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 on them.
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 the most suitable for retirement?
I'm personally not at the stage to do legacy planning.
To be honest, my biggest worry is to NOT building enough retirement funds for myself and NOT educating my son correctly on money.
With regards to leaving a ton of money for him, I'm not that keen. This is Warren Buffett's advice:
“You should leave your children enough so they can do anything, but not enough so they can do nothing.”
That means only some money for legacy.
Not a multi-million gift that will kill the hunger of your child to fight for his/her own success.
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.
PRUgolden retirement is one example. Manulife RetireReady Plus is one example.
This is typically what you will get with the right plan.
Income is guaranteed and properly structured to provide you monthly.
Kind-of boosting your income safety net.
That is why you get an insurance plan in the first place.
PS: This is something that you may really like:
Last updated on January 25th, 2019 at 11:32 pm