Alternative to Holding Cash

[dtane]

Thank you for pointing out the thread to me It was a good read.

In Quantitative evaluation almost all figures are inter-related; it's a headache sometimes. So better start with qualitative evaluation 1st. i think.

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Have you read the thread "Annuities- how we can use them." Maybe can give you some ideas.

Nah i don't think i will want to take it out earlier, because the main purpose of me buying this plan is because I am actually more interested in the cash flow of S$12K that is guaranteed per annum and for life.

It is a diversification tool for my future cash flow to meet my retirement needs. Less stressful when you know that a portion of your cash flow is guaranteed (Provided the insurance company doesn't collapse heh).

So this insurance plan (an annuity of a sort) coupled with CPF Life + stock investment portfolio + endownment plans (matures around age 53 to 55 - Plan to use the money in future to purchase more stocks or other alternative investments) + Aussie Fix Deposit will hopefully be able to fund my retirement.

Wah!
You still have 18 to 21 years to wait after paying up for 10 years. So the surrender value + non guarantee is very important consideration. You may want to take it out earlier. imo.

For me personally, i have looked at other avenues of utilizing my cash horde.

Recently taken up an insurance plan whereby the premium payable is S$9K per annum for 10 years. At the age of 60, i will be guaranteed a payout of S$12K per annum until death, surrender value in the policy will keep growing (not guaranteed of course, the guaranteed surrender value is S$98K). I still have about 28 more years to go before i can see the S$12K payout.

For my CPF OA, i transferred about S$18K to my CPF SA to top it up to S$40K so that i can maximize the current additional 1% which we can earn on top of the 4% interest rates provided by CPF SA.

While waiting for the downturn in the stock market or a crisis to happen to any of the stocks on my watchlist, i was thinking of topping up my CPF by S$7K (Believe this S$7K will be split automatically by CPF into OA, SA and MS) to enjoy the tax deduction and the interest rate of 2.5% and 4%.

I am of course still holding about 20% cash and this is still building up month on month while waiting for the downturn / crisis to occur.

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Hi NTL,

I believe we are on the same plan (Saw the Annuity Thread recommended by Temperament)

I will say one thing though, the deduction for insurance plans like these assuming investment returns of 5.25% by the insurance company is extremely high. E.g. for my plan the total deduction from now to age 60 is about S$159K for me.

From what i have heard from some of my friends in the insurance industry, the plan was removed because the amount of reserves the company has to set aside into low risk investments is extremely high due to the fact that the company guaranteed 5% payout based on the sum insured giving them less of the premium to use for higher risk investments to earn higher returns.

Another friend who is an underwriter in the insurance industry told me it doesn't make sense for the insurance company to come up with this plan. Usually for annuities, the surrender / death benefit does not increase year on year, rather it usually decreases year on year.

Recently taken up an insurance plan whereby the premium payable is S$9K per annum for 10 years. At the age of 60, i will be guaranteed a payout of S$12K per annum until death, surrender value in the policy will keep growing (not guaranteed of course, the guaranteed surrender value is S$98K). I still have about 28 more years to go before i can see the S$12K payout.

Gee... We are on the same plan. Think it WAS one of the better plan in recent times.