What comes to your mind when you think about your retirement?
Option A Staying at home looking after your grandchildren, taking public transport to meet friends over coffee or majong. Taking an occasional vacation to a nearby destination in Asia. Healthcare options are limited to government restructured hospitals. Financially independent.
Option B Zipping around town in your car meeting friends for a round of golf followed with a high tea buffet in a hotel and some shopping in town. Have the option to change your car every 5-7yrs. Ability to afford at least 2 vacations globally a year with your grandchildren. Healthcare options are available up to private specialists and hospitals. Financially independent with a decent-sized estate that can be passed down to your children and grandchildren.
Whether it’s option A or B will depend very much on your desired retirement lifestyle and the size of your retirement nest egg prevailing at that point. The more funds you have, the more retirement options will be available to you.
For most working professionals, I believe they will desire a lifestyle similar to option B but interestingly, their retirement plans may not match that objective. Why?
Some of the possible reasons are as follows:-
Prioritizes immediate gratification over deferred enjoyment
Low savings ability due to inability to curb lifestyle spending &/or over-commitment to car and housing. With our high property prices, it is not uncommon to see couples saddled with at least S$1mil in housing loan nowadays
Having a single income to support the family after a spouse leaves employment to look after the children
Being overweight in investments with a performance that did not pan out as expected. Wost still, ended with a capital loss.
Procrastination leading to delay and underfunding in the accumulation plan
Overestimated that CPF alone will be sufficient for retirement
Underestimation of how much is required at retirement age to live that desired retirement lifestyle
In this article, I’d like to discuss point #7.
To facilitate the discussion, let’s think of retirement to like taking a long term overseas vacation…something that most of you will be able to identify with. After all, taking overseas vacations is one of the most favorite pastimes for overworked Singaporeans, wouldn’t you agree?
A. The Destination
With every vacation, it starts with the destination.
Given our longevity, retirement may span at least 25yrs. Hence, for discussion purpose, let’s assume that we’re taking a Flight to Brazil which is a 30 hour flight time
Perception pitfall: one may think that the retirement period is far shorter ST article
B. Plane type, Engine, and thrust, fuel capacity
Given the destination, which plane do you think can best bring you there most effectively in one piece with minimal refueling stops? A turboprop, piston, midsize jet or a wide-body airliner? – A wide-body airliner of course!
In financial planning terms, the size of the plane is akin to the size of the retirement nest egg required to provide you with the desired retirement lifestyle. If your financial adviser has done a calculation for you, you will realize that it’s no small change. After all, Singapore is reputed to be one of the most expensive cities to live in.
With a large airplane, it needs to be equipped with large engines and fuselage to power the aircraft. Moreover, the cost of the plane is not constant. Instead, it goes up over time due to inflation.
Hence in financial terms, the earlier we start accumulating and the higher the regular contribution, the more power you will inject into the accumulation process…and the more likely we can achieve our retirement goal.
Moreover Perception pitfall: one may think that they can rely on CPF alone or that retirement doesn’t require too much money. ST article
C. The Runway
Every plane needs a runway to allow it to pick up speed for take-off. Similarly for retirement, the runway is the time period from now till our expected retirement age. This is the critical period for us to contribute towards our retirement nest egg, and take advantage of the compounding effect of money.
Typically the larger the plane, the longer the runway needed. Since we have deduced from above that we’ll require a Airbus A380 equivalent, we do need a long runway for it to do a proper take-off, agree? That means that we really need to start early – as soon as we’re in our age 30s, to start the accumulation process. Appreciating this point is the most important part of the accumulation process.
If we take advantage of the long runway by starting early, small regular contributions can allow us to achieve our retirement goal with little financial stress. We can see that through the effect of compound interest in the picture below. It certainly looks like a plane take off trajectory, isn’t it?
However, if we procrastinate and start later in life e.g age 45, the runway will be shorter and we will be required to contribute significantly more on a monthly basis to reach the same end goal. That would be pretty stressful, wouldn’t it? Another example can be seen in the following
If you’re only starting to accumulate in your 50s, your runway will be rather short and you will need all the financial firepower you can give to your accumulation plan. If you fail to do that, I’m afraid you may have to consider deferring your retirement age and/or downgrade your retirement expectation.
