Is it a better for us to get an endowment that provides a lump sum maturity or a retirement plan that provides stream of income for a number of years? Which would be more effective in terms of return? - Seedly
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Anonymous

Asked 3w ago

Is it a better for us to get an endowment that provides a lump sum maturity or a retirement plan that provides stream of income for a number of years? Which would be more effective in terms of return?

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Hey there!

It depends on your objectives and time horizon. An endowment is typically used for a long term need eg. children's university fund etc while a retirement plan is meant to supplement your CPF payouts during your retirement years.

If your objective here is to have a supplement to your CPF payouts, then you'll want to get a retirement plan. This is also because payouts for retirements start during your retirement age while an endowment plan is often used for the near future to fund an expense, as a form of savings etc. If you're looking at something for the near future, you may want to opt for an endowment plan.

Financial planning is an integral part of life. You can reach me here to find out more.

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Question Poster

2w ago

Thanks Yi Ning for the detailed sharing. But if my desired retirement is at 65, will it be better off for me to get an endowment that provides me a lump sum at age of 65 or a retirement plan that starts providing me payout from 65?
Oh Yi Ning
Oh Yi Ning

2w ago

It depends on your objectives :) If you're looking at something to supplement your CPF monthly payouts, then a retirement plan will be great. If you're looking to have a lump sum of money and have the flexibility to decide what to do with it eg. go on a holiday etc, then a long term endowment will be great! In general, people will want to opt for a lump sum because there should be flexibility in the way you enjoy your golden years of retirement. And also in case your insurance payouts isnt sufficient for future medical bills, a lump sum will be useful. Feel free to approach me if you want some options :)

There is no real need to choose. The plans in Singapore now come with both lump sum and stream of income benefits options that can be executed after 10-20 years of the policy term.

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Hi anon,

In truth either way works. If you want a controlled stream of income, a retirement plan will provide you with just that. Due to the longer duration of retirement plans compared to endowments, the guaranteed yield on a retirement plan is generally better than an endowment that matures in a lump sum. Retirement plans are generally better used to supplement CPF Life's payouts. However, if you were planning to start retirement with a bang, like go on a round the world trip, then a lump sum maturity amount might be better.

You can probably hedge your bet and get both if you are not sure of what you need. If you are not certain when you want the lump sum maturity, then you can consider a lifetime savings plan whereby you have flexibility to withdraw part or all of the accumulated money, but if not, the amount inside will keep growing over time.

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Hi there,

I will personally prefer to have regular payout as a stream of income and keep the rest invested. You can consider retirement products that will allow you to invest in a lump sum or pay over 5 years. I do not know you age so it will be harder to advise. But AIA has 2 very good retirement products that allows you to invest while you get payout during your retired years. The projected investment return is around 8%.

For example if you are 49 and you plan to retire in 15 years' time, by investing a single pay of $30k, you will be expecting a monthly payout of $838 per month for 10 years (total payout $100,560) in comparison to the investment of $30k.

This plan allows you to customise the amount to be invested, number of payment, top-up if you like (min $1,000 per top-up), target payout period, target retirement age. You can also choose to postpone the payout age to a later age if you prefer.

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Hi there. The simple answer is you will want both. One that gives you the lump sum to do what you want to do, and the other that continues to hold your money so you don't spend everything all at once.

Generally speaking though, it is usually the endowment that provides yearly income that pays better, as your money is with the insurer for a longer period of time so they are able to provide better returns.

Do feel free to have a casual chat with me here if you like to find out more. I cover 9 major insurers like Aviva, NTUC, AXA, Manulife etc.

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