Key account manager Arielle Lee has a vision of her future and she has planned how to achieve it.

It looks simple on paper: Retire at 55 and spend more time pursuing her passion in dance and yoga, do some charity work and continue to learn new things.

Ms Lee, 27, believes she would need a monthly payout of $4,000 to $5,000 for living expenses in her golden years. This does not include funding three overseas trips a year (about $12,000 all in) as she loves to travel.

She also has a dream of running her own business in the years ahead.

Her Manulife financial consultant, Mr Samuel Seah, has told her that she runs the risk of not having monthly Central Provident Fund contributions set aside for her retirement when she becomes self-employed. To help her achieve her retirement goals, he recommended a retirement insurance plan, RetireReady Plus, which she bought in August.

The plan will provide a monthly guaranteed payout of $1,000 when she turns 55 to age 70. The non-guaranteed portion amounts to an additional monthly sum of $628.43 based on a projected investment return of 4.75 per cent, and $100.59 if based on a lower projected return of 3.25 per cent. The annual premium of $8,034.34 is payable over 10 years which translates to total premiums of $80,343.

“It is my personal responsibility to ensure a happy retirement. By starting younger, I will also have a much longer time to compound my savings,” says Ms Lee, who works for a pharmaceutical firm.

“If I’m self-employed in the future, my income will become ‘lumpy’ instead of regular. To cope with rising costs of living, a retirement plan will definitely help to ensure a flow of monthly income to meet my future needs.”

She likes that the RetireReady Plus plan has a guaranteed monthly payout that will supplement other sources of income in the future. “As I’m more conservative, I prefer to save prudently over time rather than invest in more volatile investments. On top of that, the additional payout, if I suffer from two out of six Activities of Daily Living, is an attractive feature,” she adds.

In addition, she owns a whole life plan – Manulife’s Life Ready 25 – which offers death coverage of $600,000 and an early and late critical illness cover of $150,000. The annual premium of $4,550 is payable over 25 years. This plan will break even after 20 years based on a projected investment return of 4.75 per cent.

She also has other policies like endowment, hospitalisation and critical illness protection plans with different insurers.

Most of her insurance portfolio is with Manulife, totalling $12,000 in annual premiums. She forks out an annual premium of $6,000 with Prudential. She does not own any stocks or unit trust investments.

Mr Seah notes that most of his clients already have investment holdings such as shares, bonds, mutual funds, properties and businesses. Hence they would prefer a more conservative portfolio moving forward in view of the market volatility.

He says he recommends RetireReady Plus to clients like Ms Lee as it increases their guaranteed monthly income and thus reduces portfolio risk as most of their passive income streams are market-dependant.

“RetireReady Plus also allows my clients to personalise their retirement… Clients are able to select their retirement age to be as early as 50 and also their preferred income.”

Some of the retirement planning tips he offers customers include planning early so as to use time to their advantage, especially when using a low-risk financial instrument such as endowment or retirement plans.

Other tips include having no or little debt during retirement, building guaranteed income more than non-guaranteed income, and diversifying by having various sources of income from, say, property rental and dividend payouts from shares and bonds. “Do ensure you have ample coverage for life insurance, health insurance and hospitalisation so that you are sufficiently covered,” Mr Seah says.

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