6 Ways to Let Your Money Work for You to Maximise Your Retirement Fund
Building up your retirement fund is probably one of the most important plans you have to make. After all your years of hard work and saving up for your nest egg, you deserve to kick back and enjoy your golden years.
The question you should be asking right now is: How do I make my money work harder for me?
If you’ve had prior investments and savings plans, then great! Depending on when you started those plans, some of them might soon be maturing, and you’ll have a nest egg ready to support you.
The general rule of thumb here is to avoid letting your money sit idle, especially considering the erosive impact of inflation and the lost opportunities to grow your pot of gold over time.
Just like how you’re So Steady at this stage of life, we saw the obvious need for a S-T-E-A-D-Y plan on how to use your funds wisely, with the goal of increasing that sweet retirement pot of gold.
Ready… steady...let’s go!
S for: Strategically Reinvest Your Maturity Payouts and CPF Withdrawals
At this stage, when it’s time to receive maturity payouts from your previous investments, such as insurance policies and retirement savings plans, it’s important to consider what you should do with them.
While it’s tempting to enjoy a little of your hard-earned payouts, it is generally a good idea to let the bulk of the money continue generating wealth for you.
Remember though, don’t let your maturity payouts sit idle. Instead, consider reinvesting to beat inflation and guard against the risk of outliving your savings.
Investment options such as stocks, bonds, mutual funds, or insurance savings plans are available choices you may consider to outpace inflation, mitigate the risk of depleting your savings in retirement and help grow your wealth.
Insurance savings plans, in particular, can offer a good balance between risk and returns. At this pre-retiree life stage now, you might want to consider lower-risk products that can help preserve your nest egg closer to your retirement.
One of the most critical features you should look out for when choosing an insurance savings plan is the guarantee of getting back your capital. This provides peace of mind, knowing that you’re guaranteed to get back your initial investment no matter what.
A plan such as Gro Cash Sure does just that – it provides capital guarantee1 at the end of the premium term – and also goes a step further by providing a lifetime of cash payouts2 starting from the end of the premium term till age 120.
Furthermore, insurance savings plans offer a unique combination of insurance coverage and savings, ensuring you enjoy insurance coverage while also growing your wealth.
T for: Tailor Your Protection Plans
It is always a good idea to review your insurance portfolio at regular intervals, especially when you enter a new life stage and more so at a time when healthcare costs are quickly rising. When conducting your review, be sure to tailor them to your current life stage, as your needs may have changed since your last assessment.
As a So Steady pre-retiree, you may still be shouldering the financial responsibility of your children and elderly parents. This underscores the importance for you to adequately protect yourself as any unforeseen medical bills can potentially erode your hard-earned retirement fund.
Hence when tailoring your protection plans, consider boosting and expanding your healthcare coverage beyond what national health schemes offer. With higher and more comprehensive coverage, you will have more options when it comes to getting the treatment you need, or even to create a backup income stream during hospitalisation.
Here are some suggestions:
- Health plans: Enhance your ElderShield or CareShield coverage to help with income continuity in times of unexpected medical crisis.
- Personal accident plan: This complements your health plans for an all-round protection. It can help mitigate the heightened financial risks from accidental injuries, and infectious diseases.
- Whole life plan: This plan helps to preserve your hard-earned legacy and provide for your family should the unexpected happen.
- Critical illness plan: The reality is that health issues may start to appear at this life stage, so it’s important to be covered for critical illnesses.
- Hospital income plan: It’s not too late to get this plan to help provide an additional stream of income during hospitalisation.
By strategically tailoring protection plans to your needs, you can safeguard your finances against unnecessary setbacks. This approach not only protects your retirement funds, but also helps your money can grow more efficiently so you can meet your financial goals.
E for: Evaluate Your Current vs. Retirement Lifestyle
Your current lifestyle and spending habits can provide valuable insights into the lifestyle you may want to maintain during your retirement years.
By evaluating your current lifestyle and financial situation, you can make informed decisions about your retirement goals and the steps needed to achieve them.
Here are some areas that you can look at:
- Expenses: Take a close look at your current expenses, including your regular bills, transportation, healthcare, leisure and other discretionary spending. By understanding your current spending patterns, you’ll be able to estimate your future retirement expenses more accurately.
- Savings and investments: Take a broader look at your savings and investments portfolio. Determine if you’re saving enough for retirement and if your investment strategy aligns with your retirement goals. Adjust your savings and investment plan if necessary.
- Healthcare needs: Consider your current health situation and potential healthcare needs in retirement. Understand and tailor your healthcare coverage accordingly to provision for medical expenses.
- Hobbies and activities: Think about the activities and hobbies you enjoy. Retirement is a “now or never” time to pursue your interests and hobbies. Factor in potential costs associated with these activities when planning your retirement budget.
- Housing: Does your current living situation align with your retirement plans? Consider if you need to downsize, move, or modify your home when it’s time to retire.
By thoroughly assessing your current lifestyle, spending habits, and future aspirations, it provides essential insights on aligning your finances with your retirement goals.
