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

Wednesday, 2 September 2020

3 Tips To Earn More Interest With DBS Multiplier



We looked at our own DBS Multipler account and started questioning how the interest tier works and how to maximise our interest.


After reading the FAQs and thinking hard, we (kind of) found 3 tips that are quite worth sharing with you 😉


A New Tool

Before we dive into the DBS Multiplier tips, we want to let you know a new tool we've built here at Investment Stab.


If you're like us, always wondering how much more should I spend in which category in order to maximise the interest I will earn, FRET NOT!


We've took the time to build a DBS Multiplier Account Interest Estimator.


Now we can know how much more to spend in 1 category so as to earn more interest from the DBS Multiplier Account.


Let us know in the comment below which other bank's saving account you would like us to build a calculator for 😉


Alright, and now for the tips.


Tip 1: Combine your Salaries into a Joint Account

Your salary: $3,000 per month

Your spouse salary: $3,500 per month


If you both credit your salary into your individual accounts, your Multiplier account will record your 'Income' as $3,000.

Your spouse's Multiplier account will record their 'Income' as $3,500.


But, if you both credit it into a joint DBS/POSB account that you both own, both of your Multiplier accounts will record your 'Income' as $6,500!


That's like an extra $3,500 income for you and an extra $3,000 income for your spouse, to hit the Multiplier criteria.


Recommended Read: Cannot Withdraw CPF Money If Never Hit CPF Retirement Sum?

Tip 2: Invest in DBS Invest-Savers

The DBS Invest-Savers is a Regular Shares Savings (RSS) plan.

The lowest amount to invest in the RSS is $100.


If spending an extra $100 yields you additional interest that is more than $100 because you added another category, then why not.


Furthermore, it is low in fees and buying the STI ETF means you are buying the top 30 companies in Singapore.


Sounds pretty worthwhile.


The downside is that the contributions are recognised as "Investment" for only a year after you start the Invest-Saver plan with a Multiplier account.

After that, the RSS investment no longer qualifies as the "Investment" category.


Tip 3: Be Joint Borrowers of DBS/POSB Home Loan

Your monthly mortgage payment is $2,000.


If you are the only name on that mortgage, your Multiplier account will get $2,000 under the 'Mortgage' category.


But, if you add your partner's name into the mortgage, both of your Multiplier accounts will record your 'Mortgage' category as $2,000!


That's like an extra $2,000 mortgage for your partner to earn higher interest.

And you don't actually have to really pay another extra $2,000 to earn that qualifying sum ✌


FAQ

For more on the FAQs about DBS Multiplier account, you can click HERE.


Conclusion

We hope these tips are good enough for you.

If you got any more tips you want to share, let us know in the comments below 👍


Recommended Read: Why You Should Max Your CPF Retirement Sum Early

Promos & Referrals
We are starting to build a list of Promos and Referrals for our readers.
Click here to view the full list of Promos and Referrals we have. 

Hey You!

If you have a money related story about you or your relatives' that you want to share, let us know in the comments below or email us at investmentstab@gmail.com.
Alternative, you could fill in the form below for us to contact you.
Story Form

Dear Reader!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
We hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help tailor our content to you.
Survey

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁

Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Saturday, 22 August 2020

The CPF Withdrawal Age & CPF Payout Eligibility Age

There are 2 age-numbers about CPF that you should know about.

They are the CPF Withdrawal Age, and the CPF Payout Eligibility Age.


Recommended Read: Should I Top Up My Young Next-Of-Kin's CPF?


What is the CPF Withdrawal Age?

Singapore's CPF Withdrawal Age is currently set at 55.

This is the age you can start withdrawing money out of your CPF account.


How Much Can I Withdraw?

You can only withdraw money above the Full Retirement Sum or $5,000 (whichever is higher).

Alternatively, you can withdraw money above the Basic Retirement Sum if you perform a property pledge.

Click here to see the examples of how much you can withdraw.


For members turning age 65 from 2023 onwards, they can also withdraw up to 20% of their Retirement Account savings in a lump sum anytime from age 65 onwards.


Recommended Read: Cannot Withdraw CPF Money If Never Hit CPF Retirement Sum?


What is the CPF Payout Eligibility Age?

Singapore's CPF Payout Eligibility Age (PEA) is currently set at 65.

This is the age you can choose your CPF LIFE plan (CPF LIFE) and start receiving monthly payouts until you pass away.

