Is It Worth Getting A Variable Universal Life Insurance (VUL)?

As I was searching for a life insurance to protect myself and my family, I came across a type of product through the help of my financial advisor. She recommended getting the Variable Universal Life (VUL) insurance policy. I was drawn by the unique fusion of life insurance and investment.

For those of you who are unfamiliar with VUL, it is a type of life insurance policy with a built-in savings component (cash value). The cash value can be invested into different accounts consisting of mutual funds, bonds, or stocks. Associated with the savings component is a maximum cap and a minimum floor on the investment return.

What’s more? The premium you need to shell out is flexible. Flexibility is one of the advantages of having a VUL. Let us start with that.

FLEXIBLE PREMIUMS

Last week, I invited three experts to host a Financial Literacy Talk in our workplace. These experts discussed about the current economical state of the country as well as the investment and insurance options available in the market. One of the products that they highlighted was the VUL.

We all have different needs and different capabilities. However, that must not stop us to get an insurance. Fortunately, VUL’s premium can go up and down for several reasons. These reasons depend on your lifestyle and needs. For instance, you may consider to raise the death benefit as a breadwinner. Increasing your death benefit may require proof of “insurability”. Nonetheless, the performance of your cash value account may allow you to lower your premium.

BENEFICIAL DEATH

There is a considerable weight on the shoulders of the loved ones who have to go through loss. Money will never be able to replace someone’s presence, but it will help lessen the financial weight when going through a death of a family member. You need to avoid the double-whammy of losing someone and getting sucked into debt.

VUL offers both investment options, death benefits, and critical illness coverage. Study these elements before signing up.

VARIED INVESTMENTS

VUL has varied sub-accounts, which allow the investment of the cash value. Its function is similar to mutual fund with an array of stock and bond accounts along with a money market option. Some policies may restrict the number of transfers into and out of the funds.

Interestingly, VUL got its name from the varying results of investment in the ever-changing market. Keep in mind that exposure to market fluctuations can generate significant returns or substantial losses.

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Let us move on the out-payments. You must ensure that you are insurable before implementing a strategy involving VUL or other life insurance policies. Several factors will affect the availability and cost of your life insurance. These factors include age, health conditions, and amount of insurance purchased. You see, life insurance have other charges attached to it. For instance, if a policy is surrendered prematurely, some policyholders may have income tax implications. Any guarantees associated with the policy are dependent on the ability of the issuing insurance company to continue making claim payments in the long run. Choose wisely.

DISCLAIMER: Please note that this VUL product is most applicable to American and European insurance issuer. Thank you.

Sources: 1 & 2

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Delayed Retirement Age And Other Changes In Singapore Retirement

Despite the economic headwinds, the retirement age will begin to shoot up in 2022. Manpower Minister Josephine Teo highlighted they “did not arrive at this date lightly even though towards the later part of our deliberations, it was clear to us that the economic conditions have changed quite considerably.” All that is left for us to do is to adapt to the recent changes in the retirement age and CPF contributions.

INCREASED MOM RETIREMENT AGE

Foresee a gradual increase in Ministry of Manpower’s retirement age. Currently, the official retirement age is 62 years old. This number will increase to 63 years old in 2022 and to 65 years old in 2030. Do you think a higher retirement age is desirable?

Nonetheless, Prime Minister Lee Hsien Loong greatly emphasized that there is no change to the CPF payout ages and withdrawal. You may withdraw money from your CPF RA upon reaching 55 years old and start receiving CPF LIFE payouts from age 65. All these were discussed during the National Day Rally.

ALTERED EMPLOYMENT PROCESS

Possibly one of the most affected with the changes in the retirement and re-employment age is your employer. It is completely legitimate to work up to the MOM re-employment age. Your employer cannot deny you that.

At the moment, the re-employment age is 67. It will increase to 68 years old by 2022 and eventually become 70 years old by 2030. It is highly encourage that employers equip these employees with necessary training and skills to help them tackle the contemporary positions.

In light of the aging workforce, the Tripartite Workgroup on Older Workers made several other suggestions to restructure the work environment in Singapore.

RAISED CPF CONTRIBUTION RATES

Aside from the changes in retirement and re-employment age, the CPF contributions for workers beyond age 55 will be raised. This will be felt from January 1, 2021 onwards. The extra CPF contributions will go straight to your CPF Special Account.

When the CPF contributions for the 55-60 years old age group increases by 2021, the allocation for your CPF (SA) will jump from 3.5% to 5.5%. The rest will remain the same.

