The "Buy Term and Invest the Rest" concept has been around for many years and it is not something new. The main model behind this concept is to split the protection/insurance needs from your investment for retirement goals needs.
Insurance companies have try to bundle these two needs into investment linked plans whereby you will get protection and at the same time you are invested in unit trusts based on your risk profile. However, the charges such as sales charges and administrative fees could be quite huge relatively to if you do it on your own (Buying term insurance and investing in unit trust on your own). Therefore, it is not surprising that some insurance agents were pushing aggressively for Investment Linked Plans (ILP) to their less savvy clients as commissions are the greatest.
Insurance companies also offered other savings plans such as Endowment and Whole Life Plans whereby the insurance company will be in charge of investing the funds and generating decent returns for the policy holders. Majority of the funds will be usually invested in long term bonds. We will like to look at the track record and payout history of the separate insurance companies to have a gauge which company plans to choose (Thou historical record is not illustrative of future payout but at least it provide some sort of comparison and guidance).
Personally, we do not believe in an extreme buy term and invest the rest concept as we feel endowment and whole life plans adds a good dimension to your overall financial plans. It is a good way to force yourself to save and there is no temptation to dip into your investments for lifestyle needs.
For my own investment and protection needs, this is what we have planned. For protection needs, we have brought the SAF Aviva Group Insurance for both Death and Critical Illness as their premiums are really competitive. Also, we took up some SAF NTUC Group Insurance Plans. We have also taken up a mortgage declining insurance for our home loan with the bank. Not forgetting the usual health care insurance which we used our Medisave to pay for and using cash to pay for the excess waiver.These are basically term insurance.
For my kid's education needs, we have brought endowment plans that are due when they are about to go for their university education. So far Tokio Marine(Previously Asia Life) seems to have the best track record based on our comparison. However, we did diversify our plans and so we are holding policies with Tokio Marine, Manulife and NTUC Income for their education needs.
For my retirement funds goals, I am trying to segregate them into 3 sections.
1) My SRS is used mainly to build up a unit trust portfolio with some SGX listed Exchange Traded Funds as we are not able to invest in US based Exchange Traded Funds using SRS.
2) For my cash holdings, I am using it to build a portfolio of stocks. Also, if an opportunity presents itself, I will use it to pay for another property's down payment.
3) As for my CPF, I am using it mainly to pay off my mortgage and if there are excess, I will do some investments either through unit trust or exchange traded funds.
So hope my plans will work out fine and I will have a great retirement(Still a Long Way) with no worries about my finances.
No comments:
Post a Comment