In summary, our ability to achieve our retirement goals are dependant on how well we manage the following 4 parameters:-
1. desired Retirement Lifestyle, expected Longevity and Inflation – which will determine how much is needed at retirement age 2. Accumulation Period 3. Size of the Regular Contribution to the plan 4. Rate of Return on the plan (which I’ll address in a later article)
Ready to take off to retirement bliss? Get in touch with me at firstname.lastname@example.org
With the exception of Aviva, for those who bought IP riders before 8 Mar’18, you will continue to enjoy your rider with benefits unchanged. For Aviva policyholders, pls see “New Aviva Option C rider” below.
For those who bought full cover IP riders between March 8 last year to March 31 this year, your plan will transition to the new co-pay riders upon the renewal of your policies from April 1, 2021.
NEW Co-pay riders (how it works in general)
So how does the new co-pay riders look? Depending on which insurer and plan (we will assume private hospitalisation for discussion purpose) you are with, it may have the following features :-
1. 5% co-payment by you subject to a cap of S$3k/yr if you are using the insurer’s panel of specialists. No cap if using non-panel
2. AXA, Aviva and NTUC require an additional rider deductible to be payable by you if using non-panel specialist
3. AIA rider will not cover main plan deductible and co-insurance at all if using non-panel specialist
This is applicable if you bought the option C (combination of option A + option B) rider before 8 Mar’18. This rider will be effective upon your policy renewal in 2019. – there is now a rider deductible payable by you as highlighted in the table below (Existing MyHealthPlus column) – amount of rider deductible is dependent on whether panel specialist is used &/or pre-authorisation is given. Please refer to the table below- “Existing Myhealthplus” column.
New Aviva Option C rider
New Aviva Option C II rider This is applicable if you bought the option C (combination of option A + option B) rider on or after 8 Mar’18
Essentially, the Option C II rider covers – the main plan deductible after you pay a rider deductible (pls refer to above table, “New MyHealthPlus” column) – 50% of the main plan co-insurance (your exposure is cap at S$3k if using panel specialist with pre-authorisation, otherwise no cap)
Insurer panel of specialists and pre-authorisation
In practice, on the issue of using the insurer’s panel of specialists and pre-authorisation, there may be a tendency for policyholders to overlook this as the specialist they see will often be referred by their GP or referred by their friends. Hence, there’s a possibility that your preferred specialist may not fall under the insurer’s panel.
This concern is real as I’m usually informed by my clients on their impending hospitalisation or surgery just days before the surgery or hospitalisation.
Moving forward, pls use the insurer’s panel of specialist (click on the link)
If you belong to my vintage, you might remember this cartoon fondly.
Besides being merely entertaining, we can perhaps draw some important lessons from it.
On reflection, we can note several parallels with financial planning.
Well you see, a financial plan is very much like building your home, to shelter you from the elements and to provide creature comforts to you and your loved ones.
However, there are 3 major differences between a financial plan and a home:-
A house is a physical tangible item whereas a financial plan is intangible
A house serves an immediate need whereas a financial plan serves a future need
Unknowingly to most, the financial plan might be the only thing that can salvage your home
The 3 little pigs represent 3 types of attitudes towards financial planning:-
The pig that built a house of straw
This could represent an individual who
may lack awareness and knowledge on the need to plan financially or one who prioritizes resources for immediate gratification
prefers to DIY instead of seeking professional advise
The pig that built a house out of sticks
This could represent an individual who
has done some financial planning based on limited knowledge with the false comfort thinking it’s already adequate and has therefore underfunded the plan.
prefer immediate gratification over planning for the future
does financial planning on a sporadic rather than a systematic and holistic basis.
may have prioritized wants over needs e.g preference for wealth accumulation over family protection, thereby ending up with inadequate insurance protection.
has neglected to upgrade/upsize his financial plans to meeting his growing financial needs as he progresses through life (e.g getting married, starting a family and growing lifestyle needs)
The pig that built a house out of brick
This could represent an individual who
thinks long term and seeks the help of a trusted financial architect to design a sturdy financial plan that can withstand whatever life throws at it
has foresight and conviction to plan for the betterment of his family, he is willing to commit more time and resources towards meeting this goal
understands that a financial plan needs to be updated in accordance with his growing family structure and changing lifestyle needs so that the financial plan will always stay relevant in meeting his financial goals
In scene 1:58, he was being teased by the first 2 pigs on why he’s taking so much time and resources to build his house of brick when he could be playing. In life, it’s like when one is frugal/prudent with his money, choosing to defer immediate gratification so that he can channel resources towards meeting his future needs, while his friends indulge in parties and lavish/lifestyle goods? But he is not deterred and remains single focused, as he knows one day that the big bad wolf will be paying a visit and it’s best to be prepared in advance.
