Michelle (not her real name) is a 43-year-old Singaporean Working Mother with 1 young child. She is the sole bread winner for the family as her husband is not working due to a medical condition. Michelle is a Regional Finance Director earning an annual income of $200,000 in an American Bank.
Michelle has concerns over her retirement planning as she is worried about her job security and she hardly has any extra savings to set aside for her retirement. She only has about $6,000 savings every year as she has huge financial commitments for her family, children and mortgage payments.
Kenny conducted the following KYC (Know Your Client) and fact-finding to understand her current financial situation before making recommendations for her retirement planning.
After Michelle provided Kenny her Personal Income Statement and Net Worth Statement, Kenny found her financial ratios to be as follows:
Based on the financial ratios, Kenny provided a few recommendations to Michelle for improvement:
Kenny did a simple Insurance Portfolio Audit and highlighted the Wealth Protection gaps to Michelle, advising her to get sufficient wealth protection against Death, Total Permanent Disability and Critical Illnesses. Kenny highlighted that any unforeseen expenses will derail her retirement plan.
The following are the detailed planning parameters for Michelle.
Retirement Age: 60-year-old
Life Expectancy: 85-year-old
Monthly Expense = S$4,000
A Retirement Income Solution consisting of Fixed Income (Guaranteed) and Inflation Hedged Income (Non-Guaranteed but with growth potential) is considered:
This retirement portfolio also serves the purpose of the estate planning & wealth distribution because the $600,000 Dividend portfolio can be passed on to the next generation upon death. The distribution method can either be written in a will (for immediate distribution) or be set up in a Testamentary Trust (for delayed distribution).
There are 3 options for the client to save for retirement:
After analysing Michelle’s personal cashflow statement and net worth statement, current financial resources and family situation, the following recommendations are made to Michelle.
Conducted Back Test (10 Years) to check whether the constructed portfolio is able to deliver 8% p.a. expected return. The back test’s result (10 years’ data) showed that the recommended portfolio delivered an 11.28% annualised return.
Note: Past performance is not an indication of future performance.
Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
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