CPF LIFE or Private Annuity Plan?
Disadvantages of using Private Annuity Plan instead of CPF LIFE.
Although this post title is "Disadvantage", but we included some "Advantage" of Private Annuity against CPF LIFE too below.
From what we have found, Private Annuity Plans available in the market tend to supplement CPF LIFE instead of replacing the CPF LIFE.
Instead, Private Annuity Plans can be used together with CPF LIFE to
1) Boost your monthly retirement income.
2) Help you withdraw out a portion or the whole of your Retirement Sum.
1) Potentially higher returns (Annuity plans invest your money into a unit trust which can bring high potential returns. However, this depends a lot on the trusts that the insurance company invests in).
2) May comes with rider benefits (Eg; cheaper insurance premiums if you buy other INSURANCE from the same insurance company you bought your annuity plan).
It is fairly difficult to plan for your Private Annuity Plan to replace your CPF LIFE.
We made some comparison on our previous post HERE
1) Returns not as great as what CPF can provide.
2) Returns are not guaranteed - 4.25% is not definitely a 4.25% every year. Returns are determined by underlying investments (usually unit trust, which has a history of not performing well)
3) Might not have bequest left over for your children
4) Unable to plan accurately your future annuity monthly payouts*
*Your CPF LIFE cost (Retirement Sum) and its future monthly payout to you is determined when you reach age 55. The 2 figures will keep changing every year. Thus it is very hard to accurately plan your annuity plan to match its monthly payout against the CPF LIFE's future monthly payout.
This difficulty to match payouts might make you under-sized your future annuity payout and hence unable to withdraw your Retirement Sum out from the CPF fully.
Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!
Subscribe to us or
Follow us: Investment Stab on Facebook
Unhappy with your job? There's something you can do about it.
A. Save up enough money from your job so that you can fire your boss - problem is it might take some time and some effort
B: Find a new job, search for new opportunities. A career coach might be able to help you with that. And if you are looking for a free career coach, visit Workforce Singapore via the link below.
They can link you up with the career coach and you might be able to find new opportunities on their jobs portal.