Investing in a retirement annuity plan would usually mean that your principal/ capital is locked up for a long period of time. What if there are retirement plans with guaranteed principal withdrawal features to retain the option of lump sum withdrawal of your principal?
Your retirement plans can provide more than a guaranteed income stream.
By now, you would have heard of retirement plans with a guaranteed income stream, or a guaranteed payout higher than the total premium you have paid for the plan. However, such retirement plans offered means that your money is locked up over a long period of time.
Reviewing retirement plans and annuity policies across all insurers in Singapore, we compiled a comprehensive list of the 3 best retirement plan with guaranteed withdrawal of principal:
- Best for shortest waiting period to start of income payout – Aviva MyLifeIncome
- Best for highest projected surrender value – Manulife Signature Income
- Best for legacy/ third generation income planning – NTUC Income VivoWealth Solitaire
The main objective is such a retirement plan is to provide a stream of guaranteed income when you leave your principal sum untouched, yet the option of collecting back all the principal paid when you like to.
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What do we mean when we say retirement plans with guaranteed principal withdrawal?
There is nothing unique or special about a guaranteed income payout, especially when that is the sole purpose of a retirement plan. What we are looking for in a retirement plan with guaranteed principal withdrawal must have the following features:
- Guaranteed withdrawal of all or minimally 80% of the insurance premium you have paid for the annuity
- The value of the guaranteed withdrawal excludes the monthly income stream collected
- A stream of income, with a part of the income being guaranteed
- Capital appreciation of principal sum, should you choose to continue receiving income and delay withdrawal of premium paid (Bonus feature)
There is no doubt that your monthly retirement income can be even higher if you are fully committed to a retirement plan that lock in your premium for a higher income or an inflation-proof payout. However, the tradeoff is that you will not be able to withdraw your principal sum at your whims.
Don’t let the misconception that your principal will be locked up in an annuity policy stop you from generating a stable stream of income for your retirement.
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3 Best Retirement Plans with Guaranteed Principal Withdrawal
In no order of preference, we listed some of the best retirement plans that allow you to have a high rate of financial yield, yet freeing up most of the financial lock commitment typical of a retirement plan.
Note that the stated yields are very close approximates. Your actual yields and financial returns will depend on your current age and the years you let your premium compound.
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1.) Best for shortest waiting period to start of income payout – Aviva MyLifeIncome
Aviva MyLifeIncome is the latest retirement annuity policy in Singapore that is 100% Capital Guaranteed upon reaching the end of your selected accumulation period.
This means that you can surrender your policy at any point in time during your income payout period to get the total premium you have paid for the retirement plan.
- Accumulation period options (Based on premium payment term):
- Single premium payment: 4 to 40 years
- 3 years premium payment: 2 to 40 years
- 5, 10, 15, 20, 25 years premium payment: 0 to 40 years
MyLifeIncome goes a step further to further guarantee that your Surrender value will increase by 0.25% p.a (compounded), starting from the 5th policy year after the end of your desired accumulation period.
Based on the profile of a 50 year old male that wishes to start receiving his payout at age 56:
- Total premium paid: $249,498
- Guaranteed surrender value at age 60: 100%
- Guaranteed yearly income: 1.75% p.a
- Projected yearly income: 4.95% p.a
- Projected surrender value at age 80: $270,380
The advantages of Aviva MyLifeIncome
As per the illustrated chart below, MyLifeIncome offers the highest guaranteed and projected income payout compare to its other peers, at the cost of a lower projected surrender value in the future.
What makes MyLifeIncome by Aviva outstanding is that 100% of the total premium paid is guaranteed in as short as 4 years from placing a single lump sum. Should you choose to spread your premiums over a 5 years period, your capital can be guaranteed immediately at the end of the 5th year of premium payment.
The disadvantages of Aviva MyLifeIncome
The projected surrender value of the policy does not increase as higher over time compared to Manulife Signature Income. However, the guaranteed surrender value will consistently increase over time by 0.25% compounded on a yearly basis.