You also have the option to start your CPF LIFE payouts later, up to age 70.


Why Would I Want To Delay My Payout Age?

You can choose to start receiving payouts anytime between age 65 and age 70 (eg when you reach age 67), but the latest age to start is 70. 

For each year deferred, your future CPF LIFE monthly payouts may increase by up to 7%.


Conclusion

Understand at what age you can withdraw how much from CPF.

Consider if you really need to make that withdrawal at 55, or is it better to keep the money inside CPF to earn the higher interest rates.


Recommended Read: Why You Should Max Your CPF Retirement Sum Early

Promos & Referrals
We are starting to build a list of Promos and Referrals for our readers.
Click here to view the full list of Promos and Referrals we have. 

Hey You!

If you have a money related story about you or your relatives' that you want to share, let us know in the comments below or email us at investmentstab@gmail.com.
Alternative, you could fill in the form below for us to contact you.
Story Form

Dear Reader!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
We hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help tailor our content to you.
Survey

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁

Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Friday, 14 August 2020

Should I Top Up My Young Next-Of-Kin's CPF?

Young next-of-kin refers to family members that are below the age of 55.

We'll do the 'next-of-kin above age 55' next time.

So subscribe to us if you want to be notified when the next article is out 😉.


Who Qualifies As Next-Of-Kin?

  • Spouse
  • Siblings
  • Parents
  • Parents-in-law
  • Grandparents
  • Grandparents-in-law

Recommended Read: Why I Still Own Big Tech


Benefits of Topping Up

1. Tax Incentive

If you top up your next-of-kin's CPF accounts using cash, you get up to $7,000 per calendar year of tax deduction.


2. Earn More Interest

Topping up to your next-of-kin's CPF allows them to build up their retirement savings, and it will earn interest of up to 6%.


Criteria

There is a list of criteria to fulfil before your cash top-up to your next-of-kin qualifies for the tax deduction.


1. For All Next-Of-Kin Below Age 55

To recipients age below 55, you only get the tax deduction for up to the current Full Retirement Sum (FRS).

FRS - SA Savings - SA monies withdrawn under CPFIS*

*CPFIS: CPF Investment Scheme


Example:

The current CPF FRS is $181,000

Your mother's CPF SA currently has $150,000 and had previously withdrawn $30,000 for CPFIS.

So her "Total SA Savings" is $180,000.


If you top-up $7,000 cash to her CPF SA, only $1,000 will be eligible for the tax deduction.

Any additional amount ($6,000) you top-up will not be eligible for the tax deduction.


2. In Addition For Spouse/Siblings

To qualify for the tax relief for spouse or siblings top-up, in addition to the criteria above, they must also meet one of the following criteria:

  1. Income (e.g. salary or tax-exempt income such as bank interest, dividends and pension) not exceeding $4,000 in the year preceding the year of top-up*; or
  2. Handicapped** 

* "Income" of a person would include income from all sources, such as tax-exempt income (e.g. bank interest, dividend and pension) and foreign-sourced income remitted into Singapore. Hence investment income/rental income/directorship income etc, are considered to be the income of a person.


** A handicapped person is one who has been incapacitated mentally or physically. Some examples are visual-impairment, loss of hearing, loss of limb and dementia.


Recommended Read: Why You Should Max Your CPF Retirement Sum Early


Any Additional  Things to Note?

One More Thing...

There is a cap on maximum tax deduction one can receive in a given year.


The personal income tax relief cap is currently $80,000.

Meaning you won't get any additional tax deduction for each dollar you top-up to their CPF accounts if you hit the tax deduction cap of $80,000 before the top-up.


Conclusion

Topping up next-of-kin's CPF for tax reduction is a lot of work.

Need to make sure they have not met FRS.

Need to make sure they meet the income criteria.

Need to make sure I have not hit the cap for tax relief.


So view the top-up as helping your next-of-kin hit their retirement goals.

The tax deduction is just icing on the cake; additional benefits.

Not the main point.


Recommended Read: Cannot Withdraw CPF Money If Never Hit CPF Retirement Sum?

Promos & Referrals
We are starting to build a list of Promos and Referrals for our readers.
Click here to view the full list of Promos and Referrals we have. 

Hey You!

