Singapore Budget 2016 - Service & Conservancy Charge (SCC) Rebate

Announced on the 24th March 2016's Singapore Budget, Singapore households will receive between 1 to 3 months of SCC rebates in the year 2016.
The months of the rebate were not announced.
But if like previous years, the rebate will be given out in April, July and October of this year.
Below is the rebates for the different type of housings.

MORE LINKS
Can't Hit CPF Retirement Sum?
4 Things to know About Withdraw $ from CPF
5 Financial Things to do in your 20s
6 Points your CPF is like your Bond Portfolio
Reducing CPF Housing Accrued Interest
5 Things about CPF Nomination YOU SHOULD KNOW



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Berkshire Hathaway 2016 Annual Letter

Key Lessons by Warren Buffett to Investors in his annual Shareholder Letter.
Same as with last year, we summarised some of the key points to note from the Legendary Investor's Annual Letter to his Shareholders (and fellow investors!)
The full 2015 annual report is available HERE.
Key lessons for 2014 available HERE.

MORE LINKS
Can't Hit CPF Retirement Sum?
4 Things to know About Withdraw $ from CPF
5 Financial Things to do in your 20s
6 Points your CPF is like your Bond Portfolio
Reducing CPF Housing Accrued Interest
5 Things about CPF Nomination YOU SHOULD KNOW



1) Low Growth? No Problem - as long as population growth remains low.
2% annual economic growth coupled with 0.8% annual population growth means a net 1.2% per capita growth, and such growth is actually good enough - especially when compounded over long periods like over a decade.


2) Life today is better than John D Rockefeller's times - even though he had more money.
We enjoy a better standard of living today than the past: medical, transportation, communication, entertainment, etc.
How the wealth will be distributed, however, would continue to be the problem that needs to be solved by the government.


3) Efficiency means increasing output per hour of employment
Productivity is linked to prosperity.
It allows for more goods and services to be created with less manpower required, allowing more people to do other things, creating new goods and services.
While many have lost their jobs to machines, this is inevitable improvements that will occur to improve society as a whole.
Examples are given in his report:

     a) Farming Industry
         1900 America - 11 million worked in the farming industry, 90 million acres of land devoted to corn farming yielding 30 bushels per acre.
         2015 America - 3 million working in the farming industry, 85 million acres of land devoted to corn farming yielding 150 bushels per acre.

     b) Rail Road Industry
         1947 America - 1.35 million worked in the railroad industry, revenue ton-miles of freight moved by Class I railroads that year totalled 655 billion.
         2014 America - 187,000 working in the railroad industry, revenue ton-miles of freight moved by Class I railroads totalled 1.85 trillion.
         The improve in productivity resulted in a 55% inflation-adjusted price drop for moving a ton-mile of freight.

     c) Energy Industry
         1999 Iowa - Berkshire Hathaway Energy unit acquired Iowa utility. It produced 19 million megawatt-hours of electricity while employing 3,700 people.
         2015 Iowa - Berkshire Hathaway Energy unit Iowa utility produces 29 million megawatt-hours of electricity while employing 3,500 people.
         The increase in efficiency allowed BHE to not raise prices for 16 years while the industry rate increased by 44%.


4) "the early bird gets the worm, the second mouse gets the cheese."


5) 2016 Annual Shareholder Meeting can be watched Online
Berkshire Hathaway's 2016 Annual Shareholder Meeting will be streamed online for the first time on https://finance.yahoo.com/brklivestream .
Date of the meeting is April 30th 9am (US time).



For more on Warren Buffett letters, see below:



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What IF I Can't Hit my CPF Retirement Sum?

For an updated version, refer to the article HERE.

Dear Readers,

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

Answer: NOTHING HAPPENS!

MORE LINKS
Fresh Year, Fresh Pessimism? 
4 Things to know About Withdraw $ from CPF
5 Financial Things to do in your 20s
6 Points your CPF is like your Bond Portfolio
Reducing CPF Housing Accrued Interest
5 Things about CPF Nomination YOU SHOULD KNOW



Do not worry. If you do not hit the Retirement Sum (FRS or BRS), 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.

Whether you hit it or not, you would still draw a monthly payout from CPF when you reach your drawdown age (age 65). You will just receive a lower money payout from CPF.

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
But, you can pledge your property to withdraw money in excess of the Basic Retirement Sum (BRS).
The BRS on 2016 is set at $80,500.
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 December 2015, you can withdraw up to $19,500 from your RA if you pledge your property to CPF.

We talked about the types of CPF Retirement Sum previously (Link HERE)
Although the figures look daunting and achievable, there are actually not many serious consequences if you do not meet it.

Actually, you do not really need to hit the FRS.
A lot of people are actually looking at the FRS and wondering if they can ever withdraw the money above the FRS.
However, you can aim to hit just the BRS (for more info, click HERE).
1) If you hit BRS with no excess money, you will still be able to withdraw up to $5,000.
2) If you hit FRS, you can pledge your flat to withdraw out the money in excess of the BRS.
3) If you have money above the FRS, you can withdraw the excess money out or you can keep them inside to receive ERS (for more info on ERS, click HERE).

