Investment Information

One of the best business registration firm and corporate solutions specialist in Singapore – Rikvin assured that Singapore’s Personal Income Tax structure is one of the friendliest and most competitive in the world. The tax year is from 1 January to 31 December in each calendar year and income is assessed on a preceding year basis. Singapore adopts a progressive personal tax rates, relative to an individual’s amount of income.

Below are some of the relevant factors of Singapore income tax:

1. The amount of income tax that you have to pay depends on your tax residency in Singapore. The taxes for residents are different from non-residents.
2. Top marginal resident tax rate of 20% kicks in at S$ 320,000 of taxable income.
3. Non-residents are taxed at the flat rate of 15% or the resident rates whichever results in a higher tax amount.
4. In general, all remuneration arising from an employment under which duties are performed in Singapore would be fully taxable irrespective of where the funds are made available to you
5. Besides salaries and bonuses, perquisites such as housing and stock options will form part of your taxable employment income.

It is mandatory under the law of Singapore government to file Singapore personal income tax. IRAS diligently enforces the requirements relating to the filing of the personal tax and convincing both tax residents and non-residents to comply in order to avoid paying fines and/or court prosecution.

For those who will fail to abide with the law, the following consequences should apply:

1. If the tax is not paid by the due date, a 5% penalty and 1% additional penalty per month up to 12% (total of 17%) will be imposed.
2. Additional penalty of 1% up to a maximum of 12% on any unpaid tax for each month that the tax remains unpaid;
3. IRAS may direct the taxpayer’s employer to deduct any unpaid tax from his salary;
4. IRAS may direct the taxpayer’s banks, tenants or any third parties to pay any unpaid tax to IRAS from any money held for the taxpayer or due to him;
5. IRAS may restrict the taxpayer from leaving Singapore
6. IRAS may take legal actions against the taxpayer.

Finally, we have outlined some Tips on ways to save tax

1. Tax residents are eligible for tax reliefs that can be offset against the assessable income. You can get reliefs for wife support, child maintenance etc.
2. You may claim expenses incurred against your employment income; enjoy tax deductions for approved charitable donations.
3. Under the Not Ordinarily Resident (NOR) Scheme, you can enjoy either Time Apportionment of Singapore employment income or Tax Exemption of Employer’s contributions to Overseas Pension Fund, or both.
4. If you work for a foreign employer and need to travel overseas in the course of work, you may enjoy time apportionment of employment income under the Area Representative Scheme.
5. With the Avoidance of Double Taxation Treaties signed by Singapore, your income may not be taxed twice in Singapore and your home country. (For more information on countries which have Avoidance of Double Taxation Treaties with Singapore, see List of DTA Treaties)

Rikvin services team consists of a group of professionals who have in depth knowledge, legal, financial, tax, Singapore personal income tax, and corporate and regulatory frameworks. They guide you through every step, respond promptly, and closely follow your application progress to ensure that your case is presented in the best possible manner that it deserves.

Everyone isn’t going to save the same amount of money for their retirement. This is because everyone makes different amounts, and will want to live on different amounts when they are retired. So how do you know how much to save? Well, one way that makes things simple is to look at the percentage of income to save for retirement, as this number can be used for everyone. This is a good way to get started saving and make a realistic plan, however, eventually you’ll want to further evaluate how much you actually need to save total to make sure that you will, in fact, have enough.

In terms of a percentage plan, however, ten percent is a great place to start. To be more precise, if your income allows you, you should hopefully be saving twenty percent of your income each month, ten percent of that can go towards your other savings goals (down payment on a home, a new car, college tuition, etc) and then the other ten percent for retirement.

You can invest these savings in a variety of ways. You could always simply save it in a normal savings account, but with less than 3% in returns, you’re probably not even going to beat inflation this way. Other options include 401k plans through your employer, or IRAs (independent retirement accounts) that you can set up with almost any financial company. These vehicles allow you to invest your savings in a variety of ways that will earn you returns and further increase your savings.

