People often think of how best they can save for retirement, but without adequate protection for yourself, your loved ones and your investments, you may still come up short. To help, here are 5 top tips on building the right protection for your retirement plan: from Industry Winner (Insurance) at the recent SCMP/IFPHK Financial Planner Awards, Jenny Meyers Wong.
1. Get Critical Illness and Hospital Plan Cover While You’re Healthy
Critical illness coverage is typically not included in group medical plans, so even if your employer provides you with some level of health insurance, this may be something you lack. According to Wong, a qualified financial advisor for Manulife, if you are diagnosed with a treatable cancer, it may take about three years to recover – at an estimated HK$1 million in total just for medical costs, with around HK$500,000 of that incurred in the first year.1
Remember also to renew your critical illness coverage when you stop working. The cost may be higher once you’re older or depending on the insurer there may be an age ceiling, so shop around. Get protection up to 100 years of age and aim for critical illness with excellent cancer coverage (it’s the most commonly diagnosed critical illness in Hong Kong).
Wong suggests that to manage costs you purchase your own medical plan, including inpatient and outpatient coverage, while you are healthy. To gauge how much protection you’ll need, look at what a semi-private ward would cost for one to two weeks in your hospital of choice and consider a plan within that range.
2. Make Sure You Plan for the Long Term
If you rely on your financial advisor to help you reach your investment goals, ensure during your annual portfolio review you evaluate your monthly contributions and ask whether they are enough for retirement. Wong suggests those heavily invested in guaranteed funds may find they are under-prepared for retirement and should do more with their investments.
She points out that most people’s retirement planning should assume they could easily spend 30 years in retirement. With that lengthy spell in mind, she says some people, especially those that are young, could consider other asset classes or possibly higher risk depending on their risk appetite and financial situation.
3. Enhance Your Life and Health Cover When Your Family is Young
If you already have life insurance for your spouse, think about increasing coverage once your baby arrives. With a young family you have the additional worry of providing for your children up until they are at least 18 and finish secondary school, or beyond through tertiary education. In addition to life/term insurance, enhanced coverage should also include income protection, as you may be unable to continue working should you become disabled in the future.
4. Buy Term and Invest the Difference
One possible investment approach is to “buy term and invest the difference,” which may suit you depending on available income and how you want to invest your leftover savings.
There are plenty of options to consider for retirement and protection. Term insurance is a great option, says Wong, particularly when you are starting a family, as you can pay the lowest premium for the greatest protection and invest the rest of your money. Other possible options include mutual funds and investment-linked assurance plans. Whichever you choose, remember that planning early can mean you benefit more from compound interest.
If you are risk averse or very close to retirement, this volatility may not be right for you. Choosing a dividend participating policy that offers guaranteed payments may be a better option.
5. Take Ownership of Your Retirement Planning
While many people claim to have your best interests at heart, only you really do. No one is in a better position to understand your financial needs and goals, so become proactive about managing your finances rather than reactive and don’t jump from investment to investment based on partial knowledge gleaned from newspaper headlines and “hot tips”. Be proactive by doing the research necessary to know you have made the right decision. Equip yourself with the information you need to make informed decisions about what services and products you need, or don’t need. Wong agrees: “Financial advisors are an aide; investors should take responsibility for their plans.” She spends time with her clients teaching them how to use the company’s website so that customers are not solely dependent on her for information.
1Hospital Authority Cancer Registry 2009/2010
People often think of how best they can save for retirement, but without adequate protection for yourself, your loved ones and your investments, you may still come up short. To help, here are 5 top tips on building the right protection for your retirement plan: from Industry Winner (Insurance) at the recent SCMP/IFPHK Financial Planner Awards, Jenny Meyers Wong.
1. Get Critical Illness and Hospital Plan Cover While You’re Healthy
Critical illness coverage is typically not included in group medical plans, so even if your employer provides you with some level of health insurance, this may be something you lack. According to Wong, a qualified financial advisor for Manulife, if you are diagnosed with a treatable cancer, it may take about three years to recover – at an estimated HK$1 million in total just for medical costs, with around HK$500,000 of that incurred in the first year.1
Remember also to renew your critical illness coverage when you stop working. The cost may be higher once you’re older or depending on the insurer there may be an age ceiling, so shop around. Get protection up to 100 years of age and aim for critical illness with excellent cancer coverage (it’s the most commonly diagnosed critical illness in Hong Kong).
Wong suggests that to manage costs you purchase your own medical plan, including inpatient and outpatient coverage, while you are healthy. To gauge how much protection you’ll need, look at what a semi-private ward would cost for one to two weeks in your hospital of choice and consider a plan within that range.
2. Make Sure You Plan for the Long Term
If you rely on your financial advisor to help you reach your investment goals, ensure during your annual portfolio review you evaluate your monthly contributions and ask whether they are enough for retirement. Wong suggests those heavily invested in guaranteed funds may find they are under-prepared for retirement and should do more with their investments.
She points out that most people’s retirement planning should assume they could easily spend 30 years in retirement. With that lengthy spell in mind, she says some people, especially those that are young, could consider other asset classes or possibly higher risk depending on their risk appetite and financial situation.
3. Enhance Your Life and Health Cover When Your Family is Young
If you already have life insurance for your spouse, think about increasing coverage once your baby arrives. With a young family you have the additional worry of providing for your children up until they are at least 18 and finish secondary school, or beyond through tertiary education. In addition to life/term insurance, enhanced coverage should also include income protection, as you may be unable to continue working should you become disabled in the future.
4. Buy Term and Invest the Difference
One possible investment approach is to “buy term and invest the difference,” which may suit you depending on available income and how you want to invest your leftover savings.
There are plenty of options to consider for retirement and protection. Term insurance is a great option, says Wong, particularly when you are starting a family, as you can pay the lowest premium for the greatest protection and invest the rest of your money. Other possible options include mutual funds and investment-linked assurance plans. Whichever you choose, remember that planning early can mean you benefit more from compound interest.
If you are risk averse or very close to retirement, this volatility may not be right for you. Choosing a dividend participating policy that offers guaranteed payments may be a better option.
5. Take Ownership of Your Retirement Planning
While many people claim to have your best interests at heart, only you really do. No one is in a better position to understand your financial needs and goals, so become proactive about managing your finances rather than reactive and don’t jump from investment to investment based on partial knowledge gleaned from newspaper headlines and “hot tips”. Be proactive by doing the research necessary to know you have made the right decision. Equip yourself with the information you need to make informed decisions about what services and products you need, or don’t need. Wong agrees: “Financial advisors are an aide; investors should take responsibility for their plans.” She spends time with her clients teaching them how to use the company’s website so that customers are not solely dependent on her for information.
1Hospital Authority Cancer Registry 2009/2010