Retirement plans

[BBCWatcher]

Coz they can't pick and probably stick to equities/bonds/allocation issues that they let insurance do it (can also be done by financial advisors via unit trusts but for them, the simplest is still via insurers' products except ILPs).

There's a whole cadre of "roboadvisors" that have popped up that do all this already, and they're marketing most aggressively to 20-something and 30-something savers/investors. Low cost "target date" index funds would be even better, but for those savers who want a "hands off" approach, the roboadvisors are eager to serve and at least charge less than insurance companies do.

Perhaps we have very difference experiences with the youngsters we met and so we have different perspectives about them. No right or wrong on this and I am just sharing my experiences of many many many of them are clueless about the use and value of money when young. (my nephew definitely can tell when to eat the best Waygu beef).

Well, I don't think you're helping if you're suggesting they buy high cost "retirement plans" from insurance companies. If you want to try to teach, teach well.

I know you are a strong advocate of lifelong payout but if lifelong, then the monthly payout maybe $400 or $500/month instead of $600 or $700/month. So it's a choice for all to make.

Yes, there is a difference between lifetime income and income for 30 years and done. And your point is...what?

The extra income for this payout period (cant remember the range available, maybe from 15 - 30 years) is just an income supplement before CPF Life begins. A sum that is 'good to have' when one reaches mid 50s.

So not even limited retirement income? Wagyu beef is "good to have." What useful purpose is served hiring a high cost insurance company to pay 30 years of income substantially overlapping one's peak earning years? To buy more Wagyu beef? Who would rationally do such a thing in terms of general, ordinary life plans? Why would a 25 year old buy a "retirement plan" that pays 30 years of income from age 40 to age 70, for example? WTF?

Ya, I know about RSP. RSP still requires one to pick something (ETF or UT)....

No, the "roboadvisors" handle that if that's what you want. And you're pretending there are no choices involved with high cost insurance company sold "retirement plans." Of course there are. You have to decide premium level, payout term, payout starting age, usually whether to reinvest occasional "bonuses"....it's still quite a bit of complexity.

....and it can be stopped and liquidated anytime one wants.

So can "retirement plans." The liquidation (surrender) value just sucks, a byproduct of the high upfront cost of the plan.

This feature is a pro and con for some people.

Con has a couple different meanings.

*my nieces and kids are with RSP STI ETF. They asked me when then they should sell and I still owe them this answer (this ETF is not doing well at the moment).

What's your answer?

Lest I be misinterpreted, I'm a huge fan of insurance companies when they're adding value and doing something useful. Their "retirement plans" along the lines you describe aren't that.

 

[mummynew]

There's a whole cadre of "roboadvisors" that have popped up that do all this already, and they're marketing most aggressively to 20-something and 30-something savers/investors. Low cost "target date" index funds would be even better, but for those savers who want a "hands off" approach, the roboadvisors are eager to serve and at least charge less than insurance companies do.

I am aware of the "roboadvisors" though I have not tried them before. I shared with the youngsters about these but they are not keen to learn. So what's next? Get them to continue to park their money in FDs and various bank accounts or spend all away?

My previous post has a typo for this sentence:

"my nephew definitely can tell when to eat the best Waygu beef"

This should be written as:

"my nephew definitely can tell where to eat the best Waygu beef"

This is a young man who not only knows about where he can find the best wagyu but also know what's the best whisky etc. He can spend a few hundreds in a meal or a few thousands in a dress watch thinking 'it worths every cent for the experience'. Asking him to commit a $300/month into an endowment / retirement plan actually is 'cheap' for him (he is not keen to learn about 'real' investment at all and there are many youngsters who are like this).

As shared before, my brother and I each has an endowment policy maturing next year. I am looking at an irr of about 6% and his is about 5% for the past 25 years. To us, this is more than good enough (my brother even 'regretted' that he should have committed more when he signed up when he was young). We shall know next year the true irr for these two policies soon.

