Will I retire happy?

I received this email from a reader recently:

Hi Mr. Tan,

I stumbled upon your blog and read about your analysis on the inflation-adjusted retirement plan. currently, I have a term plan and am currently considering on a retirement plan, which I have recently signed.... 

And it is the above-captioned one.




I am 35 and based on this plan, I expect to retire at 55 and this plans covers me up to 70.

I will be paying total premiums of $70,875 for 15 years,


In which there will be a 5-year accumulation period.

Thereafter, my total guaranteed retirement income is $115,875 from age 65 to 70.

If I assume the inflation rate from now is 3% p.a., I should expect my guaranteed payout to be $115,171.88 for 15 years. 

Which seems like the plan is marginally palatable. 




But now that you got me thinking about the returns on my capital, it looks like I am losing the returns during the 5-year accumulation period. 

Am I right? Should I be worried?

I have already signed the plan and realized that there are more demerits to my proposal than I thought it had because I was focused on reserving retirement income while having a longer coverage on death & terminal illness. 

Like I cannot surrender it before retirement age, or else I lose everything.

Also, it would be great if you could post an article advising on securing more $ for retirement for worried young Singaporeans.

I hope I can get your advice on this.

Thank you very much!

SI

My reply:

Hi SI,

Er... I am not a Mr. Tan. 

I think you might have mistaken me for one of the 4 presidential candidates in the last presidential election. ;p

If you have already signed up for the plan, there is little else you can do about it, I suppose, short of terminating it and suffering losses.

I think that if you follow my reasoning and calculations in the blog post you mentioned, you will see why I don't think the product will do the job it says it will do.

Anyway, I don't wish to cause you further anxiety. 




There is a non-guaranteed portion in the product. 

It could work out nicely for you in the end if they deliver on that, much delayed though it might be. :)

As for how to secure more money for retirement for 'worried young Singaporeans', I blog about it on and off:

1. Earn more
2. Spend less
3. Invest for a second stream of income

This is my peasant mentality to financial freedom. :)

Best wishes,
AK

Related posts:
1. Inflation adjusted retirement income plan.
2. To be a happy peasant.
3. Very first step to becoming richer.
4. Wealthy nation cannot afford to retire?

Saturday with Victor Chng: Becoming a better investor.

In case you missed the blog post on what is happening this Saturday morning, a friend of mine, Victor Chng, is going to share his views on an unloved sector of the economy and how we could potentially make quite a bit of money by capitalising on this.

So, if you are interested in Victor's analysis and if you are free this Saturday, get your tickets at:

Level Up Life Series.

Price: S$9.00 per ticket.
Bring a friend and pay S$15.00 for a pair.
If you are a student, show your matriculation card at the door and you go in for free.

If you want to bring it a step further at the end of the half day event, ask Victor about the discussion forum he is organising. That will be another value for money learning experience.

I try to be a better investor by listening to better investors. I believe that Victor is a better investor than I am.

The book Victor wrote with Rusmin Ang.

Related post:
Saturday morning with Victor Chng: Level up..