private annuities

[Mecisteus]

ELKYMe and Prof Utonium,

Why not consider the traditional ways of earning passive income through stocks, bonds and properties?

A 1M portfolio yielding 3% or 4% will give you $30k or 40k annually.

3% to 4% is not a difficult target to achieve.

If you happen to die early, those assets will be passed on to NOK.

 

[BBCWatcher]

Based on this article, the go-go years typically lasts till age 75 and I tend to agree (still in relatively good health and have the mobility to travel).

http://cascadebusnews.com/three-stages-retirement-go-go-slow-go-no-go/

Perhaps a retirement plan with a limited payout period (targeted retirement age till 75 or 80 is a good middle ground.

It isn't really true, though. Plenty of social scientists have looked at this, and sure, spending patterns shift within retirement years but not in a clearcut way that would reduce spending. Some things go down, and others go up. For example, you might spend less on theater tickets but more on air conditioning, home adaptations, and medications for chronic ailments (as examples) as you age.

To the extent it is true, what's the direction of causation? There are certainly plenty of elderly people who don't have stable real (adjusted for inflation) annuity income streams. Are they spending less because they simply cannot spend, because they run out of money? Sure, that happens, a lot. "Hey, the oldest people aren't spending as much" isn't actually evidence that spending needs and spending preferences have decreased. Most probably it's just evidence of "Hey, they're broke."

No, I'm with Tangent314 on this, and I think it's really quite simple. First, nail down a foundational, real life annuity income stream, for both you and your significant other. (This last bit CPF LIFE doesn't cover directly. There could be merit in mixing your and your partner's CPF LIFE annuities with a joint/survivor life annuity -- I could see how that'd work better for many.) That's your lifetime(s) financial security in retirement. With that part nailed down, enjoy life however and whenever you wish, and with lots of lifetime gifts I suggest. If you are active at 72 and not at 73, OK, fine, whatever, but if you've got that strong foundation underneath, you go have tons of fun at 72 with the kids and grandkids. Longevity insurance is liberating, and that's a wonderful thing.

 

[BBCWatcher]

Why not consider the traditional ways of earning passive income through stocks, bonds and properties?

I know this part wasn't addressed to me, but I'll answer.

A 1M portfolio yielding 3% or 4% will give you $30k or 40k annually.

Yes, today, not guaranteed. See for example Japan, another demographically challenged country in Asia, which has experienced 30 years (and counting) of not having those yields.

3% to 4% is not a difficult target to achieve.

Until it is.

If you happen to die early, those assets will be passed on to NOK.

Yes, OK, that's one choice, but (as I keep reminding everyone) why make your loved ones wait? Shower them with money and affection now.

The only reason you're making them wait is because you have to hold back tons of reserve to self-insure against longevity risk. And/or you make yourself wait to take that fabulous cruise you always wanted, or to dine at a 3 star Michelin restaurant in Italy, or whatever.

There's a reason so many wealthy people like high quality life annuities (via trust funds): it's utterly liberating. You don't have to wait to give your loved ones both money and affection, and you can have as much fun as you want out of "normal" savings and investing. Because, no matter what happens, you'll be at least OK to a foundational standard of living. You too can think like a rich person and act much the same way, even if you're not rich.

AND it's OK to save/invest slightly more aggressively -- and in higher yielding fashion -- when your downside lifetime risk is limited. This is one of the major advantages of traditional CPF and CPF LIFE, properly understood anyway. CPF should properly count toward the bond/bond-like part of your portfolio when making investment decisions during the course of working career.

....Anyway, I suppose you could try to self-insure. But if you try to do it all, on your own, then it's just flat out more expensive at least while you're alive and/or makes life somewhat more miserable (or at least less enjoyable) for you and your loved ones, because you're always worried about survival and losing it all rather than relaxing and enjoying life.

 

[BBCWatcher]

Adding one more point, this works in reverse, too. If you have an elder parent or grandparent, there's a big difference between worrying about how to keep him/her financially afloat from your income, how to come up with yet another $1,000 this month (or whatever), and...that parent or grandparent having at least a foundational, lifetime real income stream. I'm in the latter category, and what a relief that is, every day. If I weren't I'd help that parent or grandparent get in that second category.

We're not talking phat monthly checks here, by the way. I'm talking about foundational real lifetime income, adequate but not lavish. Adequacy varies depending on who you are and your circumstances, but Singapore is a pretty expensive place to live.

 

[ELKYme]

Stocks tick, bonds tick, investment property no, only the one I’m staying in.

Before our gov enhanced the absd, was interested in a investment unit. Immediately called the agent but the owner decided to pull it off the market....could be blessing in disguise as I would need to take up a loan to finance part of this property.

