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Grasping the Basics of Annuities

Grasping the Basics of Annuities

Last Updated on by Tree of Wealth

Annuities are designed to provide a consistent income during your golden years. It’s important to understand the various annuities available and the factors to consider when choosing one.

Essential Insights

  • CPF LIFE is a type of annuity scheme that offers lifelong income.
  • Annuity payments may last throughout your life or a predetermined duration.
  • Choose an affordable plan to avoid financial strain and potential losses from early termination.
  • The bonuses from participating annuities can vary and are not assured.
  • Annuity policies do not permit borrowing against them.

What Exactly Are Annuities?

An annuity is essentially a financial product, similar to an insurance policy, that promises to pay out a steady income, often on a monthly basis, either for life or a specified term.

Participating annuity policies include a variable component that relies on the performance of the insurer’s investment fund.

Annuities are commonly acquired as a means to secure a stable income stream post-retirement. While you can pay the premium in full upfront, there’s also the option to spread the payment over time, after which the insurer begins your annuity payments.

The CPF LIFE scheme serves as a prime example of an annuity program.

Exploring Different Annuity Options

Annuities come in two primary forms:

  • Term Annuities: These offer a steady income for a set period.
  • Life Annuities: These guarantee income for the entirety of one’s life, acting as a safeguard against outliving one’s savings.

Helpful Hint

Assessing the insurer’s financial stability is crucial. Past returns can inform decisions, but they should only serve as a reference, not a prediction, particularly for the non-guaranteed portions of annuities.

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CPF LIFE At a Glance

CPF LIFE stands out as a life annuity, providing continuous payouts for life, distinguished from term annuities. It operates on risk-pooling, where the earnings from premiums are shared among all surviving members, ensuring enduring retirement payments.

CPF LIFE holds the distinction of being the sole life annuity supported by the Singapore Government.

Check out our in-depth CPF resource here! –  CPF Corner

Eligibility for CPF LIFE

You’re automatically enrolled in CPF LIFE for lifelong payments if:

  • You’re a Singapore Citizen or Permanent Resident born on or after 1958.
  • Your Retirement Account has a minimum of $60,000 six months before reaching the payout eligibility age.

For Singapore Citizens or Permanent Residents who don’t meet these criteria, CPF LIFE is still accessible. You can opt in anytime between the payout eligibility age and one month prior to turning 80 years old.


What Is CPF LIFE And How Does It Work?


2 Main Types of Annuity Plans

Annuities are essentially agreements made with an insurer, where you pay a premium in return for the insurer’s commitment to provide you with a series of payments either starting immediately or at some point in the future. There are more options within the annuity universe than just the basic term and life annuities. Here’s a look at two major categories:

Deferred Annuities

  • These plans start paying out at a later date. Typically, people purchase these during their working years, allowing the value to appreciate over time, ready to be accessed during retirement.

Immediate Annuities

  • The direct counterparts to deferred annuities, these begin dispensing payments shortly after a lump sum is paid to the insurer. They’re suitable for retirees who wish to convert a portion of their savings into regular income right away.

The flexibility of annuities means they can be shaped to address various financial goals, from securing retirement funds and bequeathing assets to managing expenses for long-term care. With such a broad range of choices, engaging with a financial advisor is crucial to tailor an annuity plan that fits seamlessly into your financial landscape.

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Best Retirement Annuity Plans in Singapore

Singlife Flexi Retirement

  1. Flexibility in Planning: Singlife Flexi Retirement offers a range of premium payment terms and allows the policyholder to choose their desired retirement age.
  2. Multiple Income Payout Options: Apart from the Guaranteed Monthly Income (GMI), there’s potential for Monthly Cash Bonuses and an option to either receive a lump sum bonus at retirement or convert it into Additional Monthly Income.
  3. Protection against Disabilities: The plan provides the Care Income Benefit which offers additional payouts if the policyholder is unable to perform at least 2 out of the 6 Activities of Daily Living (ADLs).
  4. Fast Forward Option: In case of first diagnosis with Partial Disability, policyholders can choose to receive the Care Income Benefit in one lump sum instead of monthly payments.
  5. Comprehensive Coverage: The plan offers coverage for Total and Permanent Disability (TPD), Death, and Terminal Illness. Premiums are waived off in case of TPD, ensuring financial security.
  6. No Medical Underwriting: Applications are hassle-free with guaranteed acceptance, regardless of health conditions, making it accessible for many individuals.
  7. Enhanced Protection with Riders: Additional riders like EasyTerm, Cancer Premium Waiver, and Critical Illness Premium Waiver offer extended protection tailored to individual needs.
  8. Guaranteed and Non-Guaranteed Benefits: Policyholders get the security of a guaranteed monthly payout alongside the potential of non-guaranteed bonuses, ensuring a steady retirement income.
  9. Ease of Application: The entire process is simplified with no medical underwriting, ensuring a seamless experience for applicants.
  10. Low-Risk Endowment Instrument: For those seeking a low-risk financial instrument that ensures guaranteed payouts, the Singlife Flexi Retirement fits the bill.