I raise kids, at least a dozen of them close to me (since I have more than half a dozen of siblings). I know some of their close friends and so I know at least a few dozens of these youngsters. Ideally, each should know this and that and do 'correctly' but all learnings need to be voluntary and cannot be forced. Among them, majority are risk averse or spending like there's no tmr with a few who don't even trust CPF. I don't blame these kids as they have their own developmental journey to go through and to learn (just like myself who was once young and foolish before but at those ages, I did know how to force myself to save in various endowment policies that reaped me reasonable returns when they mature/d).

In summary, I am for the idea of long term investment via various engines as long as one knows what he/she is doing. I did zero of that before the age of 45 coz I was busy making 'mainstream' incomes. As shared before, I am perhaps the rare few who are highly appreciative of my financial advisor and feel she deserves every cent of the commission inbuilt in the products. She helped me to make at least 6 figures across the past years (so the rhetoric may start again, that I can also make similar or higher amount on my own with 'proper low cost investment' and I will next answer coz I didn't have the time or brain juice to plan and think about it etc etc).


*Pls do me a favour by not using lingo like 'WTF'. I would appreciate civic exchange and even more on agree to disagree.

 

[BBCWatcher]

I am aware of the "roboadvisors" though I have not tried them before. I shared with the youngsters about these but they are not keen to learn. So what's next? Get them to continue to park their money in FDs and various bank accounts or spend all away?

They're adults! Offer good suggestions if you'd like, but they get to make these decisions.

For the record, ranking well ahead of an insurance company's "retirement plan" in value for money is...CPF. For example, a working person in her 20s or 30s can typically deposit $7,000 into her CPF Special Account, get tax relief ($490 if she's in the 7% income tax bracket for example), and end up with more dollars available for withdrawal at age 55+ and/or a lovely, higher lifetime retirement income stream from age 65+. That's with a reasonably assured minimum yield of 4%/year (sometimes a bit more). That too is a better deal, and it's certainly simple.

This is a young man who not only knows about where he can find the best wagyu but also know what's the best whisky etc. He can spend a few hundreds in a meal or a few thousands in a dress watch thinking 'it worths every cent for the experience'. Asking him to commit a $300/month into an endowment / retirement plan actually is 'cheap' for him (he is not keen to learn about 'real' investment at all and there are many youngsters who are like this).

OK, but he's (technically, maybe) an adult. Moreover, I don't think suggesting he buy the financial equivalent of expensive but average (at best) whisky is a good idea. He's obviously curious about watches, beef, and whisky. That means he possesses curiosity, and that's a start.

As shared before, my brother and I each has an endowment policy maturing next year. I am looking at an irr of about 6% and his is about 5% for the past 25 years. To us, this is more than good enough (my brother even 'regretted' that he should have committed more when he signed up when he was young). We shall know next year the true irr for these two policies soon.

Congratulations, truly. Now what?

Among them, majority are risk averse or spending like there's no tmr with a few who don't even trust CPF.

They're not risk averse if they're spending like there's no tomorrow.

I don't blame these kids as they have their own developmental journey to go through and to learn (just like myself who was once young and foolish before but at those ages, I did know how to force myself to save in various endowment policies that reaped me reasonable returns when they mature/d).

Actually, ~25 years ago an insurance company's "retirement plan" could have been the best available option for retail savers/investors. But it's important to take due account of the past quarter century of innovation. Otherwise you could be recommending the financial equivalent of the fax machine. And there's more to come. Do they use Grab on their smartphones, both of which didn't exist 25 years ago? Of course they do. And Grab is entering the fray soon with GrabInvest.

One counterargument they could certainly make -- and it would be true! -- is there are many horror stories about individuals who buy insurance company "retirement plans" who then cannot afford a particular premium due to hardship, such as a bout of unemployment. Then they end up taking huge losses, because the surrender value is zero or trivial. That experience can also sour an individual, probably for life. These are not "slam dunk" instruments -- far from it. Not too long ago in this forum there was an individual who had such a plan, fell on hard times, borrowed against the plan (at 6+% interest), and pretty much crashed and burned. Not fun.