Ensure that everyone in your immediate family and elderly parents has an adequate financial plan
In the story, when the house of straw got demolished, the first pig went to the house of sticks to seek protection, and when the house of sticks got similarly trashed, the first 2 pigs ran to the house of bricks to seek protection.
In life, this is like having a loved one who was uninsured, inadequately insured or not accumulated sufficient funds for children’s tertiary education or not having sufficient funds for retirement. Who do you think they will turn to for funds?
The Big Bad Wolf
The last character is none other than the big bad wolf but you know, so long as you’re financially prepared, there’s actually little need to worry and yes, that wolf can be tamed to become like a kitty cat.
The wolf can represent the following:-
Untimely death, disability, critical illness, a serious accident in the family
Funds needed for your children’s tertiary education
Funds needed to fund provide the desired lifestyle for your retirement years
If the above concerns are important for you to address, then it’ll be to your advantage to have the right attitude towards financial planning – plan early and commit the required resources to fund such future needs. Your family’s long term financial future depends on it.
RafflesHealthinsurance(RHI) , a fully owned subsidiary of Raffles MedicalGroup, announced the launch of Raffles Shield, making it the seventh player to enter the industry. Raffles Shield is the first Integrated Shield Plan (IP) developed in collaboration with Raffles MedicalGroup and is a Medisave- approved IP providing coverage for hospital and surgical expenses.
Raffles Health insurance has observed that many who purchase IPs are keen to have private hospital coverage without overly expensive premiums, and would like to have more flexibility to manage their premiums. In response to this, Raffles Shield offers two attractive options
1. the Raffles Hospital Option
– typically, one has to decide between choosing a private hospital plan vs a government restuructered hospital plan and the decision basically comes down to affordability of premium.
With Raffles Shield howver, it offers an hybrid option where a government restructured hospital plan is combined with a Raffles Hospital option at an afforable premium without any pro-ration being applied.
2. the High Deductible Option (HDO)
– whereby instead of the usual S$1.5k-3.5k annual deductible, one can opt for a S$10k annual deductible in exchange for a lower premium.
This works especially well in situations where the insured is aleady covered by existing employee benefits and thereby avoids duplication of cover and paying excessive premium at the same time. When you feel the need to have a smaller deductible, just remove the HDO anytime during policy renewal without any medical underwriting!
Pre-existing medical conditions
Typically, hospital type insurance plans have the strictest level of underwriting whereby if one has a pre-existing medical condition, a health exclusion can be commonly expected.
Hence, another unique feature of the plan is that it might be able to offer coverage to individuals with certain pre-existing conditions and work with them through the Raffles Care Management Program to improve their overall well being.
To find out more about the plan and seek independant advise on which plan option suits your needs best, just get in touch wth me at email@example.com
If you’ve watched movies cast during medieval times example, favourites such as Robin Hood, Braveheart, there will be a scene where enemies tries to take out a fortified castle. Well, here’s a clip
So what has this got to do with financial planning you ask, Well, a sound financial plan is akin to building an impregnable fortress to provide shelter to your family and protect your most precious assets from enemies of every possible kind and direction.
Well, how to go about it?
As with every building,there’s 3 major components
1. Foundation 2. Structural beams and walls 3. Roof
It starts with a strong foundation as a building with a weak foundation will certainly fail over time.
In a financial plan, this is represented byInsurance.
To build a strong insurance foundation, there must be comprehensiveness and appropriate size.
– because of life’s uncertainties, you can never predict what kind of curve ball life throws at you. It could be an accident, a serious illness, disability or death. Hence, the importance to secure comprehensive insurance coverage to protect against the various risks.
