Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Tuesday, 30 June 2015

A 2-Week Trading Tip

I chanced upon this piece of statistics when reading my daily CNBC email.

Inside, there is an excerpt regarding how the US stock market reacted towards bad news such as the potential Greece failure.
The link to the whole news is HERE


What this means is:
1) Should the market (Indexes like S&P500 or Nasdaq) fall 2.4% or more
2) Within 1 trading day - especially after a market-shocking-event
3) It will recover over an average of 14days

Possible Action to Take:
1) Should the market during an intra-day trading period fall more than 2.4%,
2) A possible may be taken where you buy the index and hold it for 14days
3) Upside includes the 2.4% (or more if you bought at a lower point) in 14days

While this short-term opportunity does not occurs frequently, it is always good to have a bonus (or extra) 2.4% return added on top of your annual returns - once a year would be nice!

Disclaimer
The above do not constitute financial advice, it is merely a sharing of my personal investment insight.
Please understand that investment comes with risk and that all investment actions should be taken only after fully considering all risks involved.

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Wednesday, 24 June 2015

CPF LIFE versus Private Annuity Plan

Today's post is on the difference between CPF LIFE versus a Private Annuity Plan.
We took quite a few to do this post because there was a lot to read about Private Annuity Plans and a lot of the plans come with different terms and conditions.
We had spent quite some time to simplify and put them in ways comparable to CPF LIFE.

LINKS
What is CPF LIFE? Click HERE
What is a Life Annuity Plan? Click HERE

Topic CPF LIFE Private Annuity Plan
Interest Returns Guaranteed 4%+1% for your Special & Retirement Account*.Potential yield of up to 4.25% upon maturity (AIA). Highest return we found.
Potential & non-guaranteed returns.
Annuity PaymentDepends on perspectives**1) Fixed monthly payment while you work
2) 1 lump-sum payment
Money Paid toCentral Provident Fund (CPF)Insurance Companies
Duration Distribute money till death 1) Distribute money till death
2) Distribute up to certain years (eg;20 yrs)
Early Death The money that is undistributed to you in your monthly payouts will be given to your beneficiaries upon your death Some policies will allow you to give the undistributed funds to your beneficiaries. However, not all allow this.
Outliving your FundsCPF will continue to distribute to you your monthly income until death.
However, no money will be given to your beneficiaries upon your death
Insurance companies will continue to distribute to you your monthly income until death.
However, no money will be given to your beneficiaries upon your death


*4% interest on Special & Retirement Account, and +1% for first combined $60k of Ordinary Account, Special Account, Medisave Account & Retirement Account.

**Could be 1-lump-sum payment because you are only enrolled into the CPF LIFE plan at age 55.
At age 55, your Retirement Sum is used to pay for your CPF LIFE.
You can also look at it as a monthly payment while you work. Because every month part of your salary is being channelled to the different CPF accounts, and ultimately that money is what forms your CPF LIFE money.

We will be posting about the limitations and disadvantage of using Private Annuity Plans instead of CPF LIFE.
Stay Tune!

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Monday, 22 June 2015

What is a Life Annuity Plan?

What is a Life Annuity Plan?

Definition (quoted from Investopedia)













Simpler Definition
1) It is an insurance plan
2) Mainly used for retirement
3) Involves you paying a monthly amount or 1-lump-sum to the insurance company to create a pool of money (Fund). 
4) the Fund will be used for investments until you reach the age to draw money from your fund
5) You will draw monthly income (distribution) from your Fund when you reach your draw down age
6) You will draw from the fund monthly until you die
7) In the event you outlive your Fund, the insurance company will take over and continue to pay you your monthly income
8) If you die before you finish utilitising your Fund, the money remaining MIGHT be paid out to your beneficiaries

Simplest Definition
There are many different type of annuity plans, each with many different terms and conditions.
But overall, they work pretty much the same way:
1) You need to pay either a monthly sum or a 1-lump-sum to the insurance company
2) The insurance company will pay you a monthly amount of money from a certain age and until you die.
3) Between the time you pay and the time you start to draw your monthly payout, the money is used to invest and grow so that you can get a possible larger monthly payout.

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Monday, 15 June 2015

What is CPF LIFE?

Today's post will be on: What is CPF LIFE?

CPF LIFE is a scheme that is meant to provide you with a fixed monthly income from when you start your retirement at age 65 till when you are dead.

When you reach 55 years old, a Retirement Account is created and the Retirement Sum is transferred from your Ordinary and Special Account to this account.
The money will be used to fund your retirement when you reach the retirement age (currently 65).
It is like an one-time annuity insurance payment instead of a monthly annuity insurance payment like that ones most people signed up for*.

However, it has an embedded feature - sort of like a life insurance.
In the event that you passed away before you fully utilised your CPF Retirement Sum, the amount remaining will be passed to your dependents/beneficiaries.

You will need to choose between 2 CPF LIFE Schemes: The Basic Plan & the Standard Plan

Topics     Basic Plan         Standard Plan    
Monthly Payout               Lower           Higher
Bequest**        Higher           Lower


*Annuity Plan is an insurance plan that pays you a monthly amount each month when you reach a certain age (usually when you retire). It will continue to pay you until you pass away.
**Bequest is the amount you give to your beneficiaries when you pass away.

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Wednesday, 10 June 2015

The new Medisave Sum - Basic Healthcare Sum

Today's post will be on the new Medisave Sum, aka Basic Healthcare Sum (BHS).
We will be sharing about the difference between the 2 schemes.

MORE LINKS
Accrued Interest More than Housing Profits?
CPF +1% Interest for those age 55 & Above
5 Financial Things to do in your 20s
Singapore Finance Minister on Personal Finance Part 2
Reducing CPF Housing Accrued Interest
CPF +1% Interest for those age Below 55

The current scheme "Medisave Minimum Sum (MMS)", will be replaced by the new scheme "Basic Healthcare Sum (BHS)".
We briefly summarised the similarity and difference between the 2 schemes.

