Why Growing Your Wealth For Retirement Isn’t Enough If You Don’t Cover Your Downside Risk

This article was written in collaboration with Etiqa. All views expressed in this article are the independent opinion of DollarsAndSense.sg based on our research. DollarsAndSense.sg is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.

Building wealth for our retirement is one of the key areas of personal finance that is indispensable in Singapore. With the high cost of living and little welfare benefits for Singapore retirees, the onus is on us to grow our retirement nest egg during our younger, working days.

There are many popular ways that Singaporeans can build wealth for our retirement. These include topping up our CPF accounts, buying an investment property for rental income, investing in stocks and bonds or buying retirement insurance plans. All of these are different methods with their respective pros and cons that we can use to grow our wealth for our (early) retirement.

Read Also: 4 Factors You Should Consider When Buying A Retirement Insurance Plan In Singapore

However, the strategy to grow our wealth for retirement isn’t just about accumulating assets to build the biggest possible nest egg. While that is part of the objective, it’s not the only objective.

If investing is plan A, then insurance is plan B

One of the biggest mistakes to avoid when we work towards wealth building is not covering our downside risk, especially in our younger, working days.

As young working adults, the biggest asset we have today is our health. When we are young and healthy, we can work to provide a living for ourselves and our families. As long as we work, we can 1) take care of them financially and 2) work towards our own retirement.

While there are many strategies that we can use to grow our wealth, none of these strategies would matter if an unexpected health incident or accident were to occur. Even the best investment strategies fail to hold up if we are unable to work.

What could go wrong?  

Unfortunately, the answer to the question is…almost everything! As Murphy’s Law says, anything that can go wrong will go wrong. Factors like our physical health, ability to work, and lifespan may go beyond our control.

We fall sick: If we fall sick with a critical illness, we may not be able to work for a substantial period of time. According to the 2017 Protection Gap Study done by the Life Insurance Association of Singapore (LIA Singapore), the recovery period for critical illness is assumed to take about five years. Assuming that the individual makes a full recovery from the illness and can return to the workplace, this still leaves the person with potentially about a 5-year period of inactive employment. This would, without question, disrupt any wealth-building plans that we may have in place.

We encounter disability: An unfortunate accident may leave us with a disability that affects our ability to work for the rest of our lives. If this happens, our financial plans will be heavily disrupted as we won’t be able to earn a living to provide for ourselves and our families, both in the present and for the future.

We pass on: While passing away means we don’t need to bother about wealth that we have built for our future, we may have dependents who are reliant on our income (e.g. young children, elderly parents). If we pass on, our dependents may suffer financial hardship if we are no longer around to provide for them.

The concept here is simple. When we are still in our working years, we are unlikely to have built up the wealth that we need to provide for ourselves and our loved ones. If an accident or illness takes away our ability to work, we need to substitute with an alternative plan that can provide our family with the financial support that is needed.

Get your desired coverage at affordable premiums

To protect ourselves and our retirement plan against these risks, we can simply purchase an affordable term life insurance plan such as Etiqa’s Essential term life cover. Based on Etiqa’s Protection Survey Report 2021, it is revealed that millennials in Singapore do not know the cost of insurance with 3 in 4 of them overestimating the cost of term life insurance. However, with Etiqa’s Essential term life cover, we can enjoy coverage of up to a million dollars for death and terminal illness from as low as S$0.38¹ a day. What’s more, enjoy the flexibility to select a policy term of your choice.

On the other hand, if you are looking at a plan which allows you to save up for retirement while providing whole life protection, Etiqa’s Essential whole life cover may be the one for you. Essential whole life cover is a limited-pay whole life protection plan designed to provide assurance to those who matter to you.

Lifetime protection with the flexibility to enhance coverage

Besides providing us continuous protection against death, total & permanent disability and terminal illness, Etiqa’s Essential whole life cover offers us the choice to multiply our protection by up to 400% of the basic sum insured. In addition, our plan will continue to accumulate cash value and bonuses, while providing us with comprehensive protection throughout our lifetime.

Enjoy comfort in your golden years with our retirement option

With this plan, we also have the choice of receiving regular yearly payments² to boost our retirement income starting from the policy anniversary immediately after age 65, for a period of 10 years.

For those who are keen to find out more about Etiqa’s term and whole life insurance plans, you can submit your enquiries here.

Don’t make the mistake of planning for your retirement without covering your downside risks!

Read Also: Why Retiring Well In Singapore Goes Beyond Financial Planning

¹Premium is illustrated based on a 5-year renewable term plan for a male aged 1 year, non-smoker and a sum insured of S$1,000,000.

²Please refer to the policy contract for full details of the terms and conditions.

This policy is underwritten by Etiqa Insurance Pte. Ltd. (Company Reg. No. 201331905K). Terms apply. You should seek advice from a financial adviser before deciding to purchase the policy. If you choose not to seek advice, you should consider if the policy is suitable for you. As buying a life insurance policy is a long-term commitment, early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid. Protected up to specified limits by SDIC. This advertisement has not been reviewed by the Monetary Authority of Singapore. Information is correct as at 7 December 2021.

Photo by Harli Marten on Unsplash