– for example, if one buys S$1mil in Death only cover but is afflicted with a major illness that requires significant medical cost. Resulting from this illness, one may not able to return to work and therefore loses income. Because there isn’t any cover for major illness or disability, not only is he unable to claim a single cent from his existing policy, he’s obligated to continue paying premiums…but his ability to fund the plan is already impaired due to his loss of income.
source: Guide to Health Insurance
– this will depend on the size of fortress you plan to build which in turn depend on the number of loved ones and precious assets you plan to protect.
for example, a S$200k life insurance may be appropriate for a single person just starting work but no so for a married person with children, mortgage and a car.
Structural beams and walls
To hold up your fortress, it must be supported by strong beams and walls
In a financial plan, this is represented by Savings.
The ability is save is dependant on your ability to control your expenses which in turn is dependant on how you prioritise planning for your future over immediate gratification.
As your family grows and prosper, you will have to continually build and fortify your walls
Having adequate savings will allow you to
a) set aside 6 mths or more in contingency reserves
b) purchase your home and car
c) provide for your children’s tertiary education
d) build your retirement nest egg
A fortress ain’t complete without it’s roof
In a financial plan, this is represented by Investments.
To protect against natural elements such as sun, rain, hail and snow, a roof needs to be properly designed.
Similarly, Investments comes with risk and needs to be properly structured such that it’s in sync with your risk appetite whilst being able to meet your investment objective at the same time
As with financial plans, you can already buy insurances and investments online, at a slightly lower cost but at the expense of much of your time and you may muddle through the process due to lack of expertise.
Successful people understand that their expertise lies in their career and their time is valuable. Hence, it’s actually more economical to hire a professional financial adviser to help design the right specifications for their financial plan and assemble the appropriate financial tools so as to help them achieve their life’s financial goals.
Without proper guidance, the propensity to buy what you like to buy instead of focusing on what you need is high – that’s where things will go wrong!
For example, there’s a high tendency to buy savings and investment products when in fact, insurance is a higher priority. Striking the right balance is key. Moreover, our financial needs evolve as we move through different life stages, and our financial plans should be adjusted accordingly to remain relevant.
Other weak links
If you have followed all the above steps in building your financial plan, that’s well and good.
However, your loves ones (parents and family members) may not have benefited from the same advisory process and may therefore ended up with a less than appropriate financial plan. Should their plan ‘fail’, you might be forced to downgrade your fortress to save them.
For example, should a family member fall seriously ill and do not have an appropriate plan to address this need, who do you think they will turn to for financial support?
Another example is when your parents retire and lack the funds for their ongoing expenses. Increasing longevity is a major concern and one may underestimate the amount of funds required at retirement. By the time one realizes it, it’s probably too late.
Hence, it’s important that every family member is equipped with a sound financial plan so that they will not become a financial burden to their loved ones.
Hope the above was beneficial. To meet up for a discussion, just send me a note on the form on the right, and we’ll get in touch soon.
Have you outgrown your clothes and dread the feeling of buying bigger sizes?
Have you been eating more and exercising less?
Planning to go on a diet or exercise program?
Yes, I’m sure some of us have experienced the above…while a few have done something about it, others are still procrastinating…that’s understandable as it takes tremendous motivation, discipline and effort to stick to a fitness regime to get back into shape.
For those who have gone ahead to improve their physical health, well done and do keep it up lest muscle atrophy set in again.
For the others, buying a gym membership and not using it or having the mindset of “perhaps tomorrow” will be cold comfort and will unfortunately not propel you to where you want to be, wouldn’t you agree?
So what has the above got to do with financial planning?
Just like exercising to get fit, your financial plans need to be regularly updated to fit your current lifestyle and financial needs. Also, being disciplined in carrying out the plan mapped out by your financial adviser will certainly help in meeting your financial goals.
for example, as you grow from an individual with single needs to marriage and to starting a family, your financial needs will change in tandem and it’s best to update your plans to protect your interest and those of your loved ones.
Not having your financial plans updated will be akin to wearing clothes when you were in your teens. Most will probably not fit you anymore nor the style….not cool.
But some of you may say “Gilbert, it takes so much effort and financial resources to get things done which is why I prefer to procrastinate“.
Well, I can appreciate that but procrastinate for how much longer?
How will that improve your situation by doing nothing in the meantime?
What happens if you realize that you need to file a claim and have cold sweat not knowing whether you have a plan that insures the event or that can cover it adequately?
Realizing your investment portfolio has taken a hit during a market downturn as you didn’t respond to your adviser’s recommendation to rebalance your portfolio.