If you have a money related story about you or your relatives' that you want to share, let us know in the comments below or email us at investmentstab@gmail.com.
Alternative, you could fill in the form below for us to contact you.
Story Form

Dear Reader!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
We hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help tailor our content to you.
Survey

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁

Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Tuesday, 11 August 2020

Warren Buffett: Buying Stocks Every Year Since He Was 11 Years Old

Source: CNBC

Personal Net Buyer Of Stocks

Buffett has been a net buyer of stocks almost every year since he started when he was 11 years old. 

He grew his wealth by buying and owning more and more shares over the years.

Maybe you should too.


Recommended Read: The CPF Bond That You Cannot Sell


The Interview Clip

Need proof to show that the man said it himself?

Here's that 1-minute clip of him saying explicitly just that.


Recommended Read: Why I Still Own Big Tech


Does He Sell Stocks?

Yes, he does!

Just that he is a net-buyer overall.

Meaning even if he sold stocks, he would still invest in other stocks.


Conclusion

World's greatest investor buys stocks every year.

Shouldn't you be doing that too if you want to build wealth? 😉


Recommended Read: Cannot Withdraw CPF Money If Never Hit CPF Retirement Sum?

Promos & Referrals
We are starting to build a list of Promos and Referrals for our readers.
Click here to view the full list of Promos and Referrals we have. 

Hey You!

If you have a money related story about you or your relatives' that you want to share, let us know in the comments below or email us at investmentstab@gmail.com.
Alternative, you could fill in the form below for us to contact you.
Story Form

Dear Reader!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
We hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help tailor our content to you.
Survey

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁

Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Saturday, 8 August 2020

Cannot Withdraw CPF Money If Never Hit CPF Retirement Sum?


Today, we would like to share with you an important issue we believe every Singaporean faces: What happens if I cannot hit my CPF Retirement Sum?

Answer: NOTHING HAPPENS!


Recommended Read: Answering the 2 Common CPF "Complaints"

Seriously, Nothing

Do not worry. 
If you do not hit the Retirement Sum (FRS, BRS, or ERS), there is no penalty involved.

You are also not required to top up the difference to CPF in the event you do not hit the Retirement Sum.

Yes! You are correct! 
It is not compulsory for you to hit your CPF Retirement Sum.


You Still Get A Monthly Payout

Whether you hit it or not, you would still draw a monthly payout from CPF when you reach your draw down age (age 65). 

You will just receive a lower money payout from CPF.
Well, less money in Retirement Sum = Lower Monthly Payouts.
Make sense right? 🤷‍♂️


Recommended Read: The CPF Bond That You Cannot Sell

But The Lump Sum Withdrawal

The only problem is that you are unable to withdraw most of your money in your Retirement Account - you can only withdraw up to $5,000 at age 55.

For members turning age 65 from 2023 onwards, they can also withdraw up to 20% of their Retirement Account savings in a lump sum anytime from age 65 onwards.


If I Want To Withdraw More Money?

You can pledge your property to withdraw money in excess of the Basic Retirement Sum (BRS).

The BRS as of 2020 is set at $90,500.

If you pledge your property at age 55, you will be able to withdraw money in your CPF in excess of the BRS.

Eg: if you have $100,000 in your Retirement Account (RA) as of August 2020, you can withdraw up to $9,500 from your RA if you pledge your property to CPF.


Conclusion

Don't fret over hitting the Retirement Sum.
It is not the end of the world if you don't hit it.

Recommended Read: Why You Should Max Your CPF Retirement Sum Early

Promos & Referrals
We are starting to build a list of Promos and Referrals for our readers.
Click here to view the full list of Promos and Referrals we have. 

Hey You!

If you have a money related story about you or your relatives' that you want to share, let us know in the comments below or email us at investmentstab@gmail.com.
Alternative, you could fill in the form below for us to contact you.
Story Form

Dear Reader!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
We hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help tailor our content to you.
Survey

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁

Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Saturday, 1 August 2020

Why I Still Own Big Tech


Quite a few of my friends have been asking me what I was invested in recently.

When I mentioned that I was invested in Big Tech, they were a little stun for 2 reasons.

1. Why would anyone stay invested in the current market?

2. Why would anyone want to invest in Big Tech now?

Decided to pen down the explanation once and for all.

What I Own Currently

Amazon and Microsoft.

What I sold recently:
Facebook, at $250

Recommended Read: The CPF Bond That You Cannot Sell

I Bought It Long Ago

First of all, I would like to make it clear that I accumulated these positions some time ago.