No matter how much it is you’re actually able to save, the point is to save. Too many people aren’t saving for this at all, and end up reaching retirement age without actually being able to stop working. While social security will hopefully still be around, it’s really not going to be enough to live a comfortable life. Make sure you put aside a percentage of income to save for retirement each month, and you’ll be ahead of most of the people around you.

Can you withdraw money from your 401(k) while you are still employed? Not everyone should; not everyone can. However, if you can, it may mean that you can effectively implement part of your retirement income plan before you retire.

If your 401(k) plan permits it, you can take an in-service withdrawal and redirect some of your 401(k) funds into another investment vehicle that offers you income guarantees.

The reasons why. A non-hardship withdrawal can provide you with early access to a portion of your retirement assets, freeing you to manage them as you wish. If the mix of funds in your 401(k) have taken a big hit lately, you might be wondering how some of those assets would do in other kinds of investments, especially those with less risk exposure.

This very question has led some people to withdraw assets from qualified retirement plans such as 401(k)s and direct them into non-qualified annuities that they own independently. A non-qualified annuity contract may be structured to provide tax-deferred growth for retirement, or immediate income. You aren’t even required to take distributions at age 70½ (though your contributions aren’t tax deductible.) The annuity may be fixed or variable. Another nice feature: non-qualified annuities do not have annual contribution limits. (There are annual contribution limits on qualified annuities held within IRAs and employer-sponsored retirement plans.)1

Today, you can find popular non-qualified annuity investments that will allow you to take advantage of stock market gains while protecting your principal against stock market losses. Many of them offer the option of guaranteed lifelong income payments. Some of these annuities may let you allocate assets across a mix of stocks, bonds and funds through subaccounts.2

With features like these, you may be interested in these kinds of investments if you are approaching retirement age.

The 72(t) strategy to avoid the early withdrawal penalty. If you are still working and pull money out of your 401(k) before age 59½, you will almost certainly pay a 10% early withdrawal penalty plus income taxes on the money you take out.3 But you might be able to make early withdrawals with the help of IRS Rule 72(t).

Rule 72(t), based on life expectancy, lets you schedule fixed income withdrawals for five years or until you reach 59-1/2, whichever is longer.4 It lets you receive fixed, equal payments according to IRS calculations.

First things first: make sure you can do this. Talk with your employee benefits officer at work, and see that the Summary Plan Description (SPD) permits non-hardship withdrawals. Talk with your financial or tax advisor to make sure it is an appropriate move for you given your overall financial plan. If you know you’ll need more retirement income, there can be real merit to reinvesting early withdrawals from a 401(k) in vehicles that generate it.

Is it right that playing stocks can be a source of daily income? Investors may have a perception that playing stocks can be used to support their family needs beside as an investment. Playing stocks can indeed be used as the main career with a specific reason.

A stock price index that rises continuously from year to year can be used as a place to invest. If the stock rises up to 20 percent per year, then investors will enjoy the investment returns of about 10 percent and about 10 percent is used for daily life. Then, how to can get these benefits? There are several standards that must be used or considered by the investors so they can meet their daily lives with playing stocks.

The risk of stock investment

First, it must be realized that playing shares have a pretty big risk. For those of you who have not mastered the stock market should begin with small caps stock. The share prices on the Stock Exchange are fluctuating, it could go up or down. Therefore, investors should be very careful in playing stocks. Knowing when to buy and when to sell.

Not greedy

Second, when playing stocks, investors do not need to be greedy and emotional. That is, investors do not need to seek profits or capital gains that are quite high. When getting profit of 20 percent to 25 percent, investor should sell shares directly. If the stock falls back, then conducting to buy back. Investors do not need to wait until gaining a high profit, for example up to 100 percent, due to the great benefit is usually required a long-term game.

After selling the shares mentioned above, then move to the stock who seems haven’t rose yet. If the new shares bought have risen about 25 percent, investors should get out of the stock. The second perception is also giving the sense that investors should be consistent with the method used on the large of profit percentage.