As I intend to retire in 12 years, what if housing market is bad in that timeframe?
Delaying my retirement is not an option I want to consider.

ELKYMe and Prof Utonium,

Why not consider the traditional ways of earning passive income through stocks, bonds and properties?

A 1M portfolio yielding 3% or 4% will give you $30k or 40k annually.

3% to 4% is not a difficult target to achieve.

If you happen to die early, those assets will be passed on to NOK.

 

[Mecisteus]

Yes, today, not guaranteed. See for example Japan, another demographically challenged country in Asia, which has experienced 30 years (and counting) of not having those yields.

Until it is.

So you are implying that the retirees in Japan should buy longevity insurances because their interests rates have remained low for some time?

And by buying longevity insurances, the insurance companies are certainly able to perform better than market returns. Better than what the market can offer.

Yes, OK, that's one choice, but (as I keep reminding everyone) why make your loved ones wait? Shower them with money and affection now.

I understand you prefer to put your money in the insurance pool such that you don't mind subsidizing others who live longer.

But there are some others who prefer to give their money to their beloved NOK.

There's a reason so many wealthy people like high quality life annuities (via trust funds): it's utterly liberating. You don't have to wait to give your loved ones both money and affection, and you can have as much fun as you want out of "normal" savings and investing. Because, no matter what happens, you'll be at least OK to a foundational standard of living. You too can think like a rich person and act much the same way, even if you're not rich.

EXACTLY. This is the reason why I say the minority of rich people wouldn't mind life annuities because they can afford to waste their money.

Note this forum is not a place only for the minority of rich people. Majority of the people are middle income and there are some less well to do.

The majority of people who are not rich can't afford to waste their money into buying the wrong products.

 

[limster]

ELKYMe and Prof Utonium,

Why not consider the traditional ways of earning passive income through stocks, bonds and properties?

A 1M portfolio yielding 3% or 4% will give you $30k or 40k annually.

3% to 4% is not a difficult target to achieve.

If you happen to die early, those assets will be passed on to NOK.

I 100% agree with this. 3-4% is a conservative and easily achievable yield and allows you to create a sensible portfolio using asset allocation ratios consistent with your risk profile. If you are chasing high yield, you might be restricted in your choices of what goes into your portfolio and end up taking too much risk.

If you put all your retirement money into the stocks of a single country, of course something bad might happen and you might not get your desired returns. My portfolio is not 100% Japanese stocks. Thats why you diversify, geographically, and by sector, and asset classes.

 

[BBCWatcher]

But there are some others who prefer to give their money to their beloved NOK.

You have this part exactly backwards.

When you have guaranteed real lifetime income in retirement (an escalating life annuity from a high quality provider in a high quality currency), you can give away more (or even every remaining dollar) to your loved ones, NOW. Not decades from now, NOW. And you get to see the smiles on their faces, the university degrees, their first homes, their new businesses that they start up with your capital.... Any of those nice outcomes and more are possible, and they are all fairly sensitive to timing.

I very much prefer to give my wealth to my loved ones! Except I'm not going to make them wait for my affections until I'm dead simply because I'm trying to self-insure against longevity risk.

Adequate longevity insurance gives you the freedom to be giving, NOW, when your loved ones can most appreciate and seriously benefit from your generosity. When they're getting married, raising families, investing in education and businesses, etc., etc. And with no risk that you're ever going to be the opposite: a financial burden on them, because you came up short or somebody (like a creditor or court) took your wealth away.

This is awesomely powerful stuff, and it's worth getting some of it (longevity insurance).

 

[Mecisteus]

You have this part exactly backwards.

When you have guaranteed real lifetime income in retirement (an escalating life annuity from a high quality provider in a high quality currency), you can give away more (or even every remaining dollar) to your loved ones, NOW. Not decades from now, NOW. And you get to see the smiles on their faces, the university degrees, their first homes, their new businesses that they start up with your capital.... Any of those nice outcomes and more are possible, and they are all fairly sensitive to timing.

I very much prefer to give my wealth to my loved ones! Except I'm not going to make them wait for my affections until I'm dead simply because I'm trying to self-insure against longevity risk.

Adequate longevity insurance gives you the freedom to be giving, NOW, when your loved ones can most appreciate and seriously benefit from your generosity. When they're getting married, raising families, investing in education and businesses, etc., etc. And with no risk that you're ever going to be the opposite: a financial burden on them, because you came up short or somebody (like a creditor or court) took your wealth away.

This is awesomely powerful stuff, and it's worth getting some of it (longevity insurance).

You are not talking sensibly.

If I have 100M, I don't mind giving 95M to charity now and left with 1-5M earning 3-4% till I die.

If I have 1-5M only, how is it possible to give most of them now?

So the crux of giving early or now is only possible if you are a multi millionaire.

