costs are very high, and you can do much the same thing ($200/month or $2400/year) without the high costs of the middlemen.

....But here's the key question: will you doggedly save and prudently invest on a long-term basis? Or will you treat this as a gambling exercise, or as something you'll do for about 3 months and then stop doing? There are some people that psychologically need the "magic black box" of middlemen who are nagging them for premiums, even if those middlemen are very high cost.

The vast majority of saving and investing that I do is entirely on autopilot, and it has been for many, many years. All I need to do is to make sure there are enough funds in my ordinary bank account, and then it all happens automatically, without any high cost middlemen. There are several Regular Savings Plans available in Singapore, and then you can add a global stock index fund (e.g. IWDA or VWRD), and you're all set. The IWDA or VWRD is quite completely automatic, but it can be partially automatic. Just schedule a regular monthly (or bimonthly or quarterly, for lower dollar levels) "push" of Singapore dollar funds from your bank account to your broker, and then just buy the same fund every month (or every two months, or every quarter). That's it! Simple.

None of this dog track nonsense. Just replicate essentially what the insurance companies do (well diversified stock and bond investing from regular premiums), but do it in a far lower cost way, that's all. And, as you think you can sustain higher monthly savings flows -- with salary increases, for example -- periodically jack up the amount, and keep doggedly saving some of your income. Simple!

Wow thanks for the insight! I guess ill forget about endowment plans etc ill look out for some global ETFs or domestic ETFs! ETFs, compared to single stocks, are harder to take a downturn right? Are dividends important as well when buying ETFs? Still alittle unsure how they are calculated

Good thing i made an SC Trading acc previously

 

[BBCWatcher]

ETFs, compared to single stocks, are harder to take a downturn right?

They’re less volatile (other things being equal), but their prices can still fall. And that’s a good thing when you’re buying. Just as with bread or coffee or mobile phone service, lower prices are terrific when you’re a buyer every month.

Are dividends important as well when buying ETFs?

No, not as a separate matter. The long-run objective is to obtain total returns net of costs. Taking out the middlemen takes out cost.

You don’t need many funds, by the way. Two, maybe three, is enough. For SGX-listed stocks, ES3 (one of the STI stock funds) works. For global stocks, VWRD or IWDA works. I’m assuming you’re a non-U.S. person.

Assuming a $2,400/year pace into stocks, I’d do something like this:

ES3: $100 bimonthly = $600/year (or $200 every 4 months)
IWDA or VWRD: $600 every 4 months = $1,800/year

The every 4 month approach works well for simplicity, and you can do it this way (example):

September: $200 ES3
November: $600 VWRD or IWDA
January: $200 ES3
March: $600 VWRD or IWDA
May: $200 ES3
July: $600 VWRD or IWDA

And so on, loop repeat. That’s about a 25%:75% local:global split, which is a little more local than I prefer (and less local than Shiny Things prefers), but for rounding purposes it’s pretty good.

Then just keep doing that, periodically raising the inflow as you can afford it, until you get about 7 to 10 years before retirement. We’ll discuss what happens then then.

I’m assuming you’re a CPF member, and we’ll treat that as the bond-like part of your portfolio for simplicity.

 

[Shion]

Hi , I actually need some advice on this subject matter. I am looking to do a monthly investment with a insurance company. I had met up with a insurance agent recently from AIA who had shared with me a 100% investment plan, the minimum for me to invest on a yearly basis is $2400. I will pay for the 1st 12 years and after the 13th year, AIA will pump in another 5% from their share which will add up to 105%. If I were to make any cash withdrawals before the 12th year, there will be a penalty charge. I was wondering if anyone can advice me if this is a good investment to begin with. If not, which company would be a better fit in terms of the flexibility.

Isnt this ILP...
You can do investment yourself

 

[a4973]

They’re less volatile (other things being equal), but their prices can still fall. And that’s a good thing when you’re buying. Just as with bread or coffee or mobile phone service, lower prices are terrific when you’re a buyer every month.


No, not as a separate matter. The long-run objective is to obtain total returns net of costs. Taking out the middlemen takes out cost.

You don’t need many funds, by the way. Two, maybe three, is enough. For SGX-listed stocks, ES3 (one of the STI stock funds) works. For global stocks, VWRD or IWDA works. I’m assuming you’re a non-U.S. person.

Assuming a $2,400/year pace into stocks, I’d do something like this:

ES3: $100 bimonthly = $600/year (or $200 every 4 months)
IWDA or VWRD: $600 every 4 months = $1,800/year

The every 4 month approach works well for simplicity, and you can do it this way (example):

September: $200 ES3
November: $600 VWRD or IWDA
January: $200 ES3
March: $600 VWRD or IWDA
May: $200 ES3
July: $600 VWRD or IWDA

And so on, loop repeat. That’s about a 25%:75% local:global split, which is a little more local than I prefer (and less local than Shiny Things prefers), but for rounding purposes it’s pretty good.

Then just keep doing that, periodically raising the inflow as you can afford it, until you get about 7 to 10 years before retirement. We’ll discuss what happens then then.

I’m assuming you’re a CPF member, and we’ll treat that as the bond-like part of your portfolio for simplicity.

my wife is 45 this year, a cpf member who has met FRS & BHS & still has $100k+ in OA. she has not been saving much.
i am trying to get her to save more & am looking for a quick fix.
is the above 4 month approach advisable for her profile?
btw she intends to continue working past 55.