Save for an early retirement

Dear Mr Tan,

I wish to save now for an early retirement. I am in my late twenties. How much should I save each month? Should I buy a life insurance policy? What is your advice?

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REPLY:

Most life insurance policies has a high upfront charge, that is used to pay commission to the insurance agent. After deducing the charges, the policy will give a negative return for 10 years or longer. After that, you may get a modest return, but it is quite low.

Due to the high upfront cost, you are locked into the policy for many years, even if you are unhappy with the low return. You can only get out of the policy by taking a loss.

It is better for you to save and invest in a fund that has the following features:

* low upfront cost (less than 1.5%)
* low annual fees (less than 1.5%)
* flexibility to change your regular savings
* flexibility to change your fund

You can buy your insurance protection separately through a low cost term insurance.

You can read more about it in the FAQ on this webpage.