If you have been checking out the local news lately, you would have noticed that one of the local bank (starting with O) has just… Read More »The 360 Account Or The Bonus Saving Account If You Have $25,000?
Here is my first attempt dedicating a single post (my replies) to the comments that you have posted in this blog. Also big thanks for taking the time to read the posts and spending some time on this site! Hope this blog has helped you in some manner of Financial Planning and most importantly – Make You Want To Plan Today!
Special Thanks To Andre Of Beginning With Finance For The 4 Comments!
Today, I am lucky enough to have Andre Of Beginning With Finance to contribute 4 of his personal comments to some of my posts and in the comments, he actually raised some good questions (this guy is serious about Planning His Finances) which I intend to post my replies through this post.
Meanwhile do click over to his Blog and read up some tips on managing your Finances!
Answering His Comments…
1. My Post: Have You Started Your Retirement Planning? His Comment: Hey Dexter, 2% for Inflation Is Actually Low? Is It Better To Over-State The Inflation Rate While Planning For Retirement?
My Reply: 2% for inflation is seriously low. The actual inflation rate is on the average of 4 – 5%. To over-state the inflation rate while planning for retirement would definitely be better and you would get more realistic results.
But if you have done the calculations yourself (which I have did), I would need to set aside $600/month for the next 37 years in order to achieve a comfortable retirement income of $2000/month. If I have done up a higher inflation rate, it would only mean that I have to set aside a much higher (than $600/month) which may be beyond my means and also that I may not be that committed to do so.
My personal feel is that if you are able to and are actually setting aside more than $600/month as an average Singaporean (earning around $2500/month) despite having to succumb to temptation of life – entertainment, gadgets, good food, holiday trips, handphone bills and parents’ allowances, is actually a remarkable feat in reality!
Therefore there’s nothing wrong to plan with inflation rate of 2%, as long as you know the fact that you need to really save is most important! Also do note that when stuffs are actually becoming more expensive over the years, there are still some lucky breaks e.g. Chicken Rice are mostly selling for $3 per plate (due to inflation) now, there are some outlets that are still willing to sell for $1.50 to $2.50. Lesser Meat but still fills your tummy!
Key Pointers: Do know that there’s inflation in reality. And you need to save no matter what! Be comfortable with your committed and regular savings!
2. My Post: You Are Unhealthy For Your Insurance… What Happen Now? Part 2 of 2. His Comment: Hey Dexter, How About Migraine and/or Hep B? Thanks!
If you like to plan well for a good retirement, to achieve your dreams early and make your this life fruitful, you’ll need to take this financial planning tip seriously and do your planning today and not tomorrow.
Planning Early For Protection and Hospitalization
Everybody, in any of the life stages, will definitely need some form of protection plan (to replace loss of income) against any Critical Illness, e.g Cancer and a good hospitalization plan (on standby) to help cover most of the hospital charges, should you seek any form of treatment in a hospital. It has been statistically proven that most people will become bankrupt because of sickness and those heavy hospital bills associated with that sickness.
Therefore the two main factors for planning early for these two areas are: Saving Money In The Long Term and Acceptance.
Saving Money In The Long Term
For protection against any loss of income or to have a lump sum of money on standby against any critical illness, it’ll be good to plan early as you are able to save lots of money in the long term.
Consider that an average person earns a monthly income of around $2,000 in life and should there be any unforeseen circumstance of striking a critical illness, you may need 5 years (of not being to work) to recover from this, you may need around $120,000 of coverage.
Then consider this, should you decide to get a whole life protection plan (with cash value) with limited premium term of 20 years:
At The Age of 1, you could be expecting a monthly premium of around $100 for that coverage of $120,000, whereas if you should decide to get this plan at age of 30, you could be expecting the monthly premium to be above $300 for the similar coverage. The difference of the around $200 per month, which amounts to $200 x 12 x 20 = $48,000, could actually be a good help to you, getting a good retirement and achieving your dreams early.
*Note: Please check with your financial planner with the actual premium rates needed for the $120,000 coverage. The rates may not be the same for every insurance company.
With this in mind, you can actually see that you will get to save a lot of money, should you decide to plan early for this.
Acceptance By Insurance Company
Insurance company is only willing to take you into any protection plan, as long as you are a healthy person. Many people decide to postpone their planning because they feel that they’ll be healthy throughout their life and protection planning is simply just a waste of their time and money. They’ll only start to consider when they feel that their health is no longer in good condition or that someone close to them has a sudden change of health and they saw the impact that this person has to their current lifestyle and to the dependents.
Also, these people with poor health, may be subjected to loading, exclusion and even being declined by the insurance company. A fact to know, if you’re obese today and should you decide to get a protection plan and a hospitalization plan, be expected to get this:
- You will be loaded at least 125% more in your monthly premium for your protection plan.
- You will not be allowed to take up any hospitalization plan till your BMI is lower than 30.
Therefore planning early while you are still in a pink of health, will ensure that you’ll be accepted by the insurance company. Should your health fails you in the future, at least you know you had your planning done and that the risk is transferred to the insurance company.
Planning Early For Retirement And Savings
If you are interested to have a good retirement or even to make your money work harder for you, the tip here, as you know it, is: Start Today!
Rather than have me blabbing all over, let me just show you a good illustration:
Assuming Joe and Jane are planning to save $2,400 per year into a plan that generates a definite 10% per annual return for the next 30 years. Joe decides to start first while Jane plans to do so after 10 years later.
Joe and Jane have different characters as well – Joe decides to save only for the next 10 years, will stop and just let the money roll over; Jane is more disciplined, will continue to save continuously but just need to wait 10 years later.
So, do you want to see who is the actual winner in having a higher savings return?