I bought Amazon when it was in the $900 range, Facebook when in the $170 range, and Microsoft at the $150 range

So they have done pretty well for me.
But, if you were to invest in them today, you might not get the same results as I did.

So do your own due diligence, research, and understand if that investment is suitable for you.

Why Have I Not Sold My Big Tech?

Despite the whole anti-trust congressional hearing, Big Tech reaching new highs, the whole COVID situation, and huge disconnection between the stock market and the real economy, I remain long-term oriented and still think Big Tech has a lot of potentials.

Break-Up Or Not?
An anti-trust congressional hearing happened recently with the CEOs from Apple, Amazon, Alphabet, and Facebook.

It does not bother me whether or not they are broken up or not.

If they are not broken up, they can "keep their monopolistic business", which means more growth and profits.
That makes sense for me to continue holding them.

If they are broken up, most analysts expect that it will lead to a temporary rise in the stock prices of these companies.
A "conglomerate discount" is usually applied to companies that are huge.
Breaking up Big Tech might release more shareholder value.

Such breakups tend to unleash lots of shareholder value.
Case in point, eBay+PayPal and AT&T.

Split Shares Or Not?
Apple announced that it will split its shares 4-for-1.
Basically, shareholders will receive 3 additional shares for each Apple share they own.
That will make the share price lower from $400+ to $100+, making it more affordable for retail investors, thereby increasing the investor pool.

Generally, share splits have been met with a slight uptick in the share prices.
Because now more funds can afford to invest in the cheaper share price.
Amazon is now trading at $3,100+, Microsoft at $200+, Facebook at $250+, Alphabet at $1,500+.

Sounds to me like it's a good time to split the shares and give it a slight pop in the share prices.

Recommended Read: Why You Should Max Your CPF Retirement Sum Early

Conclusion

These are the 2 reasons why I'm keeping my investment in Big Tech for now.

Are they undervalue or overvalue?
That's up to the individual's interpretation.

To me, for now, they are undervalued or at fair value.

Disclaimer:
Do not make any investment decisions based upon materials found on this website.

Investment Stab is not a registered investment advisor, broker-dealer, and is not qualified to give financial advice.


Investors are reminded to do their own due diligence and invest according to their risk appetite.

Promos & Referrals
We are starting to build a list of Promos and Referrals for our readers.
Click here to view the full list of Promos and Referrals we have. 

Hey You!

If you have a money related story about you or your relatives' that you want to share, let us know in the comments below or email us at investmentstab@gmail.com.
Alternative, you could fill in the form below for us to contact you.
Story Form

Dear Reader!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
We hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help tailor our content to you.
Survey

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁

Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Tuesday, 28 July 2020

Buy Stocks Like You Would Buy HDBs


If we treat stocks like how we treat our properties, maybe the average person would get better investment returns.

Instead, most people buy stocks on rumours and speculation instead of real analysis.

Here are a few things you should do before you buy a property or invest in a stock.

1. Do Your Analysis

Before you bought a new home, you would survey the floorplan, you would check out the neighbourhood, you would check if it is near parks, schools, food courts, bus stops, train stations, etc..

Do you ever just buy a house simply because you overheard a conversation from the kopitiam table next to you that the property is going to go up in value in the next 6 months?

You wouldn't!

You would do some research on that said property.

You would compare the prices of the property you are thinking of buying against the prices of properties in the same neighbourhood.

Do that with stocks that you are buying.

Are people using/buying the company's products/services?
What are the valuations of the company you are thinking of investing against its peers?
Is it cheaper or more expensive than its peers?

What growth potential does the company have that can make the stock price go higher or pay more dividends?

Do the research, determine if the stock is worth buying or not.
Don't invest blindly!

Recommended Read: The Best CPF LIFE Plan Is...

2. Understand What You Are Investing For

Are you investing for capital appreciation or dividends?

When you invest in a property, you can be investing to earn the capital appreciation (rising property price) or you can be investing to earn rental income.

If you ask a property investor, they will tell you that properties that are meant for renting will have characteristics that are different from properties that are meant for quick capital appreciation (property flipping).

Same applies for stocks. 
Are you going to be a capital appreciation or a dividend kind of investor?

If you are going to be a dividend kind of investor, what you want is a stable business, with strong cash flows, and a consistently growing dividend. 

If you are going to be a capital appreciation kind of investor, then you would look for businesses that have huge growth potential, reinvests a lot of its capital back into the business, etc.

