How to retire if you start planning in your 40s sample long title here where does it break testing
While late retirement planning means that you lose out on the accumulated interest earlier on, there are still some ways to make your money work for you. We will show you how in this article.
Do the math
Calculate how much you need for retirement, based on your desired lifestyle and health status. Image credit: Pexels
Assuming that you are 40 years old now and that you want to retire at 67 years old, you still have 27 years to catch up. However, you need to know exactly how much to prepare for retirement.
The Central Provident Fund (CPF) has a retirement calculator that helps you determine the amount of savings you need based on your expected retirement age and lifestyle. Alternatively, you can also use Income’s retirement calculator.
While you are planning, think of your health status as well. This is an often-neglected consideration which will determine if you need to buy additional health policies to supplement your existing one.
Invest in financial products with lower risk
Financial products with lower risks help you to build up your nest egg for retirement. Image credit: Pexels
Given that your savings are insufficient, you need to increase them by investing in lower risk financial products that still provide reasonable returns, such as endowment plans.
An endowment plan is a type of insurance that provides basic insurance coverage, helps you to save over a specific period of time and possibly provide a lump sum benefit upon maturity of the policy.
Limited Pay RevoSave is an example of an endowment plan. It has a wide selection of policy terms and premium payment terms that allows you to save and enjoy guaranteed yearly cash benefits after 2 years while protecting you. It also provides guaranteed acceptance which means that your policy will be accepted regardless of your health condition.
How Limited Pay RevoSave works
Mr Lee signs up for Limited Pay RevoSave (5-Pay-15) with a sum assured of $50,000. He pays a yearly premium of $11,763 for five years.
SCENARIO 1
Mr Lee accumulates his yearly cash benefit1 of $2,500 with Income at an interest rate of up to 3.5% p.a.2
SCENARIO 2
Mr Lee receives a yearly cash benefit1 of $2,500every year.
Mr Lee stops paying premiums.
Upon maturity of his policy, Mr Lee can receive a total projected payout of $89,9733 (projected yield: 3.32% p.a.)3.
Upon maturity of his policy, Mr Lee can receive a payout of $48,2803(which consists of the guaranteed maturity benefit $27,500 and the non-guaranteed bonuses and interest $20,780). Together with the guaranteed yearly cash benefits he had already received, his total projected payout is $80,7803 (projected yield at maturity: 3.25% p.a.)3.
The above figures are for illustrative purposes only.
1You will start to receive 5% of your sum assured as your yearly cash benefit starting from the end of the 2nd policy year if you have paid the premiums for at least 2 years. You will continue to receive your cash benefit at subsequent policy years if the insured is still alive and your policy has not been converted to paid-up or ended.
2Interest rate of 3.5% per annum is not guaranteed. Prevailing interest rate at the point of deposit will be determined by Income.
3The figures in the illustrations are not guaranteed and is projected based on the assumption that the Life Participating Fund earns a long-term average return of 4.75% per annum in the future. Returns are projected based on estimated bonus rates that are not guaranteed. The actual benefits payable will vary according to the future performance of the Life Participating Fund.
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