Third, investors should not invest very large money in fluctuating stock or try with penny stock picks. Usually, a fluctuated stock has been managed by very smart investors. That means, investors should conduct an investigation and understanding about the fluctuated stocks.

Detailed information

Fourth, investors should have complete information on all shares held and traded. Investors must be willing to ask questions and read the news from newspapers or from the expert’s analysis in which investor making transactions. More complete information will makes the investor easy to make a decision.

For information, investors should much discuss about the stock to the experts who analyze stocks. Investors should not rely on information that is very simple. Information of the stocks can be found from newspapers or electronic media.

Fifth, the investors must have a method of analysis so that investors can obtain the expected profit. Investors can not use a long-term investment method because it can’t be used to meets the daily needs. They should use fundamental approaches and technical approaches to analyse the market. Both of these methods must be used in order to obtain the expected profit.

Sixth, investors should use term known as 4C, which is cool, calm, confident, and consistent. Thus we will have a good planning in investing and getting a consistent profit so we can use it as our fixed income.

After we retire, most people can be losing our primary source of normal income: our paychecks. But, we will still want to secure a regular source of income to pay our day-to-day living expenses. Income in retirement can return from a variety of sources: pensions from outlined-profit retirement plans and Social Security are two of the most common. But, as 401(k) plans and other defined contribution plans have become prevalent within the workplace, several retirees find themselves with a substantial nest egg that they need to take a position in such a manner that has income.

Investing in bonds remains one in every of the safest ways that to come up with income. If you hold your bond until maturity, you may get your principal back, provided that the entity issuing the bond — a non-public company or a government entity — does not default. And in the meantime you will be paid interest on a regular basis (ordinarily, twice a year).

A bond is a loan: when you get a bond, you’re lending the issuing agency money. All bonds are issued with established maturity dates — the date on that the issuing agency promises to come back your principal to you. The maturity date can be one year, 3 years, 10 years, or longer. Additionally, all bonds pay interest at a collection rate — called the “coupon rate.” Bonds with longer maturities generally pay higher coupons. However, if you plan to hold your bonds until maturity, purchasing longer-term bonds ties up your money for extended periods of time.

Bonds issued by corporations — referred to as “corporate bonds” — generally pay higher coupons than government-issued bonds, as a result of the chance of default is greater. It’s typically best to stay with high-quality firms, whose bonds are thought of trustworthy (and are thus known as “investment-grade bonds”). Smaller, less-established corporations conjointly issue bonds, however as a result of of the upper risk of default, these bonds pay even higher coupons. Sometimes, these high-risk bonds are known as “junk bonds.”

The U.S. government problems bonds through the Treasury Department: these bonds, simply called Treasuries, are among the safest investments you can create, however they pay low interest. State and local governments conjointly issue bonds, known as municipal bonds or “munis”; interest income from munis is federally tax-exempt in the United States.

One among the largest risks that you take in purchasing bonds is inflation risk. To Illustrate you buy a corporate bond for $ten,000, with a maturity of ten years, paying a 3.five p.c coupon rate. Each year, you’ll receive interest payments totaling $350, and at the tip of ten years you may get your $10,000 back. But, ten years may be a long time. Inflation could erode the worth of your annual $350 payments. Inflation also tends to drive up coupon rates offered by new bond issues, so when 5 years, new corporate bonds may be providing 5.five p.c interest. You’ll be able to continuously sell your 3.5 p.c bond in the secondary market and buy a brand new bond paying 5.5 p.c, however nobody is going to wish to pay full value for your recent bond; you will get something less than $ten,000 for it.

One technique to combat this risk, notably if you’re getting Treasuries, is named “laddering.” Purchase a series of bonds at completely different maturities: one-year, three-year, 5-year, and 10-year, say. As the years pass by and your bonds mature, purchase new bonds, at the prevailing coupon rate, with the principal that’s came to you. This manner, you diversify your risk to allow for fluctuations in inflation, and in bond coupon rates.