Personally, I would say aiming to hit the BRS is more achievable, possible, more satisfying and less daunting mentally.
1) It is a much lower target, hence an easier target to reach.
2) You still get a monthly payout, just not as much as FRS and ERS.
3) Yes, you cannot withdraw any money out. But, if you hit the FRS with no excess, you still need to pledge your house with CPF before you can withdraw the money in excess of BRS.
4) Of course, the more money you have in your CPF account, the money your dependents will get if you pass away before you finished the money in your CPF.

Instead of looking at the CPF minimum sum as a target where you can withdraw money at a certain age, look at it as a savings + annuity + life insurance plan.
We posted an article about how CPF is like insurance HERE



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4 Things to know about Withdrawing Money Out of CPF

We all know that we can withdraw some of our money from CPF upon reaching the age of 55, but do you know there are some things you should know about it?

MORE LINKS
Fresh Year, Fresh Pessimism? 
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

1) Withdraw $5,000 at age 55
If you turn 55 in the year 2016 and after, you may withdraw up to $5,000 from your CPF OR amount above the Full Retirement Sum (FRS).
You can also withdraw from your Retirement Account amount above the Basic Retirement Sum (BRS) if you have sufficient property charge.

2) Let it Grow~ Let it Grow
Should you decide not to withdraw money from your account when you reach 55, the money will continue to grow and earn interest inside your CPF!
You can also use the money to finance your housing loan or other approved purposes.

3) Withdraw Money Bit by Bit
You may choose NOT to withdraw the whole withdraw-able amount out at one go.
If you have $5,000, you can choose to withdraw $2,000 first, and subsequently withdraw the rest on another occasion.

4) Withdraw Money any time after 55th Birthday
You may withdraw the excess money any time after your 55th birthday.
You can submit an application at any time to withdraw your savings and CPF Board will assess the request.


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6 Points your CPF is like your Bond Portfolio

For an updated version, refer to the article HERE.

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).

MORE LINKS
Fresh Year, Fresh Pessimism? 
CPF +1% Interest for those age 55 & Above
5 Financial Things to do in your 20s
5 Things about CPF Nomination you should know
What Bond Buying Taught Me about Car Buying
CPF +1% Interest for those age Below 55

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 Interests
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 Higher 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).

3) High Credit Rating
The money inside is "backed" by the Singapore government!
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 reach your retirement nest egg, 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 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 Money in Equities
Because the money in your CPF forms part of your bond portfolio, you can allocate less of your money into bonds and more into equities, which allows you to earn a better rate of return.


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5 Things about CPF Nomination of Your CPF Monies

CPF has been pushing for its account holders to state their Nomination for their CPF money.
Below are 5 points you should know about it!

MORE LINKS
Fresh Year, Fresh Pessimism? 
CPF +1% Interest for those age 55 & Above
5 Financial Things to do in your 20s
Singapore Finance Minister on Personal Finance Part 2
What Bond Buying Taught Me about Car Buying
CPF +1% Interest for those age Below 55

1) A nomination is recommended for CPF money to be distributed to your nominees.
Your CPF money is unable to be distributed according to your will.
Your CPF money will be distributed via
      a) a CPF nomination
      b) a public trustee if you do not have a nomination

2) Below is a table showing the items covered and not covered under the CPF nomination.

3) A will is unable to touch your CPF money.
Thus if you state in your will how to distribute your CPF money, it is not recognized.
A will states all your assets as estates, your debtors will have claim over your estates and the excess after paying off the debtors will be given to the dependents.

CPF money that is covered under a nomination will not form part of your estate. Because it is not part of your estate, your CPF money will go straight to your dependents or nominees in the event of your demise. It would not be claimable by your debtors!

4) Debt Repayment is Optional.
If you have any outstanding debt, chances are your nominees might use the CPF money for debt-repayment. However, that is their choice as they can also choose NOT TO REPAY YOUR DEBTS!

5) No Nomination? No Problem (sort of).
If you did not create a nomination, your CPF monies will be distributed via a Public Trustee.

It will still be distributed to your dependents, just not in the proportion that you wished they would receive it in.


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What Bond Buying Taught me about Car Buying

Buying a Car in Singapore can follow the same principles as Buying a Bond.
Mainly it is not the car but the Certificate of Entitlement (COE).
COE prices are like Bond prices.
Although COEs are not affected by interest rates movement like bonds, they follow similar buying patterns in terms of future expected prices.

MORE LINKS
Fresh Year, Fresh Pessimism? 
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

Bonds
If you expect interest rates to be going up, you will want to hold short-maturity bonds so that your money will be returned to you fast and you can re-invest it back into new higher interest-paying bonds.

Cars - mainly COE
If you expect COE to go down, buy cars with COE that is expiring soon - 1 year or so. When your car's COE expires and the price of COE has fallen, you can buy a new COE (10 years duration) at the lower price. This is cheaper than buying the full COE at the high price, even though you expect COE to fall in the coming years.

HOWEVER

IF after 1 year passed, and the price of COE did not go down as you expected it to, you will be drawn into a higher COE price. At that point, you would need to decide if you wish to lock yourself in with a longer period COE or buy another short-term COE while waiting for the prices to drop.

This is the same as buying a short-term bond (hoping interest rates to go up soon), but interest rates drop. Resulting in you being required to buy another bond that pays you a lower interest.


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