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May these guidelines and significant changes help you decide for a better future ahead!

Sources: 1 & 2

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Foolish Things People Do With Their Money

We have all made mistakes in the past, especially when it comes to money and relationships. While some are knowingly reckless, others are less obvious. That being said, here are some foolish things that people do with their own money.

Awareness is the key to change!

BEING OVERLY CONSERVATIVE WITH ONE’S INVESTMENTS

Whether you are terrified to max out your savings or to dive into uncharted territories, Millennials are not investing hugely in the stock market. Consider your risk tolerance while you are in your early 20s as this is the best time to bounce back after a decline. Compound interest entails that it is beneficial to stay in the market as early as you can. Simply put, a risky investment while you are young has time to correct itself.

Apply this ideal towards your retirement fund. Set a diversified portfolio directed to your retirement fund and ensure that the risk exposure is based on your age and timeline.

ABSORBING THE INTERNET SCHEMES

Let us face it! The Nigerian Prince you have waiting for may never come. Although Internet scams have become more sophisticated than ever, you must not give your sensitive bank information to anyone that pleads for it.

Some people carelessly give out their account passwords in the name of love. You have to think twice! You are merely opening yourself to identity theft by doing so. Mark suspicious emails as spam and leave them alone.

MAKING FINANCIAL DECISIONS ON YOUR OWN

A family is a unit and it is helpful to have an open communication with your partner. As financial decisions and career paths affect multiple people in the relationship, you must discuss these as a unit. Relocating, childcare, long working hours, or converting to entrepreneurship are examples of factors that involve the sole earner as well as other family members.

If you belong to a dual-income household, do not make the daft decision of managing your ambitions on your own. Ensure that you are on the same page when in comes to managing your household and your career goals to avoid conflicts.

DISMISSING YOUR CREDIT CARD REPORT

Despite being a free service, checking one’s credit card report is not something that people do religiously. It is important to check your report to help you catch suspicious activity, prevent identity theft, and report unauthorized purchases.

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In addition to keeping an eye on fraud, you can track your credit score progress.

Sources: 1 & 2

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Australian dollar hits decade low against the Singdollar: S$1.00 = AUD1.08

The Australian dollar is at its lowest since 2009

The Australian dollar has dropped to its lowest level against the Singapore currency since the 2008 Global Financial Crisis. The Aussie dollar is weaker this morning after it traded at an intraday low of 1.0816 against the Singapore currency, according to Investing.com

The Australian dollar plummeted after a huge rate cut from the Reserve Bank of New Zealand as investors now expect the Reserve Bank of Australia to follow suit, as it did with rate cuts earlier this year.

It is about time to plan a holiday to Australia with the attractive exchange rate.

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How To Set Better Financial Boundaries

Establishing boundaries is important in living a happier and healthier life. For starters, boundaries can help you protect yourself from emotionally draining people or help you build stronger relationships. Limitations are also vital in creating professional relationships founded by efficiency and awareness.

However, there is one area in our lives that some are not so keen to establish. I am referring to the financial boundaries. It is easy to overstep our own financial boundaries and keep making mistakes that will hurt our goals in the long run.

KEEP THINGS HEALTHY

Restrictions go hand-in-hand with creating boundaries. These are most evident in creating a budget. Use this budget to work around your spending, but you have to be gentle with yourself.

Avoid having too many restrictions as you may torment yourself in the process. Holding on to an impossible budgeting standard can lead you to falling off the wagon.

INCREASE YOUR AWARENESS

Everyone makes mistakes. When it comes to finances, I learned this the hard way! Do not get me started with setting up financial limits while traveling! What is important is that I learn from these experiences.

You need an honest and nonjudgmental reflection whenever you cross a financial boundary. Otherwise, hiding your mistakes increases the likelihood of it happening again.

Abraham Lincoln once said, “Give me six hours to chop down a tree and I will spend the first four sharpening the ax.” This is exactly what time spent reflecting on your life is. You need to sharpen the ax in the decision-making process of your financial journey.

GET PROFESSIONAL HELP

Let us face it! Setting up financial boundaries can be tough. This is why some people seek the help of their partners, their trusted friends, or their financial planners. Having a financial planner can help you to make sound decisions with a goal in mind.

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Furthermore, there are several financial planners in Singapore. Make your life easier by searching thru the financial planner directory of Financial Planning Association of Singapore (FPAS). It is a non-profit association dedicated to promoting unbiased financial advice to the Singaporean public.

Sources: 1 & 2

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