Retirees who are interested in bonds should put together a diversified portfolio of treasuries and corporates, adding municipal bonds if there are sufficient resources. Gauge how much interest you’ll be earning annually on your bond portfolio, and aim to hold your bonds to maturity. If you enjoy “taking part in the market” and have some talent in choosing investments, you can set a small quantity of cash aside for trading bonds in the secondary markets, but it’s best to play it safe with the bulk of your nest egg.

Different types of foreign exchange or forex options on hand help equity and futures traders gain an access to the currency option market. Equity traders can make use of exchange-traded options to make great profits while futures traders can capitalize on currency future options. Over-the-counter (OTC) options and binary options are two other forms of currency option trading. Each and every form of foreign exchange options is intended for hedging as well as speculation. You can avail education and research over the internet to learn how to trade options in a profitable manner.

Forex options are available to the trader with a web-based stock brokerage account facilitated for trading options. Exchange-traded options or ETFs can be traded in the identical fashion as equity options. Comprehensive education is extended by the International Securities Exchange or ISE by means of a website dedicated to currency options. At this site, trading tools and on-line dealing are offered free of charge to the trader. The NASDAQ also owns a website with updated news events, analyses and informative resources. Both the aforesaid exchanges provide ETF trading with loads of assistance for new and veteran traders.

The Chicago Mercantile Exchange, owned by the CME Group, is the biggest regulated and most diverse derivatives marketplace in the world. Currency futures options are heftily traded here and accessible to the trader with a futures trading account. Futures option trading is usually more complex and may not be well suited for the beginners. Enlightening materials are on offer via the CME Group. However, an in-depth understanding of such options derivatives must be gained before venturing into this extremely cutthroat and complicated market.

Over-the-counter forex options are not provided by the brokers in the USA, but they are in great demand in several other nations. These options are traded much similar to spot foreign exchange and are able to be traded within the same account. The comparative easiness of managing OTC options makes them an appropriate pick for hedging spot forex positions.

Binary option trading is the least difficult variety of trading currency options and is apposite for beginners. Brokerage firms over the internet that are expert in binary options give assistance in the form of enlightening resources and practice accounts. Binary trading is the most straightforward to educate yourself on, and just a petite investment is needed to create an account.

Numerous alternatives are on hand in the currency option market and the trader must be well-versed in FX option trading on the whole. The capability to trade the options effectively is dependent upon the trader’s expertise in interpreting the underlying asset. Fundamental as well as technical analysis techniques must be employed to predict future movements in spot price before putting an option trade.

Did you ever wonder why your EMI is generally restricted to 30% or 40% of your monthly income? Here is why.Salary details, qualifications, employer/business, years of experience, growth prospects, alternate employment prospects and sources of other income, if any, all are aspects that determine the amount of loan you are eligible for.

Generally, the repayment schedule is worked out in a manner that allows not more than about 40% of your monthly gross income to be repaid as EMI. It is restricted to 30 % or 40% keeping the following factors in mind:

10% of your income is spent on other loans, if you have any or if you avail one in the future.

25% of your income gets deducted by way of statutory deductions and for investment purposes.

25% of your income is generally spent to meet your monthly expenses.

This leaves back 40%, which is taken as your repayment capacity for this loan.
For self-employed applicants, profit is the benchmark that determines loan value. The longer the time frame for repaying the loan the lower the EMI and this also means you can opt for a larger loan amount. The loan amount you are eligible for is also dependent on other factors like the company you are employed with, the location of your residence and your credit history.

A long term loan like a home loan is a debt that is part of your budget every month. If you invest too much into it, there might not be adequate funds to manage a huge list of other expenses that will tend to accumulate with time. For eg. You need to make allowances for future expenses like education expenses for children, emergency funds for a job loss or the loss of one income in a situation where two people have taken a joint loan.

The might be spikes in interest rates. In such a scenario usually banks will increase the loan tenure in order not to put the loan taker in a tight spot by increasing his EMI. In such a scenario if you have adequate funds in hand you could prepay at intervals, allowing scope for closing your loan early.

