By far, the two most important financial issues that concern Senior Citizens are:
- Do I need to buy annuity;
- Am I too old to buy life insurance? Wouldn’t the premium be very high?
- How do I protect my hard-earned savings?
The short answers to the first two questions are ‘YES’ and ‘NO’ respectively.
The best options for Senior Citizen, age 50 and above, are two insurance plans that can provide him with a monthly payout for your entire lifetime, and take care of final expenses when the final day comes.
The first of the 2 insurance plans is the Annuity.
Annuity for Singapore Citizens and Permanent Residents aged 50 and below as at 31 Dec 07 is now compulsory. If you did not purchase any annuity from private insurers, the compulsory annuity will take effect at age 55 and you can only start drawing the payout at age 85.
For private annuity, you can use your CPF Minimum Sum or cash to pay for it. For annuity purchased using CPF minimum sum, the first payout will be at age 62. For annuity purchased using cash, the first payout can be any age (for instance, first payout age for NTUC Income is from age 40 to 65) chosen by the policy holder. If you are cash-rich, it is advisible for you to leave your CPF Minimum Sum with CPF Board that will pay you monthly income from your draw-down age for a fixed number of years You may then use the cash to buy an annuity that will pay you another monthly income, probably at an earlier age, for life. The annuity will supplement the monthly payout from the CPF Minimum Sum, and will replace it once it runs out in, say 20 years. The monthly income from the Annuity will be much higher after 20 years, if you buy the annuity that enjoys the bonus declared by the insurer.
As for life insurance, if you think that you cannot afford to buy any whole life insurance at age 50 due to high premium and pre-existing illness, fret not! As of the time of writing, NTUC Income is the only insurer in Singapore that has a life insurance plan (called Senior Plan) that covers you for whole life for death and for Total Permanent Disabilities till age 65. So, you can still purchase life insurance at age 50 to 70, even with a pre-existing illness if you have not been hospitalized for the past 12 months. The best thing is that you just need to pay for 10 years to get the whole life coverage.
The sum assured for the Senior Plan is $15,000 and the coverage will increase every year since it is a participating policy which gives you bonuses over the years. The sum assured is, however, pro-rated for the first 5 years of insurance. This means that the first year coverage starts from $3000, becomes $6000 in second year and increases linearly to $15,000 by fifth year. For a male age 50, the sum assured becomes $27,240 at age 80 with a total premium of $11,106. As it increases the value of the premium paid, the Senior Plan is best for providing for the final expenses and leaving behind some inheritance for children. Policyholder can surrender the policy for the cash value, but this will be lower than the protection value.
If you have a capital sum to invest, the better and safer choice is to desposit it with any insurance company that pays a decent interest, around 3–4% and provide free insurance with the sum assured amount above your principal sum. Some insurance company also pay double the sum assured if the insured were to pass on or become permanent disabled due to unforeseen accident.
Hence, to be assured of providing for yourself adequately for your whole life and to be covered for Death and Total Disabilities, a private annuity, Senior Plan from NTUC Income and Lump Sum deposit with insurance company are the three complementing plans that all Senior Citizens should consider.