 

[Nofear40]

Hi, recently there have been news of potential agencies acquisition
I recall that under such circumstances, MAS will require the buyer to buy the existing policies with the same terms but I can’t seem to find the link
Does anyone know?

 

[Aaron_soh80]

Retirement plans got a few type. Maybe u ean to describe how u wan your retirement plan be like. All the mentioned have retirement plans.

I wan to save $100 per mth but retire with 1 million ..can u do it?

 

[BBCWatcher]

Hi, recently there have been news of potential agencies acquisition
I recall that under such circumstances, MAS will require the buyer to buy the existing policies with the same terms but I can’t seem to find the link
Does anyone know?

There have been several insurance company acquisitions in Singapore:

* AXA bought Wing An Life
* Manulife bought John Hancock
* Prudential bought UOB Life
* Zurich stopped issuing new policies in Singapore (but continued to service them), then Singlife later acquired Zurich's existing policies

All policies remained in force. It's a non-event for policyholders, really.

 

[boredboiboi]

I wan to save $100 per mth but retire with 1 million ..can u do it?

Are your serious or are you joking $100 a month to get a million

 

[celtosaxon]

Are your serious or are you joking $100 a month to get a million

$100/mo for 50 years, average 9% return.

 

[Mr. Wood]

There have been several insurance company acquisitions in Singapore:

* AXA bought Wing An Life
* Manulife bought John Hancock
* Prudential bought UOB Life
* Zurich stopped issuing new policies in Singapore (but continued to service them), then Singlife later acquired Zurich's existing policies

All policies remained in force. It's a non-event for policyholders, really.

Last time got OAC got bot over or change name to GE. no doubt existing policy still in force, but the GE agents took over policies dunno is it cannot be bothered or wht. policy holders want to check their policy but given the answer dis is old policy they dun hav records.

 

[xtwis7]

While that’s more of a operational issue, very similar to this is the fact that GE agents cannot see client’s OCBC policies even if client transferred all their policies over.

When OCBC policy is essentially a GE policy.

Last time got OAC got bot over or change name to GE. no doubt existing policy still in force, but the GE agents took over policies dunno is it cannot be bothered or wht. policy holders want to check their policy but given the answer dis is old policy they dun hav records.

 

[boredboiboi]

$100/mo for 50 years, average 9% return.

And it must be constant. And u still go calculate it.

 

[BBCWatcher]

Why worry about something you cannot control? Every insurance company selling policies in Singapore can move your policy to another carrier whenever desired. Moreover, your agent (if you have one) is not a slave and is mortal. These aspects of your insurance experience are subject to change.

Don’t worry about stuff you cannot control. Just buy insurance you actually need, with the best value for your premium dollar, and within SDIC coverage limits.

 

[dork32]

There have been several insurance company acquisitions in Singapore:

* AXA bought Wing An Life
* Manulife bought John Hancock
* Prudential bought UOB Life
* Zurich stopped issuing new policies in Singapore (but continued to service them), then Singlife later acquired Zurich's existing policies

All policies remained in force. It's a non-event for policyholders, really.

i used to be on john hancock. now switch to manulife

 

[dork32]

I wan to save $100 per mth but retire with 1 million ..can u do it?

you are not being realistic.

 

[BBCWatcher]

I wan to save $100 per mth but retire with 1 million ..can u do it?

Maybe, but probably not. With the following assumptions you can barely make that math work:

1. The $100/month is based on 2020 dollars, and you increase this nominal figure with wage inflation and career progression. Let’s assume that’s 3%/year compounded annually. In other words, a year from now you’re investing $103/month (+3%).

2. You start on your 22nd birthday and do this for 45 years (to your 67th birthday), i.e. 540 months.

3. You invest in a low cost stock index fund, mostly or fully global.

4. Your S$1 million target is based on 2065 nominal dollars.

5. You don’t skip any months, don’t withdraw.

Do all that and, if you experience an average yield net of all costs of 9.3% compounded annually, you’ll meet your goal.

OK, now let’s look at how much easier this is if you start with $200/month, so here are the new assumptions:

$200/month, 2%/year contribution increase, 40 years (480 months).... Then you still meet your goal if your average yield is 8.9%.

