I was at NTUC Fairprice recently and the PRU team there was marketing the PRUwealth plan. I understand that it is their champion solution for retail clients.
Even banks are distributing this plan. You may have heard from your banker too.
Key Features of Prudential PRUwealth
- Cash value: Yes
- Cash withdrawal benefits: Yes
- Policy continuity with joint ownership: Yes
Optional Add-on Riders
- Early Stage Crisis Waiver
- Crisis Waiver III
- Payer Security Plus
Click here to view it from Prudential website
Apparently, it was pitched as a retirement plan.
I don't agree on it and this post is to suggest my personal approach. I'll also draw a comparison with the Manulife ReadyBuilder plan which is very similar.
How does the PRUwealth and Manulife ReadyBuilder work?
Both these plans are SUPER LONG TERM endowment plans. Usually endowment plans are 15y/20y/25y but PRUwealth is until age 100 while Manulife ReadyBuilder is until age 120!
First unique way you can use them: Partial withdrawals
Because they are long term endowment plans, there is a design to do allow you to do partial withdrawals if you have cash values in such a plan. Kind-of like a bank account.
If you want to fund a year long travel or second property, you can rely on savings in these plans.
But any withdrawal will reduce the long term cash value of the plan. This part is quite opaque as to how much the impact is.
It is not really the tool to plan out passive income cashflow for your retirement years.
For example, you want to get passive cashflow of $1,000/mth when you are aged 60 to 80 for retirement purposes. These plans are not suitable.
Second unique way you can use them: Legacy gift
Both these plans have a joint-life feature. Which means you can jointly apply with your spouse or child to pass on as a gift.
PRUwealth's illustration is for husband-wife to jointly owning the plan.
Manulife Retirebuilder illustration is for a parent-child jointly owning the policy
This is where these plans really deliver value.
The longer you own the policy, the more spectacular the return on invested capital.
Take a look at this, $30,000 becomes more than $281,000 potentially.
Or this, $99,962 becomes a staggering $1,925,709! 19x capital!
It is NOT fake.
It is the magic of compounding at 4.75% par fund returns over 60years and 80years.
Hence, it is only when you are using as a legacy gift then yes these plans are your must get vehicles.
Warning: A large portion is non-guaranteed
Be very careful on this part. Or at least how it is presented to you.
My suggestion is to moderate your expectation on the returns if you are buying these plans.
Why PRUwealth and Manulife ReadyBuilder are NOT suitable for retirement cashflow?
My strategy for retirement is to build passive cashflow.
CPF life is one source. Rental income is one source. DIvidends is one source.
And a proper retirement plan is one source.
PRUwealth and Manulife ReadyBuilder are not designed for that.
There are 5 plans in the market that I've identified to serve to provide cashflow to you in retirement.
They are the following (You may click to get the brochures)
1) AIA Retirement Saver III : III is the newest version
2) AVIVA MyRetirement Choice : Choice is the newest version with most flexibility
3) AXA Retire Happy Plus : Plus is the newest version
4) Manulife Retire Ready Plus : Plus is the newest version. Sold frequently in DBS
5) NTUC RevoRetire Retire : Previous version was a different plan name
Read more here 5-best-retirement-plans-that-will-give-you-guaranteed-income
Conclusion and how to get started on retirement planning
PRUwealth and Manulife ReadyBuilder can be a side vehicle to COMPOUND wealth long term.
It should be used to complement the main sources in providing retirement cashflow.
Kind-of boosting your income safety net with an asset that has good compounding factor and flexible.
If you're looking to find out more on retirement planning, contact me below for a preliminary discussion and I'd get in touch with you real soon to make positive changes! See you!
Last updated on September 22nd, 2019 at 12:18 pm