All of us have the same 24 hours of time and limited financial resources, thus how we prioritise these resources to better our future will separate the have and have-nots. Which segment would you like to belong to?
To get started on your financial fitness program, hire a financial coach today (yours truly at your service)!
“Most people do not plan to fail but simply fail to plan” It’s a personal choice. Take charge of your financial life TODAY!!
It’s undoubtedly the top past time for busy working Singaporeans whenever we can can afford it or have time for.
A good vacation can involve much time involved in planning especially for free and easy multi-week vacations across Europe, U.S.A or Japan and can amount easily to a tidy five figure sum.
Now with your plans all finalized, leave applied and approved, flight and accommodations all paid, what’s next? Insure it of course!
Insurance is often an after thought or not consciously incorporated in one’s travel plan when it should, shouldn’t it? After all, what happens if the travel agency closes down before you travel (I’m sure you’ve read such horror stories in the papers)? What if a close family member falls ill and you need to cancel your trip? lose your passport or have your money stolen? lost luggage? fall ill and require hospitalization? and the list of possibilities goes on…and your vacation can turn out to be a real nightmare.
In such circumstances, you’ll be glad that you had bought a travel policy to insure against these and more. After all, the cost of insuring is insignificant relative to the cost of your vacation and the amount of time and effort put into planning, so the only logical decision is to get insured, isn’t it?
So now that you’ve decided to secure a travel policy, next question is, does it cover my pre-existing medical conditions?
Most insurers will not cover pre-existing medical conditions which means that if you have high blood pressure and you suffered a stroke whilst overseas and need emergency hospitalisation or medical evacuation back to Singapore, sadly you’re on your own…well until now.
An insurer has just launched a travel policy that will cover your pre-existing medical conditions, thereby giving you greater security and peace of mind. However, it comes with a caveat – there’s 50% co-payment or lower insured limits for certain benefits, and comes at a higher premium of course.
Notwithstanding, it’s an excellent option that is now available when previously there was none.
To find out more, just drop me a note on the right and we’ll get in touch soon.
Rental yields are falling…will this sway Singaporean’s ‘lust’ for investment property?
In my client discussions, property investment is often one of the topics raised.
Often, when I cautioned my clients over the risks, emotions tend to override rationality. Such risk include :-
– low rental yields Vs a projected 4% yield for Endowment plans
– hassle in tenant managment Vs endowments that are hassle free
– buying at a high in the property cycle = potential losses if one is forced to sell at the wrong time
– being over leveraged
– risk of interest rate hikes and it’s adverse effect on one’s cashflow especially in an over leveraged situation
– sacrificing other more important financial priorities (child education, insurance protection and retirement planning) just to buy a property
A lesson that has always stuck in my mind was the Asian financial crisis in 1997-1999 – a very painful period in Singapore’s history. This period was marked by financial turmoil where many lost their jobs, faced investment losses as markets plunged, the property market went into a deep slump and interest rates spiked. The stars were aligned for a prolonged crisis.
I was working as a banker in the corporate lending business at that time. When the crisis hit, I become a debt collector overnight to salvage back the bank’s loan as companies we lent to became increasingly distressed. Also had the unpleasant task of winding up companies and going after the director’s personal assets.
Will this be repeated? Who knows but it’s better to play it safe than sorry especially if you don’t have deep pockets and have dependents to care for. Job security is also never a given.
With our government dead set on bringing prices down + strict loan requirements, being patient in your purchase should bring benefits.
low savings due to lifestyle choices (choosing Wants over Needs) or over commitment to home and car purchase
starting late in life on your saving/investment plan due to procrastination or fear of commitment
not sticking to the accumulation plan long enough – accumulation is a marathon, not a sprint
not contributing enough resources towards your accumulation plan – You reap what you sow.
playing it too safe by keeping too much money in the bank at low interest rates, allowing inflation to erode your spending power over time
Successful wealth accumulation requires prudent spending, starting early, contribute the best you can afford, stay the course and be prepared to take calculated risks.
More importantly, take ACTION to better your financial future…you only have One Chance to accumulated for your child’s education and your retirement! Once time has passed, it can NEVER be regained so wait no further.
To re-quote Einstein :-
“Compound interest is the eighth wonder of the world. He who understandsTAKES ACTION AND APPLIES it, earns itAchieves financial success … he who doesn’t … pays for it.”