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Retirement

Retirement

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While it’s easier said than done, particularly when we’re all so caught up in the details of a busy day, it definitely pays to start early when it comes to retirement. Starting early gives you the benefit of having ample time to grow your savings; you’ll be able to take full advantage of the compounding effect. Plus, when you consider the rising costs of living, healthcare and education for the young ones, as well as the longer life expectancies nowadays, you’ll want all the advantages you can possibly get. Let’s see how current retirement plans in the market can help you.

RETIREMENT PRODUCT GENRES

Like all investment-linked plans, an investment-linked retirement plan gives you two things:  access to protection of funds, as well as the flexibility to grow your funds. Because investment-linked plans typically allow you to add or upgrade benefits as well as choose the type of investment you’re putting your money in, these plans are great for taking advantage of upswings in the market (by investing more) when you have the cash. Either way, since entry costs are typically low (you can start an investment-linked plan with just RM500 per month), they allow you to start early and then slowly build your nest egg as your income grows. Here are some key features of an investment-linked plan:-

  • Usually has a 95% allocation rate for investments from the first policy year onwards. The rest goes towards protection of your fund.
  • Usually rewards loyal policy holders with a loyalty bonus (for instance, a one-off payment amounting to  2% of your yearly premiums). Such bonuses, however, would only take effect  every third policy year. After all, it is a loyalty bonus so you’d have to prove loyal first.
  • Incorporates a unit trust investment vehicle to grow your fund faster.
  • Allows you to boost the investment value of your policy via single premium top-ups.
  • Allows you to select your own investment funds to suit your retirement goals.
  • Option for flexibility in making withdrawals.
  • Option to switch funds to take advantage of market opportunities.
  • Optional riders such as premium waivers to ensure continuity of your investments even if your health takes an unfortunate turn.

You may want to consider an investment-linked retirement plan if you want :

  • More emphasis on investment.
  • A decreasing cost of investment as time passes.
  • The flexibility to increase investment or vary your investment strategy.
  • A protected retirement fund.
  • Tax relief.

You can think of an endowment plan as similar to a whole life insurance plan, with the exception that the former is designed to maximize the amount that you can save, as opposed to providing maximum protection. Endowment plans can be better understood by taking a look at its key features, such as:-

  • Premium payments that are guaranteed to remain the same year after year.
  • Guaranteed death and disability coverage.
  • Guaranteed stream of income that typically starts from the end of the first policy year onwards.
  • Additional non-guaranteed cash bonuses that typically start from the end of the first policy year onwards.
  • Certain plans feature a limited pay option. Under such a payment scheme, you’d typically have the option of paying premiums for either 5,10 or 20 years for a 30-year coverage term.
  • Waiver and payer options which guarantee the continuity of the plan in the event something happens to you.
  • Typically offers additional benefits upon maturity of the plan.

When should you get an endowment retirement plan? Consider getting such a plan if you want:-

  • A secure retirement fund.
  • A limited pay option.
  • To diversify your portfolio of investments.
  • A protected retirement fund.
  • Tax relief.
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