Managing the risk of retirement

Some insurance agents ask customers to spend a lot of money on Private Shield or critical illness cover. They argue that it is for risk management, in case they face with a big hospital bill that has to be paid.

There is no need to face a big bill, if the patient is willing to be treated in a subsidised ward and is insured for basic Medishield.

The biggest and real risk faced by most people is insufficient money on retirement. More than 97% of working people will not face any critical illness or premature death in the first 25 years of their working life (when they have to accumulate their savings). If they do invest their savings well, they will have sufficient money for their retirement needs or to meet other unexpected events, such as critical illness.

Many people have insufficient savings as they got a poor return by investing in bad financial products, such as the following:

a) Paying too much premium for insurance that is not needed, e.g. expensive Private Shield or critical illness cover.
b) Buying a whole life or investment linked policy which takes away 160% of their annual savings
c) Investing in bad financial products, such as structured products, land banking, dual currency investments and overpriced property

Insurance allows you to manage your risks, but you have to pay the right price for this service. Do not pay an excessive price for a service that cost much less. Be careful of advisers who is only interested in the commission earned from selling an expensive, over-priced product to you. They do not take care of your interest; they only think about the commission that they can earn.

Look for an adviser who is genuine in giving good advice. Pay a reasonable fee for this advice, and ask for the embedded commission to be returned to you.

To recap: your biggest risk is not having sufficient money for your retirement. Do not invest in bad financial products that gives you a poor or negative return. Look for an adviser who is genuinely able to give you proper advice that is in your interest.

Tan Kin Lian