Savings and Investment Plans

Sav­ings and invest­ment can be done through either reg­u­lar or lump sum invest­ment. For those who are risk averse, you may invest with those tra­di­tion­al endow­ment plans that will give con­sist­ent rate of returns between 3–6%. For those who do not mind short-term fluc­tu­ation but poten­tially may attract much bet­ter returns may con­sider invest­ment-linked policy. The cap­it­al is pro­tec­ted upon death, total per­man­ent dis­ab­il­ity of the insured as the insur­ance cov­er­age is at least 5 times the annu­al premi­um.


Reg­u­lar Invest­ment. One good way to lever­age the reg­u­lar sav­ings fea­ture of insur­ance is to buy the third-party policy, for example, the Edu­ca­tion Policy for your chil­dren. Such policy has the advant­age of ensur­ing the savings/investment con­tin­ues even if the pay­er or par­ent is dia­gnosed with crit­ic­al ill­ness, death or total per­man­ent dis­ab­il­ity. This is some­thing no oth­er sav­ings or invest­ment tools can offer you. This implies that once the edu­ca­tion policy is bought with, say, reg­u­lar sav­ings of $200, you will be guar­an­teed that this sav­ing with the declared bonus will be avail­able to your chil­dren for ter­tiary edu­ca­tion upon matur­ity. Isn’t this a won­der­ful relief and gift that you, as a par­ent, will want to guar­an­tee a bright­er future for your chil­dren?

Some of you may be wor­ried that you may not be able to com­mit to such con­sist­ent sav­ings due to reas­ons like retrench­ment or urgent needs of cash at some point in time. How­ever, do note that you are not worse off by buy­ing this edu­ca­tion policy since it is an essen­tial expendit­ure in this mod­ern com­pet­it­ive age. You may ask for tem­por­ary premi­um sus­pen­sion as long as there is enough cash value in the policy.

For Lump Sum Invest­ment, you may put it in the tra­di­tion­al endow­ment plan or unit trust offered by the insurer, rather spend it on con­sum­able items that has no invest­ment return. And it comes with free insur­ance cov­er­age too. This insured sum can con­trib­ute towards the required sum insured for yourselves, which is about 7–10 times of your annu­al salary.

Sup­ple­ment­ary Retire­ment Scheme (SRS) is a scheme to help the high-income earner to save tax by con­trib­ut­ing any amount up to a max­im­um cap of $11,475 into the SRS account. It also helps to build up your retire­ment fund. The amount con­trib­uted to SRS will be deduc­ted from your assess­able income. This works out to be a sav­ings about $1,000-$2,000 if you invest the max­im­um amount allowed. The cap­it­al gain for invest­ing the SRS sum is not tax­able. You will be able to with­draw the SRS money from age 62 onwards, the offi­cial retire­ment age when you open the SRS account at any loc­al Singa­pore bank. And only the 50% of the amount with­drawn are sub­ject to income tax if it is above $24 000. So you can plan and spread out the the with­draw­al amount for the next 10 years to min­im­ize the chargeable income tax.

Amount depos­ited into SRS account can be used to invest any­thing such as share, unit trust, insur­ance policy and even fixed depos­it. Just don’t leave the money in the SRS account as it only gives the mea­ger % of interest rate offers by the bank.

Down­load the Fin­an­cial Needs Ana­lys­is spread­sheet now to determ­ine the amount of funds required for the vari­ous area of insur­ance cov­er­age!

Ginny Lim Gek Eng
Email: lgekeng@yahoo.com
Web : www.aboutfinancialplanning.net

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