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Retirement plan, savings plans, annuity, … the list goes on. At the end of the day, these products can be categorized into two main broad categories. The only difference between these 2 categories is in terms of the features and characteristics of the contract itself.

In today’s article, I’m going to walk you through these two main categories of retirement products that you should be aware of by going through the main features and characteristic of each category

Limited pay-out period retirement plans

Basically, how the policy work is simple:

1. Premium term: You pay for (x) years

2. Accumulation period: you wait for (y) years

3. Pay-out period: you receive an income – guaranteed and non-guaranteed – for (z) years

4. At the end of the pay-out period, you may or may not receive a lump-sum depending on the contract

To give you an analogy of this category of retirement plan, it is something like you saving money into a bank and slowly withdrawing it from your account during your retirement until the balance eventually reaches zero.

Note: there are a few companies that provide limited pay-out policies that have a sizeable maturity value at the end of the policy (but those are not as common).

Depending on how you use it, you can structure a limited pay-out period retirement plan to

• Supplement your additional recreational expenses during the earlier years of your retirement and drops off as you progress to a more laid-back retirement lifestyle
  

• Provide you with a basic income before CPF life pays out and drops off when your CPF life starts to pay-out after 65

Lifetime pay-out retirement plans

Similar to limited pay-out premium plan’s retirement plans, the features of such plans include:

1. Premium term: You pay for (x) years

2. Accumulation period: you wait for (y) years

3. Pay-out period: you receive an income – guaranteed and non-guaranteed – for lifetime

The key difference between limited and lifetime pay-out policies:

To give you an analogy of this category of retirement plan, it is something like “investing in a private property” and receiving rental income every month. When you want to divest your “property investment”, you are still able to recover a sizable amount of invested capital. – I’m sort of generalizing the concept but you get the point.

So yeah… that’s really it

The next time someone presents with a retirement plan, first understand which category it fits into and from there you will be able to decide how the features and benefits of the product can fit into your own retirement plan.

Retirement planning is, after all, like trying to build a Lego bridge. You just need to know what’s the design of the bridge that you want to accomplish and then fit the right Lego pieces into the right places.

If you’re having troubles getting started, you can reach out to me here. We can work things out together and I will walk you through step by step what you need to do to progress towards your retirement.

I will also provide you with the answers to the questions you may have towards your retirement and we will do so in a few hours’ time as opposed to you spending weeks trying to do everything on your own.

So, when you are ready to take your first step towards retirement, get in touch with me directly through telegram or WhatsApp! I look forward to hearing from you.

Remember to join my telegram channel to receive first hand updates: https://t.me/updatesfromdaniel

Daniel is a Licensed Independent Financial Consultant with MAS and a certified Associate Wealth Planner, who specializes in retirement and investments planning. Find out more here.

Disclaimer:

This article is meant to be the opinion of the author and is for information purposes only.

This article should not be seen as a financial advice

This advertisement has not been reviewed by the Monetary Authority of Singapore