Living means making choices. Poor decisions often lead to poorer life choices in the later part of life. Likewise, making a good decision at the earlier part of your life could lead to a more secure future.

In the recent 1Q2014 Manulife Investor Sentiment Index in Asia (Manulife ISI), some 72 per cent of Singaporean respondents expects to be working part-time or full-time during retirement. That is not unexpected. With a retirement age of 62 in Singapore, how many are prepared for years without an income. In addition, Singaporeans are under-estimating healthcare costs in their golden years.

Respondents anticipate that during retirement, healthcare and medical expenses will account for 13 per cent of their monthly expenses, second only to household expenses and daily necessities (19 per cent). Currently, healthcare expenses account for 10 per cent of investors’ monthly income. “Singaporeans recognise that healthcare costs will rise as they get older but they are misguided if they think that healthcare costs will account for a similar slice of the household budget in retirement as it does now,” said Manulife Singapore.

“During the past ten years, per capita healthcare expenditure in Singapore has risen by 15 per cent a year on average plus they aren’t factoring in the possibility of being hit with costly chronic diseases like cancer or heart disease.” Certainly, many Singaporeans could find themselves unable to sustain a happy retirement with increasing life expectancy and rising healthcare costs.

So how does one get to enjoy a happy retirement?

The answer is simple. Recognise that you and only you are responsible for your life and the outcome. In other words – take ownership. Understand that comprehensive and detailed planning is crucial to ensure a desired lifestyle after retirement. Every month, an individual has to save a part of his income as well as set aside a certain sum for sufficient protection as well as investment. We turn to our panel of experts to answer questions on insurance products that will help one lead a happy retirement.

With savings rate at an all-time low, how could a young person build his retirement nest swiftly?

By setting aside savings from his monthly income, he can start investing. However, he has to be prudent when using these savings for investments. Instead of timing the market without financial knowledge, he can employ investment strategies such as Dollar Cost Averaging. This would make volatility work for an individual while minimizing the risk involved. He can choose to invest in different financial instruments such as Managed Funds, ETFs (Exchanged-traded Funds), stocks, insurance products etc.

With asset diversification it would ensure that if the market turns, the overall portfolio’s equity will not be substantially affected.

What is the optimum allocation portfolio for a person in the early life stage?

As each individual has different needs, I would highly recommend to first figure out their personal goals and objectives.

His income and personal risk preferences would also determine the optimum allocation. Therefore it is strongly advised to have some figures to work around with before creating a portfolio.

What should a person do to protect his Wealth?

It is important to protect your savings from unexpected health issues. With advancements in medical science, most illnesses can be treated. But it costs lots of money and healthcare costs are expected to rise substantially in the future. Just one major illness could possibly wipe out a substantial portion of savings.

Manulife’s ManuCompleteCare provides financial support for the treatment of critical illnesses in all stages, including illnesses diagnosed in the early stages. The payout is doubled for selected illnesses such as Parkinson’s disease, which are known to be particularly expensive to treat. It also pays 20 per cent of the basic protection amount for covered Special Benefit conditions such as diabetic complications. The coverage allows one to focus on recovery without having to worry about the additional expenses burdening one’s loved ones or depleting one’s retirement nest egg.

What sort of protection is sufficient, say for a person earning S$24k per year?

You need a comprehensive healthcare plan, to take care of your hospitalization needs at an affordable cost instead of incurring a financial burden. A term plan which provides high coverage at a low cost.

An early stage illness plan like ManuCompleteCare to ensure that there is a payout for someone with a low income to foot the basic bills of treatments before being reimbursed by their hospital plans.

A career protection plan to ensure that if you lose your job due to a disability or an illness, your income earning ability would be preserved while meeting your basic daily needs so that your livelihood is not affected.

What products will give a lifetime annuity?

The Manulife products that can supplement your CPF Life are: The Manulife Income Series of Investment-linked sub-funds are designed to provide monthly payouts that act as a steady stream of income. Depending on your risk profile, you can invest from a little as $5000 in any of the four funds managed by professional fund managers, so as to create your investment portfolio.

Or

Manulife 3G is a life insurance product that works like an annuity. It allows you to enjoy lifelong income with just 10 years of premiums. You can also boost your retirement with attractive yearly Cash Coupons currently at 4.2 per cent p.a. of the basic sum insured starting from the end of 10th policy year onwards till as long as the insured lives.

Assuming if you want to retire with a monthly S$5k in annuity, how much should he invest in annuity products?

Assuming this person is now 25, wishes to retire at age 65 with an estimated life expectancy of age 85, he needs to invest S$2737 monthly into an annuity product at a rate of return of 4 per cent to achieve a monthly of S$5000 in annuity. (Assuming a rate of return at 5 per cent and a rate of inflation at 3 per cent).