Even 8.9% is unrealistic, I feel, so how about returning to 3%/year contribution increases, 6.5% for your average yield, and 41 years? Then, if your starting amount is $300/month, you’ll meet your goal.

Lessons:

A. Start now.
B. Be diligent. Don’t skip months, and keep increasing the savings flow as wage increases and career progression allow.
C. Don’t stop. Find something you like to do that someone pays you to do, and keep (re)finding that.
D. Don’t be cheap on yourself. If $100/month is genuinely all you can afford now, OK, but you really can’t find another $50/month?
E. Don’t screw up badly. Prison, for example, doesn’t help.
F. Don’t expect ridiculously high yields, and don’t chase them.

 

[purpleberry]

Plans aside, how much do we need to save up for our golden years for a couple? I know this depends on your personal lifestyle but say on average, not too lavish and not too kiamsiap also. 3-4k/month?

 

[boredboiboi]

Plans aside, how much do we need to save up for our golden years for a couple? I know this depends on your personal lifestyle but say on average, not too lavish and not too kiamsiap also. 3-4k/month?

10 to 20% of your income now to set aside for your golden years.

 

[zoneguard]

Plans aside, how much do we need to save up for our golden years for a couple? I know this depends on your personal lifestyle but say on average, not too lavish and not too kiamsiap also. 3-4k/month?

$2,351 monthly budget in 2019 terms. You need to work backwards for the retirement budget with inflation adjustment.
Sources:
https://lkyspp.nus.edu.sg/gia/artic...household-need-for-a-basic-standard-of-living
https://whatsenoughsg.wordpress.com/key-findings/

 

[BBCWatcher]

Plans aside, how much do we need to save up for our golden years for a couple? I know this depends on your personal lifestyle but say on average, not too lavish and not too kiamsiap also. 3-4k/month?

I think you're suggesting you want to end up with S$3,500/month (2020 dollars)(*) in total retirement income. Adjust that figure if you'd like, but some more information is required:

1. Approximately how many years do you (the couple) have until retirement? And may we assume a classic/traditional retirement age of 65, or should we assume some other age?

2. Approximately how much have you (the couple) saved toward retirement so far (long-term savings, not savings you're earmarking for some upcoming "big bill," such as a child's university tuition)? For simplicity, include in this figure all CPF assets (you, your spouse/partner) excluding MediSave balances.

(*) You set retirement lifestyle goals based on real dollars, not nominal dollars. What those dollars can buy (or not) is what actually matters. So the actual nominal dollar figure in retirement will be higher, and it will keep getting higher with inflation. Pending answers to questions 1 and 2, we'll get to that part in due course.

 

[purpleberry]

10 to 20% of your income now to set aside for your golden years.

$2,351 monthly budget in 2019 terms. You need to work backwards for the retirement budget with inflation adjustment.
Sources:
https://lkyspp.nus.edu.sg/gia/artic...household-need-for-a-basic-standard-of-living
https://whatsenoughsg.wordpress.com/key-findings/

I think you're suggesting you want to end up with S$3,500/month (2020 dollars)(*) in total retirement income. Adjust that figure if you'd like, but some more information is required:

1. Approximately how many years do you (the couple) have until retirement? And may we assume a classic/traditional retirement age of 65, or should we assume some other age?

2. Approximately how much have you (the couple) saved toward retirement so far (long-term savings, not savings you're earmarking for some upcoming "big bill," such as a child's university tuition)? For simplicity, include in this figure all CPF assets (you, your spouse/partner) excluding MediSave balances.

(*) You set retirement lifestyle goals based on real dollars, not nominal dollars. What those dollars can buy (or not) is what actually matters. So the actual nominal dollar figure in retirement will be higher, and it will keep getting higher with inflation. Pending answers to questions 1 and 2, we'll get to that part in due course.

A bit hard to set aside a definite amount due to kids still young. But to put some figures down.

1. Hope to work for another 35-40 more years.

2. So far zero. Anything extra is for mortgage, health insurance, parents and university funds.