Annuity or Savings Plan?

Investopedia.com said something very true, which is that most of us hope to live until a ripe old age, but longevity can have perils. Among them is the risk of outliving your money. I don’t know about you, but I think my money should outlive me, not the other way around. A good way to ensure that there is money coming in when we get older is to invest in an annuity or a savings plan.

An annuity is a contract with an insurer whereby you agree to pay the company a certain amount, either in a lump sum or through installments. In turn, the company makes a lump sum or series of payments to you at some future date. Sometimes those payments last for a specific time period like 10 years but annuities also offer lifetime disbursements. It is a great safety net for when we get older.

A savings plan is a flexible, affordable retirement investment plan which allows you to accumulate cash for long-term needs. The plan's maturity date should be between 50-70 years and at that time, you can get a tax-free lump sum and invest the remainder. The interest accumulated on this plan is very encouraging to say the least. The returns are even better if left until 60+ years.

Both options are key elements in retirement planning because they allow you to contribute toward your future cash flows. These plans can be subscribed to through some commercial banks and most insurance companies. The signup process is short and the agents are usually very helpful and knowledgeable. An annuity or a savings plan is beneficial even before retirement age because a percentage of the annual contribution is deductible for tax purposes. Isn’t that great? 

If you haven’t done so, I would definitely recommend that you put one or both of these plans in place. Your future self will thank you later.

Income Tax Computations

This post is not the typical money management topic, however a friend requested it so here goes. DISCLAIMER: This information is not meant to supersede the directives of the Ministry of Finance. I just wanted to shed a little light on the basics of the computation since most persons I know have some challenge with it.

Income Tax (PAYE) should be paid based on the gross annual earnings of an individual. It is to be deducted and remitted monthly by the employer and in the subsequent year, income earners have the opportunity to submit a tax return. Persons with multiple sources of income and those who would have eligible deductions should file a return. You do not need to submit a tax return if:

1. You earn less than the yearly personal allowance (now $72,000.00)

2. You only earn emolument income

Noteworthy deductions:

• Registered Deed of Covenants – up to 15% of your annual income
• Tertiary Expenses – up to $60,000.00 per household for foreign tertiary expenses
• First time home ownership – joint or single deduction up to $25,000.00
•  CNG Kit Installations – 25% of the cost up to $10,000.00
• Tax incentive savings plans or annuity payments - 25% contributions.

Simply put, the calculation determines how much taxes you should have paid based on earnings and other deductions like those listed above. Then, the tax that you actually paid is subtracted to arrive at the payable or refundable position. Of course, the latter is preferred 😊 however if you need to pay, please do so promptly because interest and penalties will accrue.

This post is a brief summary of the main points so if there are any questions or further explanation needed, please contact me here or follow the link to the official instructions from Inland Revenue Division here.

General Saving/Spending Tips

We are surrounded by information that suggests one way or another for money to be spent or saved or whatever. Sometimes we may not be open to advice on managing money but great tips can go a long way once practiced diligently. Here are some tips for different areas relating to money. I believe knowledge is power so the more we know the more we can make wiser choices.