The majority of people are not multi millionaire. So this people has to spend their money wisely.

If you understand the alternatives but still choose to rely on insurance products, then fine.

But sadly the majority who bought don't even know of the alternatives.

 

[Prof. Utonium]

ELKYMe and Prof Utonium,

Why not consider the traditional ways of earning passive income through stocks, bonds and properties?

A 1M portfolio yielding 3% or 4% will give you $30k or 40k annually.

3% to 4% is not a difficult target to achieve.

If you happen to die early, those assets will be passed on to NOK.

Like I said, as I intended to retire earlier than 55. At conservative estimate, I am aiming to be able to retire latest at 50. Though this is just a goal. An aspiration. A target. Hence I set my pay out to start at age of 50. I have at least 2 decades to let my annuity compound before pay out kicks in.

Provided the variables remain constant,
due to compounding effect the total pay out I would receive at the end of term would double. Though obviously I did not factor in the NG portion. Which I treat as a bonus.

With that being said, this is just a safety net to allow me to hit my goal. Of course I have other assets allocation to help me in my goal and take higher risks. Though my warchest are currently idle due to current market condition and having Trump as president, it is truly unpredictable.

I don't want to rely solely on my portfolio for retirement. I have annuity and CPF to rely on too. I had made transfers to SA too. Provided everything remains constant in such that I won't be retrenched and contribute the same amount as I am now, I should have double of the current minimum sum by the time I am 55.

CPF and annuity is for my retirement while portfolio is a bonus as a legacy for my relatives in case I die early or for my kids if I happened to start a family in the future. As the money I inherited, I planned to shower it to the next generation.

It depends entirely on your goals and endgame. There is no one size fits all.

 

[Lewis.T]

You are not talking sensibly.

If I have 100M, I don't mind giving 95M to charity now and left with 1-5M earning 3-4% till I die.

If I have 1-5M only, how is it possible to give most of them now?

So the crux of giving early or now is only possible if you are a multi millionaire.

The majority of people are not multi millionaire. So this people has to spend their money wisely.

If you understand the alternatives but still choose to rely on insurance products, then fine.

But sadly the majority who bought don't even know of the alternatives.

Disregarding what BBC said, which I also feel makes no sense as most people do not have a large amount of cash to part with upon retirement after planning for their retirement, there are a few key benefits of having an annuity.

The most important I feel is the lack of monitoring. There is absolutely no need (unless you're curious) to check up on the fund.

This also means that you can be disconnected and enjoy your retirement years. You do not have to be monitoring your bond/investment and doing trades. And in turn, this protects you in the case your mind doesn't function as well as before, which in turn protects your sum of money.

That being said, there are pros and cons to strategies an individual would like to adopt. Finance isn't a science where you can say ok put 20% here and 40% there etc, it's more of an art. Different strokes for different folks. The pros and cons have a different weightage for every individual, and that is why people handle their finances differently.

 

[havetheveryfun]

The most important I feel is the lack of monitoring. There is absolutely no need (unless you're curious) to check up on the fund.

this sentence is contradicting...

 

[Mecisteus]

Disregarding what BBC said, which I also feel makes no sense as most people do not have a large amount of cash to part with upon retirement after planning for their retirement, there are a few key benefits of having an annuity.

The most important I feel is the lack of monitoring. There is absolutely no need (unless you're curious) to check up on the fund.

This also means that you can be disconnected and enjoy your retirement years. You do not have to be monitoring your bond/investment and doing trades. And in turn, this protects you in the case your mind doesn't function as well as before, which in turn protects your sum of money.

That being said, there are pros and cons to strategies an individual would like to adopt. Finance isn't a science where you can say ok put 20% here and 40% there etc, it's more of an art. Different strokes for different folks. The pros and cons have a different weightage for every individual, and that is why people handle their finances differently.

Prudential Agent

Thank you. We value your feedback.

 

[Lewis.T]

Prudential Agent

Thank you. We value your feedback.

I didn't know a doctor can't tell you why vaccinations are good for you, because they earn money from it, especially after telling you the benefits of it. But suit yourself, you seem pretty narrow minded and shallow just from that quote.

If you'd like to argue against my points go ahead, that's what a discussion is all about isn't it? Or do we judge a person's rationale based on their profession instead of their argument?

 

[Mecisteus]

I didn't know a doctor can't tell you why vaccinations are good for you, because they earn money from it, especially after telling you the benefits of it. But suit yourself, you seem pretty narrow minded and shallow just from that quote.

If you'd like to argue against my points go ahead, that's what a discussion is all about isn't it? Or do we judge a person's rationale based on their profession instead of their argument?

I really lol at your lack of understanding of how business is run.

When you go see a doctor, you need to pay a fee for his advice. He can recommend what is good or bad without any conflict of interests.