Trading in stocks can be a lucrative venture for you if you are searching to earn off your investments. In the old days, prior to businesses to become associated with equity funding, profitable share investing was not very as fast. The dawn of the new age has led to the broad spread purchasing and selling of stocks to earn great earnings. Penny stock trading is really a relatively new form of investing which has a separate twist to it. Due to the high marketplace volatility of this form of trading, some traders shy away from it. In stating that, you can find also many savvy traders who make quality gains regularly from this form of investing, mainly because they placed all their focus into watching the market and keeping their fingers on the pulse.

Can I Earn profits From Penny Share Trading?

The question is, if these shares are worth so little to buy, how is it prospective to produce significant gains?. The answer is yes, it’s definitely potential to generate vast gains from such cheaper stock, small increases in rate could lead to massive gains, on the other hand you’ll would like to rotate your share constantly above the temporary. Nevertheless, it’s easier said compared to done because it is crucial to follow several aspects to be able to attain profit off the proper stock at the right time.

Make Easy Decisions

In general, penny stock investing need to be viewed as a short-term investment chance, unlike more traditional stocks where it is good practice to hold shares over the longer term. Unlike the traditional stock market, dealing in penny shares involves making quick decisions that don’t involve any emotions. Acting swiftly and making informed decisions on the spot is imperative in this form of trading.

If you’re the kind of person who trades emotionally and cringes at sudden stock fluctuations, you may quite well be better off giving penny share investing a miss. Even so if you think you could keep up with the easy pace of the penny stock marketplace, then you’re bound to earn a considerable volume of revenue.

Conduct Thorough Exploration

Prior to you could even think of purchasing penny stocks, you have to conduct thorough exploration to be able to look at what firm has the possible to do quite well. Never be tempted to purchase penny shares simply because they are discounted, investigate the organization and make decisions dependant on where you think they are heading in the future, looking at past performance is something to think about. As penny shares are very short term, the purchasing and selling cycle might be really simple and you need to be on guard to make simple decisions.

Do Several Further Research

Though penny shares are available at minimal entry rates, the market in nowhere near becoming saturated. There is always a ready supply of new penny stocks accessible as there’s always companies exiting and entering the penny share market. Due to this reason alone, it is imperative for penny traders to keep their fingers on the pulse and stay completely concentrated. To become a successful penny share trader, you should have to constantly exploration your trades and gather all of the news you can. There are the proper information through two major techniques..

Stock Newsletters

You’ll find quite a lot of newsletters accessible which will offer quality info related to penny stocks and their related firms. This may give you insight into what the current past of the organization looks like and where it is headed in the next few months. Unfortunately the newsletter won’t be capable to inform you possible profitability, however they are able to certainly be a great guide for basing decisions on. You’ve to utilize your knowledge and intuition to judge the possible profitability of the business.

Online Resources

You’ll find numerous quality investing websites online that will provide you with several great data prior to penny share trading. Just make sure that it is a credible website that clearly states all its terms and conditions. Do your due diligence before deciding on an online broker as well, research them thoroughly to ensure they’re not ripping you of by charging exhorbitant commission fees for purchasing and selling your shares. So only utilize your head and check whether the website is a safe option to invest through.

SAVING ENOUGH BY age 65 to ensure that you can maintain your standard of living through a long retirement has become increasingly difficult. Consider just this one fact. Current retirees receive close to 70% of their retirement income from Social Security and defined-benefit pension plans, while today’s workers will probably only receive one-third of their retirement income from those sources (Source: Ibbotson Associates, 2007).

While that means you’ll be responsible for a significant portion of your retirement income, Social Security and defined-benefit plans are a valuable component of that income. For years, we’ve heard that Social Security benefits are modest at best and should not be counted on as our only source of retirement income. Sometimes, it’s even suggested to completely forget about Social Security benefits when planning for retirement, because changes in the system will probably be necessary when the huge number of baby boomers start retiring. But the fact is that Social Security benefits are a very valuable benefit, especially since benefits are adjusted for inflation annually.