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Review – Singlife Flexi Retirement

In summary, the Singlife Flexi Retirement plan is a comprehensive retirement solution that not only ensures a steady income during retirement but also provides extensive coverage against unforeseen health complications. Its flexibility and range of benefits make it a desirable choice for those planning their retirement.

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Income Gro Retire Flex Pro

  1. Flexible Premium and Payout Terms: Offers a variety of premium terms from Single Premium to 30 years and payout options from 10, 20 years, or till age 100.
  2. Robust Financial Security: Provides a steady stream of guaranteed monthly income during retirement with potential non-guaranteed bonuses.
  3. Comprehensive Protection Coverage: In the unfortunate events of death, terminal illness, or disability, the plan assures significant financial payouts.
  4. Accidental Death Benefit: Before the age of 70, an additional payout of 105% of net premiums is granted in case of accidental death.
  5. Disability Care Benefit: Offers unique advantages like waiver of future premiums and additional monthly payouts in case of specific disabilities due to accidents.
  6. Secondary Life Insured (SLI) Option: Ensures wealth accumulation continuity by allowing the appointment of an SLI.
  7. Retrenchment Benefit: Provides a financial cushion during unexpected job losses by waiving premiums for up to 12 months.
  8. Hassle-free Application: Guaranteed issuance without the need for medical underwriting or health check-ups.
  9. Yield and Returns: Promises a stable yield with projections based on various annual percentage rates.
  10. Endorsed by a Reputable Source: The plan details are sourced from NTUC Income, lending it credibility and trustworthiness.

The Income Gro Retire Flex Pro stands out for its comprehensive benefits tailored for retirement, ensuring both financial security and peace of mind.

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NTUC Income Gro Retire Flex Pro Retirement Plan Review

Manulife RetireReady Plus III

Guaranteed Monthly Income: The plan promises a guaranteed monthly income for life, ensuring a steady income during retirement.

  1. Flexible Retirement Planning: You can tailor your retirement plan by specifying the retirement age, amount of guaranteed monthly income, and the preferred period for income payout.
  2. Diverse Premium Payment Options: You can choose from four premium payment terms (5, 10, 15, or 20 years) or even opt for a single lump-sum payment.
  3. Full Allocation of Premiums: 100% of the premiums you pay are invested in the participating fund, and Manulife ensures the policy remains solvent and profitable through a diversified asset allocation strategy.
  4. Tax-advantaged SRS Integration: The plan allows you to use funds from the Supplementary Retirement Scheme (SRS) to enhance your retirement savings and enjoy tax deferment benefits.
  5. Flexible Payout Options: Upon retirement, you can choose to either receive your Retirement Income Benefit or accumulate and reinvest it with Manulife, with the potential to withdraw at any time post-retirement.
  6. Adjustable Income Payout Period: You can modify your income payout period according to changing retirement needs, ensuring your plan remains relevant to your evolving financial situation.
  7. Bonus Features: Potential cash bonuses based on the performance of the participating fund can enhance the returns of your policy. Additionally, there are potential surrender and claim bonuses.
  8. Protection Against Loss of Independence (LOI): In the event of severe disability, the plan offers an LOI income benefit, which can provide up to 100% of the Guaranteed Monthly Income, offering additional financial security.
  9. Retrenchment Payout Benefit: If you face retrenchment and remain unemployed, the plan offers a significant lump sum payout to support you during such challenging times.

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REVIEW – Manulife RetireReady Plus III Sets You Ready to Retire

Delving into the world of annuities unveils a promising path to financial security. Whether you opt for a deferred annuity to cultivate your nest egg over time or an immediate annuity to enjoy the fruits of your labor right away, these financial instruments can be customized to fit your retirement vision. They stand as a testament to the power of strategic planning, offering peace of mind and financial stability when you need it most.

Are you ready to weave the perfect financial safety net for your retirement? Our expert financial advisors are here to help you navigate the annuity landscape and craft a plan that’s as unique as your retirement dreams. Reach out today, and take a decisive step towards a secure, comfortable, and rewarding future.


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