You earn your commissions by pushing sale of products.

You understand the difference in the business models?

 

[Lewis.T]

I really lol at your lack of understanding of how business is run.

When you go see a doctor, you need to pay a fee for his advice. He can recommend what is good or bad without any conflict of interests.

You earn your commissions by pushing sale of products.

You understand the difference in the business models?

Whereas your logic is to attack the strawman and my profession instead of the argument. Was there anything you deem inaccurate with my argument posted above? Make a rebuttal towards that cause thanks.

Quoting myself for your convenience dear sir.

The most important I feel is the lack of monitoring. There is absolutely no need (unless you're curious) to check up on the fund.

This also means that you can be disconnected and enjoy your retirement years. You do not have to be monitoring your bond/investment and doing trades. And in turn, this protects you in the case your mind doesn't function as well as before, which in turn protects your sum of money.

That being said, there are pros and cons to strategies an individual would like to adopt. Finance isn't a science where you can say ok put 20% here and 40% there etc, it's more of an art. Different strokes for different folks. The pros and cons have a different weightage for every individual, and that is why people handle their finances differently.

What I'm saying in my vaccination analogy, to make it clear for you to understand is this -

Does the doctor's advice/argument for vaccinations being good not hold weight just because they earn money by vaccinating people?

And in tandem, does my argument for buying an annuity not hold weight because I'm an insurance agent? There are plenty of searches you can do on the internet to find out why an annuity is good at what it does, which is to provide lifelong income. I'm just stating one of the ones I feel is more relevant (to me).

Edit: In case you haven't noticed, I'm not saying an annuity is better than your suggested bond ladder. There are certainly pros and cons to both. I'm just presenting a pro from the annuity standpoint to counter your 'bond ladder is better' argument.

 

[limster]

I would say that sometimes the business models for doctors might also not be ideal. Can watch some documentaries on US healthcare... what happens what doctors hear that your insurance company will pay for everything....

i'm actually going to lend my support to Lewis T. who has been a forum regular and i think his advice/views fairly represent one viewpoint that not everyone might agree with, but I haven't seen any 'integrity issues' that seem to afflict so many others in his profession. We should just let him state his views.

 

[Mecisteus]

I would say that sometimes the business models for doctors might also not be ideal. Can watch some documentaries on US healthcare... what happens what doctors hear that your insurance company will pay for everything....

This is not the same.

Both doctors and patients opt for the best healthcare because patients already paid for the insurance costs after all.

You go to a buffet. You are a loser if you just eat sushi only while skipping the lobsters and crabs.

 

[Mecisteus]

What I'm saying in my vaccination analogy, to make it clear for you to understand is this -

Does the doctor's advice/argument for vaccinations being good not hold weight just because they earn money by vaccinating people?

And in tandem, does my argument for buying an annuity not hold weight because I'm an insurance agent? There are plenty of searches you can do on the internet to find out why an annuity is good at what it does, which is to provide lifelong income. I'm just stating one of the ones I feel is more relevant (to me).

Your analogy is a poor one.

The costs of vaccinations are in the range of $100 to $200. You need to think 1x carefully.

You are buying an insurance product which can cost more than hundreds of thousands. You need to think x1,000 more carefully.

I thought I mentioned this in my concluding remarks.

If you understand the alternatives but still choose to rely on insurance products, then fine.

But sadly the majority who bought don't even know of the alternatives.

 

[Lewis.T]

Your analogy is a poor one.

The costs of vaccinations are in the range of $100 to $200. You need to think 1x carefully.

You are buying an insurance product which can cost more than hundreds of thousands. You need to think x1,000 more carefully.

I thought I mentioned this in my concluding remarks.

You not done with the strawman yet? He looks like he can't take another round of this.

Firstly, you are absolutely correct! You should definitely think carefully especially when it comes to a large amount of money, so why dismiss my argument for an annuity based on my profession? Are you not thinking clearly? This is the only point I can address from you that you've made so far since my first post here, I guess it's a start.

On the topic of cost, let me extrapolate it for you.

If a software development manager tells you that a software is good for you as it'll lessen the load on your staff and you could even cut down on a few stuff in your organization, does it mean his argument for getting that software should be ignored because he's a software development manager?

If a property agent tells you a condo has better appreciation compared to a hdb...

If a marketing manager tells you that advertisements are one of the best ways to attract views...

Do you still not get it? Sure, you can take my advice about insurance with a truckload of salt, but like I said, a simple search on the internet will yield thousands of results of why you should consider an annuity, from both biased and non biased sources.

If your response is again going to be something about the analogy without addressing the point I made on the pros of an annuity then I think we're done discussing. You would have proven that your reasoning and/or logic is flawed; at least to me.