Client: Miss Lee
Age: 35
Monthly Salary: $15,000
Bank Deposit: $20,000
Investment: Nil
MPF balance: $280,000 (monthly contribution $2,000, i.e. $1,000 from both employer and employee)
Risk Tolerance Level: High
Target: Retire at age of 65 with monthly spending of about $10,000 as at today's value.

Question: How would Miss Lee plan for her retirement?

Retirement Needs

Miss Lee has no saving and investment habits. She expects to spend $10,000 per month at today's value after retirement. By assuming an average inflation rate of 3% per year, this amount will increased to $24,273 at her age of 65. Suppose she has a life span of 30 years after her retirement and the post retirement investment return is 2%, the total amount required for her retirement will be $10,102,074. If she continues to work until 65, her MPF balance with an annual growth rate of 5%, will be $2,915,486. That means an additional amount of $7,186,588 is needed.

Recommendation

     Plan tenure: 30 years
     Monthly contribution: $3,200
     Expected annual rate of return: 10% p.a.
     Maturity value: $7,233,561

We suggest Miss Lee starting with a saving plan to accumulate the wealth for retirement. She can make use of an investment-linked insurance policy as the financial tools. It provides a platform for mutual funds saving to achieve long term goals. With an annual growth rate of 10% for 30 years, she has to save around $3,200 each month in order to meet the short-fall. The plan has to be reviewed according to any change of her personal particulars, e.g. change in salary, change in marital status, new born baby, etc.