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
Web : www.aboutfinancialplanning.net