Refer to: Aviva MyLifeIncome review
2.) Best for highest projected surrender value – Manulife Signature Income
Manulife Signature Income is one of the most competitive annuity plans in the Singapore market, in terms of capital appreciation and income payout. It is also part of the newly launched signature series of products catered towards HNW individuals.
The policy is made attractive with a payout that starts from the 5th policy year, assuring you of a lifelong income stream while accumulating your surrender value over time.
Based on the profile of a 50 year old male that wishes to start receiving his payout at age 55:
- Total premium paid: $249,900
- Guaranteed surrender value at age 60: 80%
- Guaranteed yearly income: 1.59% p.a
- Projected yearly income: 3.53% p.a
- Projected surrender value at age 80: $339,671
The advantages of Manulife Signature Income
Manulife Signature Income can be transferred to your future generation for legacy planning. This means that you can receive an income stream as you live, while your spouse and children can take over after your demise. They can continue to receive a payout while letting the plan accumulate for an even higher lump sum surrender value.
Among the all the retirement annuity plans, Manulife Signature Income has the highest rate of growth on the projected surrender value. While projected values are non-guaranteed, the plan may potentially enhance capital gains if the yearly declared investment returns matches the stated illustration.
Signature Income is also available for purchase in USD currency, should you believe that USD will appreciate in the long-term.
The disadvantages of Manulife Signature Income
The projected income payout of Manulife Signature Income is not the highest among the 3 best retirement plans with guaranteed principal withdrawal. This is offset by a higher guaranteed income payout and the benefit of increasing projected surrender value.
Refer to: Manulife Signature Income review
Best for legacy/ third generation income planning – NTUC Income VivoWealth Solitaire
NTUC Income VivoWealth Solitaire is a single premium retirement plan that also allows you to leave a legacy for the next generation. With the monthly income payout starting on the 6th policy year after placing your single premium, you can be assured of a lifelong income stream while accumulating your surrender value over time.
Based on the profile of a 50 year old male that wishes to start receiving his payout at age 56:
- Total premium paid: $250,000
- Guaranteed surrender value at age 60: 80%
- Guaranteed yearly income: 1.56% p.a
- Projected yearly income: 2.56% p.a
- Projected surrender value at age 80: $275,250
The advantages of NTUC Income VivoWealth Solitaire
This annuity can be purchased by having your child named as the insured, allowing the policy to continue paying out an income payout even after your demise. Subsequently, your child can surrender the policy or nominate a beneficiary for a lump sum cash value.
NTUC Income VivoWealth Solitaire pays out an additional year worth of guaranteed income on the 21st and 31st policy year as a unique feature. The surrender value of the policy is also projected to increase over time, allowing for capital appreciation.
The disadvantages of NTUC Income VivoWealth Solitaire
NTUC Income VivoWealth Solitaire has the lowest project yearly income comparing out of the 3 best retirement plans with guaranteed principal withdrawal. However, its high guaranteed income payout is almost on par with Manulife Signature Income.
Refer to: NTUC Income VivoWealth Solitaire review
How to get the most out of a retirement plan?
Your retirement plans are meant to supplement your lifestyle and expenses in your golden years. Find a retirement plan that pays out according to your life objectives before looking at the financial figures.
After all, the yields and the financial payout will not make a difference if the retirement plan does not allow you to utilize it according to your desired retirement lifestyle.
Whenever possible, consider the following before taking up a retirement plan:
- Would you prefer a higher guaranteed or a higher overall non-guaranteed payout?
- Do you need the payout to increase at a fixed rate to keep up with inflation?
- In the event of disability or Critical Illness, do you still have to continue paying your premiums?
- What is the overall annualised yield on the retirement plan?
- Are you expecting a lump sum payout once you reach your retirement age?
- How much guaranteed and non-guaranteed are you expecting to receive if you have to do an early surrender of your policy during your retirement years?
- In the event of disability during the payout period, is there any income multiplier to cover additional costs that will be incurred on your lifestyle?
Ensure that your retirement plan can address your retirement needs and concerns as much as possible. Due to the large financial commitment and long time horizon required, never compromise on what is important to you.
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