What you don't want to do, is to be a dividend kind of investor, but invests in stocks that don't pay a dividend.

So, understand what kind of investor you want to be, and choose stocks based on what kind of investor that is.

Of course, you can be an investor that mixes both dividend and capital appreciation, in which case you would have very different criteria.

3. Invest For The Long-Term

Do you check your property price every day?
If not, why do you check stock prices every day?

If you check your property price every day and realised that your property price has fallen by 10%, do you feel so sad that you want to sell your property immediately?
If not, why do you do that for stocks?

If the property is still earning you rent, you probably won't sell even if the price fell by 10%.
Most likely, you will wait for the price to rise back up.

The same can be applied to stocks.
If it is still paying dividends (and that was what you were after), there is no need to sell the stock immediately even if its stock price fell by 10%.

4. Don't Over-Leverage

When buying a home, you try not to over-borrow and get yourself too deep into debts.
You try to calculate how much you can afford and how much you can rise, and borrow appropriately.


Source: Gannett

Same applies to stock investing.

Just because you can leverage and invest on borrowed money (margins), doesn't mean you should.

Don't take on unnecessary risks that you cannot afford.

Recommended Read: Why You Should Max Your CPF Retirement Sum Early

Conclusion

Know yourself, know your goals, know what you are looking for in an investment, and don't over-borrow!

What other similarities are there between buying properties and buying stocks?

Promos & Referrals
We are starting to build a list of Promos and Referrals for our readers.
Click here to view the full list of Promos and Referrals we have. 

Hey You!

If you have a money related story about you or your relatives' that you want to share, let us know in the comments below or email us at investmentstab@gmail.com.
Alternative, you could fill in the form below for us to contact you.
Story Form

Dear Reader!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
We hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help tailor our content to you.
Survey

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁
Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Friday, 24 July 2020

The CPF Bond That You Cannot Liquidate


While most people consider CPF money not as theirs and ignores it as part of their retirement planning or investment portfolio, we tend to think that CPF compliments those 2 things!

We think that money in CPF is like money invested in Bonds (Terms & Conditions applied).

Even the CPF Board explains how your CPF monies are invested.
They are invested in Special Singapore Government BONDS.

Recommended Read: 5 Financial Things to do in your 20s

A standard retirement portfolio consists of bonds, stocks (equities), and cash.

In most cases, the goal is to try put as much money as possible inside your portfolio and withdraw as little as possible, allowing your money to grow over time to finance your retirement in the future.

We recommend Indexing for equities, read more about equities-indexing HERE


CPF fits into this criteria nicely - money only in, rarely out!

You can look at your Special Account like it is part of your Bond Portfolio!

1. Pays You Interest
Think of your Special Account as a bond you bought that pays you interest annually.

Even better, think of it as a long-term bond! - one that starts when you start working and ends when you reach your retirement age (kind of like a 40-year bond).

2. Pays You A High Interest
Bonds today pay little/low interest! - you are lucky if you found one paying you 3%!

Fortunately, CPF SA pays a minimum of 4%!

It comes with a bonus +2% interest too (terms & conditions applied).

Recommended Read: You Should Not Choose the CPF LIFE Basic Plan

3. High Credit Rating
The money inside is "backed" by the Singapore government!
It is the few remaining AAA rated countries left in the world.

That is essentially risk-free!
It is hard to find a high interest-paying risk-free rate of returns these days!

4. Fits Your Retirement Goal
To achieve the amount required for your retirement, not only is the returns you get important, but also the discipline to keep the money inside your nest!

It is preferable to have more money going in and less money going out of your retirement portfolio.

CPF is able to do just that - it is almost literally a one-way traffic!

5. The Disadvantage Of This "Bond"
You cannot withdraw money out from your CPF - unlike a normal bond where you can sell it for cash.

That is the drawback of getting a higher interest from a "bond".

But, since it is for your retirement goal, you really shouldn't mind the problem of not being able to withdraw it out.

6. Allows More Allocation To Stocks
Because the money in your CPF forms part of your bond portfolio, you can allocate less of your cash money into bonds and more into stocks, which allows you to earn a better rate of return.

Recommended Read: Answering the 2 Common CPF "Complaints"

Conclusion
If you are planning your retirement portfolio, you can consider setting your CPF SA balance as your "bond allocation".

