For the purposes of this article, I will be using the definition of retirement as per wikipedia : withdrawal from one's position or occupation or from one's active working life.
I came across a Straits Times Article with headlines “Property no longer the best retirement investment in S'pore: DBS report”. You may read more here
The release of the research coincided with my recent discussion with a friend on retirement planning, we touched on the following possibilities:
- Purchasing
investment linked insurance policy
- Investing
directly into funds
- Buying
properties.
Most insurance agents will tell you that
they can offer you products that can generate higher returns than your current
investment portfolio. Most personal financial planners will be able to show you
financial products that can generate high returns too and the same can be said
for property agents.
As with most things in life, there is no black and white answer (which is great otherwise life would be boring!). We concluded that each has its own merits:
- Investment
linked policies provides an avenue for people with little or no financial
background a chance to gain higher returns without the need to actively monitor
the portfolio.
- Direct
investments into funds are great for those are know what to invest in and have
the discipline to constantly monitor the market.
- Properties
provides stability and constant stream of rental income.
An important thing is to do proper needs
based analysis with a clear investment horizon and not put all your eggs in one
basket (diversify).
The DBS report compared returns on buying a
second property to various other investments and found that it yields lowest returns
amongst eight asset classes. High taxes (e.g. ABSD) was cited as a factor that
reduced the returns. One could technically buy a second property as a family
unit under another family members name and enjoy a lower tax rate. Hence, do your own research / seek your own advice and interpret the research findings with a pinch of salt. Always think: whose interests does the research seek to serve? (hint: it may not be you, the customer)
How are you planning your retirement? What are
your thoughts on purchasing properties in Singapore for investment? Leave your comments below!