Do not buy insurance savings plan to save for retirement. Save 300k by reading this!

There are many endowment plans and single premium plan marketed by insurance companies. One of them works this way.

You pay $1M upfront and 5 years (60 months) later, you will receive income for life. The income is about 42k a year. After 5 years, your principal is guaranteed. Apparently, it is selling like hot cakes as people like guaranteed products.

To me it is plain silly because there are like a billion alternative investments equally safe and more liquid.

For example, you can buy a portfolio of Unit Trust. First State Dividend Advantage, Schroder Asian Income, First State Bridge, Schroder Asian Income etc. They are not the best but surely can generate 5% pa or more and pays you dividend straight away upon investing.

Or simply invest in infinity series world equity funds. Expense ratio of 0.4% only. 

You can buy 4 different bonds of different tenure. For example SPH 3.2 2030, Wingtai 3.68 2030. Or today's IPO Shangril 3.5% 2030 bond. 

If you still think it is risky, then buy STI ETF! It pays you at least 3% a year of dividends! I do not think the 3 banks + Singtel will go belly up in 10 years since they form majority of the STI ETF.

After 10 years, the insurance plan would have paid you 42k x 5 years = 210k + 1M capital.

STI returns assuming 3% dividend and 2% capital gains (cash out) would have become 1.5M after 10 years. Similar so for your Unit Trust portfolio, assuming 5% dividends and 0 capital appreciation.

Your SPH + Wingtai + Shangrila bond portfolio would have become 1.35M assuming your coupons are reinvested at 0%. I am not even talking about decent perps (since your insurance is in perpetuity right?!) like SPH 4.5 perp, UBS 4.85 perp, Ascott 3.88 perp, Mapletree 3.95 perp, wingtai 4.48 perp, FPL 4.38 perp.

Why buy something, receive guaranteed negative returns for first 5 years, poor liquidity, pay interest for 5 years with no cash flow return (banks provide financing) and then get sub par returns thereafter?

If you are supporting your insurance agent, relationship managers, IFAs because of their excellent service, then give them money directly instead of compromising your returns! 

Effectively, you are foregoing almost 300k or 30% of your returns over 10 years!

Are their service and advice worth 300k? They probably make 10k commission from your 1M only. If they are from banks, the revenue works out to be 2k commission to them. Please, give them 11k from your pocket instead. Everyone will be happier.