It would allow you to capture a higher overall rate of return at lower volatility & risk.

Promos & Referrals
We are starting to build a list of Promos and Referrals for our readers.
Click here to view the full list of Promos and Referrals we have. 

Hey You!

If you have a money related story about you or your relatives' that you want to share, let us know in the comments below or email us at investmentstab@gmail.com.
Alternative, you could fill in the form below for us to contact you.
Story Form

Dear Reader!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
We hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help tailor our content to you.
Survey

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁
Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Wednesday, 15 July 2020

Why You Should Max Your CPF Retirement Sum Early


Today, we are going to present to you a controversial idea.

That controversial idea will help you hit the CPF Retirement Sum faster, earlier, and easier.

That idea is, to top up your CPF Special Account (SA) to the prevailing year's CPF Retirement Sum ASAP, even if you are below 55.

Top Up My CPF SA?!

Before you go "you are crazy!", hear us out first.

So, CPF has revealed in advance the next few years' Retirement Sum.
Source: CPF

Based on the figures above, we can see that the Retirement Sum increases by about 3% per year.

Your CPF SA pays you an interest of 4%, +1% additional interest on the first $60,000 balance.

If the CPF Retirement Sum keeps increasing at the 3% rate while CPF keeps paying you a 4% interest rate, your CPF balance will grow faster than the rate the Retirement Sum is increasing.

That's like CPF is paying you to hit your Retirement Sum early.

That makes reaching your CPF Retirement Sum a lot easier.
We'll show you why.

Recommended Read: The 4% Shortfall In Your CPF Retirement Fund

Retirement Sum Estimator Example

Assuming that you are born in 1985, you will reach 55 years old in 2040.
The estimated CPF Retirement Sum for your cohort is $327,800.

That seems daunting, like a far and never reachable goal.
But it is a lot more manageable if you break it down.

Assuming you contribute $2,000 into your CPF SA every year till 55 years old, via work contribution + your own Retirement Sum Top Up (RSTU).


Suddenly, if you managed to save $121,439.54 in your CPF SA by 2020 year-end, you will be able to hit your cohort's Full Retirement Sum by the time you reach 55 years old.

$121439.54 + (20 years x $2,000) = $161,439.54.

By contributing a total of $161,439.54, you will be able to hit your cohort's retirement sum of $327,800.

If you top-up more money into your SA earlier, you will be able to hit your cohort's retirement sum even earlier.

Recommended Read: Is CPF A Scam?

Retirement Sum Estimator

Interested in finding out the CPF Retirement Sum for your cohort?

Interested in finding out how much you should have in CPF by what year to hit your CPF Retirement Sum?

We have actually made this calculator public.
You can find the calculator via the link below.

Click here to try the Retirement Sum Estimator

Try it out and let us know what you think of it.
It would be even better if you have any suggestions for us to improve the calculator.

Recommended Read: Answering the 2 Common CPF "Complaints"

Promos & Referrals
We are starting to build a list of Promos and Referrals for our readers.
Click here to view the full list of Promos and Referrals we have. 

Hey You!

If you have a money related story about you or your relatives' that you want to share, let us know in the comments below or email us at investmentstab@gmail.com.
Alternative, you could fill in the form below for us to contact you.
Story Form


Dear Reader!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
We hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help tailor our content to you.
Survey

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁

Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.

Thursday, 9 July 2020

The Hidden Taxes In Singapore


In the recent rally speech by Senior Minister Tharman Shanmugaratnam, he said that the median income Singaporeans paid 0% to 2% in income taxes.

There were sceptics who questioned how true that was on social media.
So we decided to run the numbers to check it.

Singaporean's Median Income

The median income for full-time Singaporeans in 2019 is $3,900.

That translate to about $50,700 annual salary (+13th month bonus).
Less 20% CPF contribution, the annual chargeable income is $40,560.

That translates to about $589.20 in chargeable income tax, which is about 1.2% of the total $50,700 salary.

The above chargeable income tax excludes other sources of tax relief like donations or parent or child relief, which would lower the tax bill even more.

So... I guess SM Tharman is not lying when he said that the median Singaporeans pays less than 2% in income tax? 🤷‍♂️🤷‍♀️

Cherry-Picking Tax Policies?
Of course, that's kind of like cherry-picking on the tax issue.
"Pick the one we scored best and show it to the public".

So at Investment Stab, we decided to dig deeper and find out what is the overall tax rate Singaporeans pay in Singapore.

