Retirement as the best gift for your children

Media from Wix

Recently I met up with a client. Her profile is married with two children, current age 35. We spoke about Family Income Protection, Legacy Planning/Estate Planning and Retirement Planning.

Her priorities are Family Income Protection for now till age 70 because of existing liabilities and she is also the higher income earner of her family. However due to budget constraint and need of high coverage, she took up a term plan to age 70, thereafter the plan terminates and do not have any cash value in return.

So from a financial adviser perspective, usually i recommend my clients to take up policies that has guarantees of return over investment (ROI) because cost of protection is important, but eventually if all those cost are not claimed, it will just be down the drain.

We spoke and she said legacy planning is not the important priority because she believes her children should take care of themselves financially when they are of age and not rely on her financially. Therefore, from her perspective, retirement planning is of more importance. She mentioned taking care of herself and her own needs during retirement is a better gift to her children. Hence I went back home, thought about it and eventually came up with a planning that looks something like this:

Based on this plan, I projected my figures according to the actual total premiums paid including all riders. For the income received, I based my figures on the Guaranteed Minimum Income received excluding bonuses.

So assuming there are no claims from the protection policy and my client lived healthily until age 75, she would have received a total sum of $180,000 from her retirement income, covered the cost of total premiums paid for her Retirement and Protection, and still have a nett sum gain of $17,650 excluding the non guaranteed bonuses.

What do you think of this recommendation?

This is a type of "buy term invest the rest" kind of planning. Because a whole life limited pay plan only make sense if you claim, but when you don't claim and you surrender the cash value, the break even age is usually age 80-85. However that is not the retirement age we are looking at isn't it? Most of us are looking to Retire earlier and 55 or 60 isn't it?

If you are unsure of what is the best recommended solution for you, contact us now for a financial portfolio review and we will help you take a look at what you currently have, what are your priorities now and recommend a few possible portfolios for you to choose, and also out of these portfolios you see, recommend the portfolio that we think best suit your needs and we will explain why too!