Many Singaporeans are beginning to realize how “expensive” retiring is. The need for adequate income during retirement is a concern and a priority because it is likely that the cost of funding your golden years will rise due to inflation and higher living standards.
We are likely to want to travel more when we are retired in order to enjoy the years when we are still physically healthy and mobile. In the first 10 to 20 years after leaving the workforce, this is typical. And as we have more free time, it only makes sense that we would look for activities to keep us busy, which could increase costs.
Planning for retirement is a crucial aspect of your financial journey, and Singapore offers a range of insurance plans that can help you secure a comfortable and financially stable retirement. In this article, we’ll explore four key insurance plans that can boost your retirement income in the Lion City.
1. Retirement Income Annuities
An annuity pays out monthly or yearly payments for the rest of your life. It entails paying an insurer a one-time premium or a number of premiums over a predetermined period of time. The premiums are invested to provide you with a consistent, guaranteed income.
Because most retirees are concerned about outliving their financial resources, an annuity’s regular payouts, especially if they are guaranteed and for life, provide them with peace of mind. Such a policy frequently serves as a building block for retirement plans to produce retirement income flows. The insured’s beneficiaries will receive any remaining cash value in the event of a premature death.
Retirement income annuities, also known as CPF LIFE (Central Provident Fund Life), are a government-backed annuity scheme in Singapore. When you reach the withdrawal age for your CPF savings, you can choose to use a portion of your CPF funds to purchase a CPF LIFE plan. This plan provides you with a lifelong stream of monthly payouts, ensuring a steady income during your retirement years. CPF LIFE is designed to provide retirees with a reliable source of income.
2. Endowment Plans
Endowment plans are a popular choice in Singapore, as they combine both savings and protection. These insurance policies require you to make regular premium payments over a fixed period, usually ranging from 10 to 20 years. At the end of the policy term, you receive a lump sum payout. This payout can be used to supplement your retirement income or for other financial needs. Some endowment plans also offer bonuses or dividends, potentially increasing your overall returns.
3. Whole Life Insurance with Cash Value
Whole life insurance policies in Singapore are known for their cash value component. These policies provide a death benefit for your beneficiaries while accumulating cash value over time. The cash value can be accessed during your lifetime, offering flexibility in managing your retirement income. Some whole life policies in Singapore may also provide dividends, further enhancing the cash value.
Whole life insurance frequently lasts a lifetime. This is assuming that the insured pays the required premiums, or until a specified maturity date, such as age 100.
In addition to the protection component of paying out to your beneficiaries in the event of your death or total and permanent disability, whole life insurance plans also have a savings component. If you need to use the savings component (surrender value) in your later years, you can surrender the policy. Some provide an add-on to cover serious illnesses.
Participating whole life policies share in the profits of the insurer’s participating fund. Your profit share is distributed to your policy as bonuses or dividends. These bonuses or dividends, however, are not assured because they largely depend on the investment success of the participating fund. Bonuses or dividends that have been declared will be paid in addition to the amount assured when you file a claim.
Non-participating whole life policies have guaranteed benefits, but policyholders are not eligible for bonuses.
4. Health and Critical Illness Insurance
Though not directly related to retirement income, comprehensive health and critical illness insurance are fundamental components of a sound retirement plan. These policies help manage medical expenses, which can significantly impact your retirement savings. Adequate health and critical illness coverage can prevent unexpected healthcare costs from eroding your retirement income and provide peace of mind during your golden years.
Conclusion
In conclusion, Singapore offers a diverse range of insurance plans that can be integral to your retirement income strategy. To make the most of these options, it’s essential to assess your individual financial situation and consult with a qualified financial advisor. They can help you tailor your insurance and retirement planning to your specific needs and goals, ensuring a financially secure and comfortable retirement in the Lion City.
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