A for: Address Outstanding Debts
Retiring with debt can be a stressful affair when you are no longer actively working.
High interest debt, such as credit card debt, is one of those things that will eat away at your retirement savings, leaving you with less than you originally saved up for. That’s why managing your outstanding debts before retirement is especially important.
Always weigh the pros and cons of whether you should be using your funds to clear off entire debts, or should you be saving the money to invest while continuing to repay the debt over time.
For instance, paying off a low-interest debt may not always be the best move. Instead of using your funds to repay it, consider investing in opportunities that may potentially yield higher returns than the debt’s interest rate over time.
Of course, each financial decision is unique so it’s essential to evaluate your own circumstances and determine what truly benefits you.
D for: Diversify Your Investment Portfolio
As the age old saying goes, never put all your eggs in one basket. For anyone approaching retirement, it is important to consider having a balanced and diversified investment portfolio.
This approach involves allocating your investments across various asset classes, including stocks, bonds, real estate, and international markets, effectively spreading risk, and reducing the likelihood of significant losses. Such diversification is vital, ensuring that your savings are not overly exposed to the volatility of a single asset class.
The primary aim of diversification is not solely to maximise returns but also to strategically position your investment portfolio to withstand market ups and downs, ensuring you remain on track to meet your retirement goals. This approach is integral to what retirees should do to maintain financial stability and peace of mind.
Y for: Yield Returns and Enjoy Your Golden Years
As you approach your golden years, your careful and strategic financial planning will soon bear fruit.
The returns you can expect in retirement depend significantly on your investment and saving strategies, market conditions, risk tolerance, and the overall structure of your retirement plan.
Here are some types of returns that you may yield during retirement:
- Regular payouts: An insurance savings plan such as Gro Cash Sure provides a lifetime of cash payouts2 starting from the end of the premium term till age 120, ensuring a steady stream of income even during your retirement years.
- Lump-sum payouts: These are normally received as part of an investment plan’s maturity.
- Investment returns: If you have investments such as stocks, bonds, or mutual funds, returns can come in the form of dividends, interest payments, or capital gains. You can also choose to sell a portion of your investments periodically through your retirement years to generate income. With investment-linked plans such as Invest Flex or WealthLink, you have the option to choose from a wide range of funds to best match your goals and investment risk appetite.
- Cashing out on insurance policies: You can cash out and surrender insurance policies with cash value, especially those plans that you may not need during retirement.
Still Unsure on How to Reinvest Your Maturity Funds?
We understand that there are many ways for you to reinvest your maturity funds – some ways more suitable for your needs than others. But don’t worry, we’re here for you. Speak to our insurance advisors to get personalised help on how to plan your finances to meet your specific goals.
1 At the end of the premium term, if the policyholder did not cash in this policy and all premiums for this policy have been paid for, the guaranteed cash value for this policy is equal to total premiums paid, excluding premiums paid on riders. If the policyholder choose to cash in this policy partially, the sum assured after the partial cash payout cannot be less than the minimum sum assured limit or any other amount Income may tell the policyholder about. Income will use the new sum assured and reduced regular premium amount excluding premiums paid on riders to work out the guaranteed cash value (if any) from the policy entry date.
2 If the insured survives at the end of the premium term, and if all premiums for this policy have been paid for, Income will start paying the cash benefit at the end of the premium term. Income may pay a cash bonus on top of each cash benefit, by applying a bonus rate to the sum assured, and may include any loyalty bonus payable from the end of 20th policy year after the end of premium term. Income may or may not pay this cash bonus for each policy year. Each yearly cash benefit is 2% of the sum assured and the non-guaranteed cash bonus without loyalty bonus is 7.3% of your sum assured and with loyalty bonus is 7.9% of your sum assured (based on the assumption that the Life Participating Fund earns a long-term average return of 4.25% per annum). At an illustrated investment rate of return of 3.00% per annum, the non-guaranteed cash bonus without loyalty bonus is 4% of your sum assured and with loyalty bonus is 4.35% of your sum assured.
If the sum assured of the policy is at least $80,000, the yearly cash payouts can be received in monthly payments. Please refer to the policy contract for further details.
This is for general information only. You can find the usual terms, conditions and exclusions of this plan in the policy conditions. All our products are developed to benefit our customers, but not all may be suitable for your specific needs. If you are unsure if this plan is suitable for you, we strongly encourage you to speak to a qualified insurance advisor. Otherwise, you may end up buying a plan that does not meet your expectations or needs. As a result, you may not be able to afford the premiums or get the insurance protection you want. Buying a life insurance plan is a long-term commitment on your part. If you cancel your plan prematurely, the cash value you receive may be zero or less than the premiums you have paid for the plan.
This article is meant purely for informational purposes and should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income Insurance products mentioned are specified in their respective policy contracts. For customised advice to suit your specific needs, consult an Income Insurance advisor. This advertisement has not been reviewed by the Monetary Authority of Singapore.
These policies are protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact Income Insurance or visit the GIA/LIA or SDIC websites (www.gia.org.sg or www.lia.org.sg or www.sdic.org. sg).
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