Similarity
Contribution rates into Medisave Account remain the same as before
Increases almost every year, and will continue to increase in the future
Amount in excess of the 'required amount to be set aside' can be withdrawn (age 55 & above)
Amount in excess of the 'required amount to be set aside' will be transferred to SA or OA*
*Excess money will be transferred to OA instead of SA if SA has met the prevailing Retirement Sum.


Differences
Topic Medisave Minimum Sum (MMS) Basic Healthcare Sum (BHS)
Top-ups If you did not meet the MMS, you need to top up money into your MA until you hit the prevailing year's MMS before you can withdraw any money out of your CPFIf you do not meet the BHS, you do not need to top up money into your MA before you can withdraw money out of your CPF
Starting/ Ending Date End on 31 December 2015. However, you now have the option to not top up your MA to the MMS amount Start on 1 January 2016
Age Amount is Fixed NA. You will be pegged to the prevailing year's MMS when you are making your withdrawal 65. Upon reaching 65, your BHS is fixed at that year's prevailing sum
Maximum amount kept in MA $48,500 is the maximum amount you can retain in your MA for the year 2015 $49,800 will be the maximum amount you can retain in your MA starting from 1 Jan 2016
Minimum amount kept in MA $43,500 is the minimum amount you must have in your MA for the year 2015 before you withdraw any money out $49,800 will be the minimum amount you must have starting from 1 Jan 2016 should you wish to withdraw any money out

We understand that this might not be all comprehensive about the new scheme.
I believe there are more points that we can talk about that we have not yet discovered.
However, we hope that this would be able to show the changes made in the new scheme against the old as well as raise interest in this new scheme.
We would love to see you give us some feedback as to what else can be added or what information did we posted wrongly.
We would also like to know about your views and comments regarding this new scheme.
So feel free to comment and email us!

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Monday, 8 June 2015

Steps to Retirement

Retirement.

The omni-present word that would always masquerade in random chit chat topics. As usual, me and my friends were casually chatting and as if there was a hidden force, we were once again on the topic of retirement. This is often said to be life's last goal, but rarely do people know the way or steps to it.

As clueless as I am (probably due to my young age), I have not been through this significant life stage yet. Hence, to be honest, I am just inexperienced to comment on a successful method to retirement. However, I do have a view on how I can achieve mine, after reading and researching into how people attained theirs.

I believe that in order to achieve this goal, most of it has to do with the mentality of the person. If he strongly believes and strives in his life with this goal in his mind, it is highly probable that he would be able to achieve it. This is because of the steps that he has planned out earlier on in his life and the discipline to push it through.

In my opinion, here are the steps which I feel is are necessary:

1. Knowing what retirement entails

"If you fail to plan, then you are planning to fail." - Benjamin Franklin. This quote is a classic and it applies to everything you want to do. In order to retire, you must know what retirement means to you. Everyone has their own standards of living and this varies. Hence, before you start taking any actions, you must first plan how much you must accumulate for a comfortable retirement. This part generally means taking into account your daily expenses and luxuries that you would not want to sacrifice later on in your life. It also includes the duration of retirement. You may want to use a retirement calculator for easier calculation to account for inflation.

2. Protection

You might be thinking, "After planning, shouldn't we start reducing our expenses and look for ways to increase our income via investments?". Well, this is correct but in my opinion, I feel that being adequately protected against future risks are far more important. Furthermore, leveraging on CPF, a compulsory saving scheme, I believe that forms a fundamental basis for retirement. As such, building on adequate protection should be earlier. Well, they always say, a good defence is the best offence.

In this, you should look for insurance policies that can protect you adequately and start saving for a rainy day fund of at least 6 months of expenses.

3. Start accumulating and reduce spending

As all personal finance books advocate, you start reducing your expenditures and start saving up capital for investments. This is especially important as the earlier you start, the better it is. This is due to the principle of compounding.

After accumulating a decent amount of capital, then you can start to look for investment options. This will be based on your investment duration, growth required and risk that you can afford to take. From here on, you can look forward to increasing your asset base and net worth.

We are also collecting responses on how people feel on their retirement. Please help us by filling in the following form: https://docs.google.com/forms/d/1Ve3O7IpI1swxaTb_xp9dAoAl6yNtWAO2DtPgCn32BmA/viewform

The above is just my opinion, if you feel that there are more that can be done, do share it with us and other readers below. You can also simply email us and we can discuss more about it!

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Tuesday, 2 June 2015

Buying a House using CPF after 55

Today's post will be on: Buying a House using your CPF after age 55.
This is part of the chain of housing-related posts.
We have the misconception that upon reaching age 55, if we sold our house, the money we get from it will be transferred to our Retirement Account (RA) until the Retirement Sum (or Minimum Sum) is met.

We would like to share today that, you can actually use the money in excess of half your applicable Retirement Sum to buy your next house if you are age above 55.

Example:
You are 56, you recently sold your house, and your applicable Retirement Sum is $155,000.
If you wish to buy a new house, you can withdraw amount in excess of half your Retirement Sum ($77,500) to pay for your house.
However, let's say you do not meet your Retirement Sum (you only have $130,000).
Then you can withdraw the amount in excess of half your Retirement Sum ($77,500), meaning that you can withdraw ($130,000 - $77,500 = $52,500) to partially finance your new home.

However, this usage of your Retirement Sum to finance your new home is not an automatic option.
You would be required to fill up a form with CPF and request for this financing option to be made.

For more information on this, you may visit CPF's website, or more simply email/comment us with your questions and we will do our best to find you the answers.

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