Recently, Singapore government has raised the concerns that many Singaporeans will not have enough money for retirement.
The Singapore government is proposing a Compulsory Annuity Scheme for all Singaporeans. What's the problem?
The only problem is that currently, Annuity plans offer very low returns of less than 3%. Thus, putting money into Annuity plan for retirement income might not be a good idea if inflation rate is above 2%.
If returns on Annuity is 3% and inflation is at 3%, it means ZERO returns for your money parked in Annuity.
The Good News is a person can easily structure an Attractive Annuity Plan with double the returns of a typical Annuity plan by "laddering TEPs". What do we mean? A person can invest in say 5 TEPs with varying maturity period of say, 5 years, 6 years, 7 years, 8 years and 9 years to maturity.
Upon maturity of the 5 year TEP, you can withdraw the "gains" (double that of Annuity) to fund your lifestyle and rollover (re-invest) the principal amount into another TEP with say another 5 years to maturity. At end of year 6, you have another TEP maturing and again you can withdraw the gains to fund your lifestyle and again roll over (re-invest) the principal amount into another TEP with another 5 years to maturity.
By repeating this process, you will actually create a non-stop income stream year after year after 5 years from now and achieve the same benefit of an Annuity plan (non-stop income stream).
However, by investing into TEPs, you have an added advantage over investing into Annuity as the returns of TEPS can be double that of Annuity plans currently.
2 comments:
It seemed like yesterday when we got our first salary, now, we are worrying over our retirement... how much tougher can likfe get here ?
hey true....things like annuities and healthcare ...woah, damn stressed
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