They chose financial independence over home ownership.

This is somewhat extreme but watch how this Canadian couple chose financial independence over home ownership.  They are in their 30s and,...

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How many 20 years and $29,000 do we have?

Wednesday, June 8, 2016

Friend, sighing, "I should have listened to you."

AK, "Huh?"

Friend, "I finally surrendered my PruLink policy."

AK, "Oh, congratulations!"

Friend, "Congratulate what lah? I put in total of $29,000 since 1996. Every year put in money. 20 years and I took back less than that! I lost money!"

AK felt like saying "I told you so" but AK kept quiet. 

Friend, "Leave money in the bank or fixed deposit also better. Should have terminated long ago. My agent told me to continue paying for another few years and maybe it will make money. Stupid, right?"

AK, "Er... Ahem..."

Friend, "I still remember you said to terminate and put the money in my CPF-SA. How much would I have now if I did that?"

AK, "Well, I don't think you want to know..."

Friend, hesitating, "Ya, you are probably right. Haiz. Sad lah."

My dear readers, are you curious?

If my friend had placed the yearly contribution of $1,450 into his CPF-SA for 20 years instead of the Investment Linked Policy (ILP), how much would he have today?

About so much:

Calculator at:


A hard truth and the truth hurts.

That's not all. 

My friend would also have had the benefit of income tax relief which is given for the first $7,000 of Minimum Sum (MS) Top Up. 

In my friend's case, the income tax savings would have probably been a few hundred dollars a year. Multiply that by 20 years? Ouch.

The long and short of it, buy insurance for the sake of insurance. 

Don't mix insurance and investment.

Related posts:
1. Should I terminate an expensive ILP?
2. Free ILP or Term Life policies?
3. How to upsize $100K to $225K in 20 years?
Hey, sexy S A! Oppa AK style!


INVS 2.0 said...

Hi Ak,

This makes us the REIT investors with average of 8% looked much richer!

AK71 said...

Hi INVS 2.0,

Remember, nobody cares more about our money than we do and don't ask barbers if we need a haircut. ;p

Nicole said...

Never a fan of insurance savings products :P

emelyn said...

Hi AK71, you are really the CPF guru. I am now very excited to start building up my cpf funds. I was reading the CPF website and came across this,
"After setting aside your Full Retirement Sum or Basic Retirement Sum with sufficient property charge/pledge, you can choose to withdraw the remaining CPF balances (excluding top-up monies, government grants, and interest earned in your Retirement Account), or continue to keep your savings in CPF to earn attractive interest. "

It seems to say that once we hit 55, we can withdraw the monies that is the balance after setting aside the min sum but excluding top-up monies? Does it mean the yearly top up of 7k from OA to SA cannot be withdrawn?

AK71 said...

Hi Emelyn,

Don't like that say. I am not a guru lah. -.-"

Think of it as the top up money staying in the CPF-RA that will become CPF Life and withdrawing the voluntary and mandatory contributions above the FRS. I think it is very hard for someone's FRS to be fully or mostly made up of top up money. ;)

AK71 said...

I always tell my clients that insurance and investment are both long term commitments. 9 years is too short a time to judge.

Hmmm. What about 20 years? Long term enough?

AK71 said...

Laurence said...
This is terrible. Yet just hours ago, Prudential reported a mind-boggling stratospheric jump in profits:

"Prudential records 109% YoY profit growth at $1.5b for the first half of the year."


Blogger AK said...
Hi Laurence,

Chinese saying from my primary school days:


LOL. ;)

AK71 said...

On my FB wall:

Jimmy Ng:
Come bro. i feel for you.

Welcome to the Victims of ILP club.

heng heng for me, i got a grand TOTAL 0.023% gain out of 15+ years, when i exit 4 years ago.

Yup, that 老千 agents at counter still ask me to continue as it will mature soon. giving me a TOTAL PROJECTED non guaranteed gains of .............

0.03000000% !

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