For instance, the maximum Social Security benefit in 2008 for workers retiring at full retirement age is $2,185 monthly. While that might not seem like that much money, consider how much you’d need to accumulate to generate that monthly income. A 66- year-old male would have to pay approximately $377,000 for an annuity that would pay $2,165 per month for life with annual inflation adjustments, while a 66-year-old woman would pay approximately $421,000 (Source: Vanguard, 2008)

While only 21% of the work force is currently covered by a defined-benefit plan, it is a valuable benefit if you are covered by one. Defined-benefit plans typically don’t adjust your benefits for inflation, but they will pay a benefit for your life or the joint lives of you and your spouse, depending on the option you choose.

But despite the value of Social Security and defined-benefit plans, you will probably be responsible for the majority of your retirement income, whether you obtain that income from 401(k) plans, individual retirement accounts (iras), or taxable investments. Before retiring, you’ll want to ensure that you have sufficient savings to support yourself for 20, 30, or even 40 years, depending on your age when you retire.

Deciding how much you need to accumulate by retirement age is difficult, since so many of the variables that

Go into that calculation are uncertain. To come up with an estimate, you need to make assumptions about your life expectancy, how much income you’ll need during retirement, how much you’ll receive from other retirement sources, when you will retire, your long-term rate of return on investments, future inflation, and future income tax rates. If your estimates are inaccurate, you could end up with little in the way of income in the later years of your life.

Because of all the uncertainty, it is typically recommended that you only withdraw modest amounts from your retirement savings, especially in the early years of your retirement. A common rule of thumb is to withdraw no more than 4% annually from your retirement funds. So if you want to withdraw $75,000 annually from your retirement assets, you need to accumulate $1,875,000 by retirement age.

But that 4% figure is based on the value of your investments when you are ready to make the withdrawal and is not

A static number based on your savings when you retire. During periods of market volatility, your asset balances can fluctuate considerably, causing significant changes in the recommended withdrawal amounts. Market fluctuations are especially dangerous during the early years of your retirement, when it can be difficult to make up for market declines while you are withdrawing money from those reduced balances. If you aren’t able to overcome market declines, you could be forced to drastically change your retirement plans.

How can you help to ensure that your retirement savings will last a lifetime? Consider these points:

4 ANNUITIZE A PORTION OF YOUR RETIREMENT ASSETS. This will provide you with a definite monthly income for the rest of your life. Annuities can be purchased with or without inflation protection. Since an annuity is paid for the rest of your life, it protects you from outliving your savings and from the risk that lower-than-expected investment returns will reduce your portfolio. Typically, the benefits will end once you (and your spouse if you elect joint benefits) die, although some annuities will pay a lump sum or periodic benefit to beneficiaries. Thus, it is important to understand that if you (and your spouse if you elect joint benefits) die at a relatively young age, your benefits may not equal the purchase price of the annuity. While you probably do not want to use all of your retirement assets to purchase an annuity, you may want to use enough to purchase an annuity that will cover your regular monthly expenses.

* WITHDRAW CONSERVATIVE AMOUNTS FROM YOUR RETIREMENT ASSETS. If you limit your withdrawals to 3% or 4% of your balance, the assets should last for decades. At least annually, reassess your retirement assets and make sure that your withdrawals are reasonable based on your current balances. Market fluctuations can cause your asset allocation to get out of line, so you should rebalance at least annually. Even during retirement, you should allocate your assets among a variety of investment types, ensuring that your allocation is appropriate for your specific situation.

* MAXIMIZE OTHER SOURCES OF INCOME. While Social Security benefits and defined-benefit plan benefits will likely only provide moderate income, don’t totally discount these income sources. Delay Social Security benefits as long as possible, until age 70, to maximize the benefits you’ll receive. These benefits are also adjusted annually for inflation. While defined-benefit plans are becoming increasingly rare, make sure you apply for benefits if you

Are covered.

