About Annuities Part 1

The biggest concern for most who have already planned for retirement is “Will I outlive my resources?”

Most people fall into the trap of planning for too short a period – someone at 35 now may think he will only live till 75. In fact not many people believe that their life could actually be longer that they think. Planning for a shorter provision may be a fatal step to a situation of downgrading one’s lifestyle to nothing left but a 1 room apartment, discarded funiture, work and charity help.

And so something was created to give the person an assurance of an income for life. This was an annuity. Then slowly annuities improve and start to have room for growth.

How does one solve this problem of outliving one’s resources? – The answer is in annuity, nothing else.

Income for life, stability and security. These are features that need to be found in an annuity. However in order to buy an annuity, a capital sum needs to be created. Most annuities should offer 5% returns each year of the invested capital. This is reasonable as higher rates may indicate some sort of link to market performance or some link to a ponzi-scheme.

Beware of ponzi-schemes in the market as they show off fantasitic guaranteed returns. They could be legally created however they are not regulated by MAS. More information could be found on http://www.moneysense.gov.sg/publications/quick_tips/Consumer_Portal_Alert.html

Annuities are here to stay due to the fact that it solves the problem of outliving resources and futhermore it is being regulated here by MAS. Annuities are very widely accepted overseas as the main component in the income decumulation phase.

There are many such annuities in the Singapore market such one which offers income for life is Manulife’s Secure Retirement Plus. Other companies also offer annuities but there are none that offer income for life.

Next post will discuss about the various types of annuities and their strength and weaknesses.