Recommended Read: The Best CPF LIFE Plan Is...


The "Social Security" Portion
In most countries, social security is their CPF.
And in this scenario, we are only calculating employee's contribution.

You can think of social security as a retirement tax.
"I contribute a portion of my pay to the Government. In return, when I am old and retired, the Government will pay me a monthly payout until I pass away."

In Singapore, well that's 20% of our salary although we would consider it to be 0%.

20% is the actual figure most Singaporeans contribute every month when they are young.

The problem is as Singaporeans, we tend to max out or use up that 20% for housing.
Whereas in other countries, they actually cannot use their social security money for housing - they have to pay cash.

So, if you are using all 20% of your CPF contribution for housing, technically you paid 0% in retirement tax.

If you use anything less than the full 20% for housing, then your retirement tax will be whatever that you did not use.

If you did not buy a house or did not pay for your house with your CPF, then your retirement tax can be considered as 20%.

So one would have paid between 0% to 20% in "retirement tax".

Source: Wikimedia

The GST Portion
Monthly Income:                    $3,900
     Less CPF Contribution:     $(780)
Monthly Take-Home Pay:      $3,120

Assuming you spent every cent of your take-home pay, you would have paid $218.40 (7% GST) or $280.8 (9% GST).

Since GST have not increased yet, we will just assume one pays 7% in GST.

$218.40 / $3,900 = 5.6%.

Bonus calculation: $280.8 / $3,900 = 7.2%

So a median income Singaporean would pay about 5.6% per year in GST.

Recommended Read: SM Tharman on Personal Finance

The Property Tax Portion
We assumed that with a spouse that earns the same median income, both would get a 5-room HDB flat.

Based on 2019 4th quarter data:

Highest 5-room flat property tax area: Bukit Merah
Rental: $2,800 per month.
Estimated Annual Value: $33,600
Estimated Property Tax: $1,024

Lowest 5-room flat property tax area: Woodlands.
Rental: $1,800 per month
Estimated Annual Value: $21,600
Estimated Property Tax: $544

If the taxes are split evenly between the couples, each couple is liable for $272 to $512 in property taxes.

$272 / $50,700 = 0.5%
$512 / $50,700 = 1.0%

That translates to about 0.5% to 1% in property taxes paid by each spouse respectively.

So there are no additional taxes payable by Singaporeans on these items.

Taxes We Don't Have
We don't have capital gains tax, dividend tax, estate (aka inheritance) tax.

So there are no additional taxes payable by Singaporeans on these items.

Source: Flickr

Total Tax Rate
If we sum up the total taxes the median income Singaporean earner pays, it works out to be...

Income Tax:               1.2%
GST:                           5.6%
Retirement Tax:  0% - 20%
Property Tax:  0.5% - 1.0% 

Total Tax Rate: 7.3% to 27.8%

Based on an annual income of $50,700, the median income earner would pay between $3,701.10 to $14,094.60 in taxes annually.

We expect the number to be nearer to the lower end as most Singaporeans would use their CPF contribution for housing, which would greatly reduce the "retirement tax contribution" part.

Of course, we did not include property tax, stamp duty, COE & road tax (if you own a car), and a bunch of other taxes.
These taxes are either harder to calculate, may or may not apply to everyone, or are generally a one-time tax.

But what we have listed are the general taxes most countries' citizens pay.

Is the tax rate for the median income Singaporean earner within the range you find acceptable?
Let us know in the comments below 😉✌

Let us know if we miss any other big taxes that you think should be included in the list of taxes we pay in general.

Recommended Read: Answering the 2 Common CPF "Complaints"

Promos & Referrals
We are starting to build a list of Promos and Referrals for our readers.
Click here to view the full list of Promos and Referrals we have. 

Hey You!

If you have a money related story about you or your relatives' that you want to share, let us know in the comments below or email us at investmentstab@gmail.com.
Alternative, you could fill in the form below for us to contact you.
Story Form

Dear Reader!
As we progress towards the next phase of our journey, we would like to find out what would make you like us even more.
We hope you could help us fill in a short survey of 8 questions (4 of them are MCQs) so that we can help tailor our content to you.
Survey

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
Have feedback? Tell us now!

Follow us on Facebook and Instagram for more timely updates about finance-related articles and memes! 😁
Subscribe to our newsletter too in case social media platforms decide to stop showing you our content.