wealtharticles-have_you_got_your_longevity_risk

Have you got your Longevity Risk covered?

Singapore is experiencing a situation similar to those of many developed nations - a fast ageing population with decreasing fertility rate. The average lifespan of men and women have increased to 82.1 and 84.4 respectively, according to the Singapore Government's Department of Statistics in 2006.

A longer lifespan means that Singaporeans will need a larger pool of savings to last them through their post-retirement lives. However, in a study that Manulife Singapore conducted in May 2007, Singaporeans on average anticipate surviving for only another 9 to 12 years after retiring when in actualfact, they could expect to live on for at least another 17 years, thereby running the risk of outliving their resources.

Having noticed this, the Singapore government has been encouraging Singaporeans to plan for their retirement. Besides taking steps to educate and institute retirement planning and financial responsibility for each individual, initiatives have kicked in since January 1, 2008 to help Singaporeans stretch their retirement dollars.

Besides just relying on the government's initiatives, individuals should take a more proactive approach towards planning for a financially secure retirement. A retirement tool that they might consider is the annuity.

It is beneficial to purchase an annuity as early as possible.This is because the principal amount has a longer time to grow before the first payout, hence translating into a higher amount per payout. Annuitants will be able to enjoy their golden years even if they are not working, as they will receive an income stream. Hence it will help them to manage longevity risk (1 in 2 persons are likely to live beyond 85 years) and they won't have to worry about running short of money as they advance in age.

Article was abstracted from Manulife Singapore in their ManuReach publication, January 2008.