* LOOK FOR OTHER WAYS DESIGNED TO REMOVE RISK FROM YOUR RETIREMENT INVESTMENTS. There are a variety of portfolio strategies that can help cushion the impact of market fluctuations. If your portfolio is properly diversified,

Downturns in one asset class can be offset to at least some extent by the performance of other assets in your portfolio. Diversification does not assure a profit or protect against loss.

* REACH RETIREMENT WITH MINIMAL EXPENSES. Cut back on your living expenses before retirement, and try to enter retirement with as few debts as possible. Mortgage and consumer debt payments consume a significant portion of most people’s income. Pay off those debts by retirement, and you can significantly reduce your cost of living. This

Can have a two-fold impact on your retirement. First, it frees up money to set aside for retirement. Second, you get

Used to a lower standard of living, which should also reduce the cost of your retirement lifestyle.

* WORK AS LONG AS POSSIBLE. While there is something very alluring about totally retiring from the work force, the reality is that a long retirement is very costly. Working a few more years can go a long way in helping fund your retirement. Those years are typically your highest earning years, so hopefully you’ll save significant sums during that period. Also, every year you work is one year you don’t have to support yourself with your retirement savings.

Once you are ready to retire, try to work at least part-time during the early years of your retirement. That doesn’t mean you have to stay at your current job. You can find a totally different job or start a business. Even modest earnings can help significantly with retirement expenses.

Every retiree wants to live a long and happy life after retirement. Yet, that is only possible if one is able to outlive his or her assets. Because of this, many people invest in 401k plans, stocks, bonds, IRAs, and CD accounts before they retire. The underlying problem, however, is that those investment options are not able to protect them from inflation. In this article, I will examine Swiss annuities, an investment that has been recently admired by many financial professionals for its safety, inflation-protection features, privacy, and tax-friendliness.

A regular annuity can be defined as an insurance contract, by which an insurance company has to annually pay a fixed amount of capital, plus profits, to the annuitant or policy holder. These annuities can also be customized to provide payments to the holder for as long as the insured person lives. This is ideal for retirees who expect to outlast their savings. However, there is a major problem with this structure. As time goes by, inflation erodes the fixed payments’ buying power. Annuities protect investors against stock market and other business risks, but they do not protect them against inflation. The following may help you understand the effect of inflation on an annuity.

Take, for example, a 65-year-old retiree who has paid an initial premium and purchased an annuity that would generate him an income of $12,000 annually ($1,000 every month). Consider that the annual inflation rate continues to grow at 4% every year. If inflation continues to grow as it has historically, the purchasing power of that $1,000 would erode to $675 when he reaches the age of 75. And, when he turns 85, the monthly income would be equivalent to just $456.

This example gives a clear demonstration of how a regular annuity can only provide partial protection for a retiree who wants to protect his/her future income. Even though the stream of income continues, it is significantly devalued.

However, there are inflation-protected annuities (IPAs), sometimes referred to as “real annuities”, that offer protection against inflation. Such annuities are far better than regular annuities, because they offer a rate of return that is “real”, which means that it is higher than the inflation rate. These annuities are Swiss annuities – annuities denominated in Swiss francs, which is one of the world’s most stable currencies.

When you are shopping for Swiss annuities, make sure that the company you intend to deal with provides at least the following four options: Lifetime Annuity, Guaranteed Years/ Lifetime Annuity, and Joint and Survivor Annuity/ Guaranteed Years. Lifetime Annuity payments are provided for a lifetime. Guaranteed Years/Lifetime Annuity payments are also provided for a lifetime, and there is an additional guarantee of payments to be made for a fixed number of years. If the annuitant dies before reaching the required number of years, the payments are provided to a beneficiary. With the Joint and Survivor Annuity/ Guaranteed Years option, the payments are provided to the sole/joint annuitant for a lifetime, along with an additional guarantee of making payments for a minimal number of years. Upon the death of both annuitants, the beneficiary is provided with payments if the fixed number of years has not been reached.

Inflation Protected Annuities are still not popular among retirees and investors due to lack of understanding and information. We encourage you to do your own research and learn how Swiss annuities can help you protect your future.