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8 Things to consider when you buy a retirement saving plan

With the high cost of living in Singapore, it is only natural that many Singaporeans would be concerned about their retirement. Would I be able to retire comfortable at age 60? Or would I have to retire from my retirement? Hence, it is important to plan for our retirement early, and one of the ways to do so is via an insurance retirement saving plan

Endowment Savings Plan For Retirement

Following the 8 points below closely and you would be able to select a reasonably good retirement plan.

  1. Have a realistic retirement goal in mind.
  2. Decide on the duration (number of years) of saving. Our general recommendation is current age plus saving duration should not exceed the age of 55.
  3. Find a financial advisor that has been in the industry for more than 3 years and preferably around your age group. Why 3 years? Based on our experience, most agents that have less than 3 years of experience has a higher chance of quitting. The advisor should also be in the same life stage as you are to understand your needs better
  4. Talk to a financial advisor who can get quotations from more than 5 insurance companies. Most Singaporeans have limited resource (be it the time or money), and it is important that we get to compare different endowment plans from various insurers to find an endowment that is most suitable to us before committing.
  5. Ensure that the guaranteed payout is higher than the total premium paid. This may sound common sense enough, but we see many clients purchased endowment plans recommended by their insurance agent or relationship manager that have a guaranteed value lesser than the total premium paid.
  6. Do not have too many riders attached to the endowment plan. A simple waiver of premium upon dread disease (aka critical illness) is fine but not the dread disease accelerator or early stage dread disease rider. We have seen several cases where the interest generated by the endowment is not even enough to pay for the total cost of the riders!
  7. Find out what is the actual rate of return based on the 4.75% projection. Most of the endowment savings plan are presented based on the projection at 4.75% p.a. However, the 4.75% p.a. is not what you are going to receive. For example, you will be surprised to find the actual return could be as “high” as 1% from some insurers.
  8. This is probably the most important point in this article. Always ask for the historical performance of the insurance company’s participating fund (minimum last 7 years) to have an indication if the insurer can fulfil the 4.75% projection. Most quotations show the historical performance for the past 3 years, but this hardly provides a meaningful insight. Do not listen to the sales talk of the agent, insist on seeing the actual participating fund reports with the insurance company’s logo. You can find an example of Prudential’s participating fund reports (annual bonus) that show the Prudential’s participating fund performance from 2008 to 2015 (8 years) here. We have participating fund historical data of most insurers since 2005 from various sources 🙂

If you are confused or need help, fill up the form below and we will help you to find a combination of retirement plan that is suitable for you!

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Besides getting a proper retirement saving plan, you may want to read our post on financial simulation for retirement planning here.

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