Can I Use CPF to Buy a House After 55 Years Old?

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 54, you recently sold your house, and your applicable Retirement Sum is $155,000.
If you wish to buy a new house, you can withdraw the amount in excess of half your Retirement Sum ($90,500) 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 ($90,500), meaning that you can withdraw ($130,000 - $90,500 = $39,500) to partially finance your new home.

Recommended Read: The HDB Pricing Dilemma

However, this usage of your Retirement Sum to finance your new home is not an automatic option.
You would need to make a request to CPF to allow you to reserve a portion of your OA to not transfer to your RA.
The instruction on how to do it can be found here.

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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Recommended Read: What Happens to the CPF Accrued Interest when the Owner Dies?

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The HDB Pricing Dilemma

As for if it is a problem of cooling measure of economic failure, I would say it's probably neither, but it's the social phenomenon in modern societies - we technically see it in most asset classes like stocks and bonds too.

HDB Problem:
The older generation (those with HDBs) or any sellers would love the prices to be high so that they can sell it for a profit and have a comfortable retirement egg nest.
The younger generation (those buying BTOs and resale) or any buyers would love the prices to be low so that they don't have to pay as much for a home (lower debt burden).
It's a struggle (or tug-a-war) between people of different generations and it is tough to say which side should get more help.

Help the Buyers of Houses?:
Sell BTO at the cost of construction to buyers
Buyers can buy cheaper BTO flats.
After the 5 years minimum occupancy period (MOP), these buyers can sell their flats in the resale market.
That will probably result in a drop in HDB resale prices on a whole (you as a buyer would not pay a huge premium for a resale flat if you knew it was sold initially at cost price).
The result is people who previously bought a flat before the drop in resale prices (ex-buyers who bought at a high price) will now be underwater (loan amount > HDB value).
It is also possible that these ex-buyers are retirees relying on their flats for retirement income, and suddenly the drop in the value of their flats might affect their ability to retire.
Qn: Do you want to give subsidies to those homeowners who are underwater to compensate them on their losses?
Let us know in the comments below.

Help the Sellers of Houses?:
Sell BTO at marked-to-market prices to buyers
Buyers buy more expensive flats.
Initial buyers are given subsidies to afford the high cost of homeownership.
After the 5 years MOP, these buyers can sell their flats in the resale market.
Flat prices in the resale market will probably remain high.
Sellers can sell at even higher prices in the resale market.
Qn: Do you want to give subsidies to the new home buyers to help them afford their first home and make homeownership a reality for them?
Let us know in the comments below.

Our View:
Housing is a sensitive issue that requires delicate handling and balancing of the interest of both the buyers and sellers.
We think the Singapore Government did manage to solve this pretty well with all the grants being given out to the younger generation to ensure they can buy a home.
It is more important to ensure that homes in Singapore are kept at a fair value so that it does not disadvantage the older or younger generation too much.
So some form of cooling measures and some form of grants would be needed.
That's not to say that what we have now is perfect - there is always room for improvements.
What are some improvements can you think of?
Let us know in the comments below 😉.

Also, because of the need to balance between buyers and sellers, we think that HDBs are not really a great investment - because the Singapore Government has to keep it at a fair value, which means there is kind of a "cap" on how high prices can go.
That is also why we prefer stocks over HDBs, as we had previously written in an article.
Link here: 3 Reasons Stocks are Better than 99 Year HDB

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

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WSG can provide you with a career coach that is able to help you with that. 

And if you are looking for a free career coach, visit Workforce Singapore via the link below.

They can link you up with the career coach and you 
might be able to find new opportunities on their jobs portal.

http://ow.ly/GY8150wlfrF

Recommended Read: CPF LIFE in the Year 2020

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What Happens to the CPF Accrued Interest when the Owner Dies?

Today we will be answering this question: What happens to the CPF accrued interest when the Owner of the HDB passed away?
This question was submitted by one of our readers.
We would like to thank all our readers who post questions or tips to us.
We would love to see more of that coming in, so do feel free to keep sending us these messages!
You can contact us via email (investmentstab@gmail.com), comment on our blog, or drop us a message via Facebook or Instagram.

Answer:
If the owner of the house dies, the accrued interest is waived.
Think of accrued interest as something the owner needs to return into their CPF account in order to ensure that they have sufficient money for their retirement.
The accrued interest is technically taken out of their profit from the sale of their flats.
If the owner passed away, there is no need to plan for their retirement, and hence the accrued interest is cancelled.
The new owner(s) of the house will now be able to sell the house without the need to pay back any money into CPF.

Recommended Read: $20,000 Silver Housing Bonus: Should You Apply For It?

Side Note:
The paying back of the accrued interest is to ensure that your "retirement egg nest" is not reduced because of the act of taking money out to buy a home.
And that accrued interest in a way would be funded by the profits (if any) from your home sale.
Even if the sale of the home results in a loss, technically the accrued interest would not affect you much because we technically never have to pay it back anyway.
The accrued interest would keep accumulating in this case, but we technically will never have to pay it back until we buy another home, sell it again, and make profits on it.

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

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And if you are looking for a free career coach, visit Workforce Singapore via the link below.

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Recommended Read: 6 things to do with your CNY money

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$20,000 Silver Housing Bonus: Should You Apply For It?

Source: HDB

Today we will be answering this question: is it advisable to put $60,000 into my Retirement Account (RA) to get the $20,000 Silver Housing Bonus?
This question was submitted by one of our readers.
We would like to thank all our readers who post questions or tips to us.
We would love to see more of that coming in, so do feel free to keep sending us these messages!
You can contact us via email (investmentstab@gmail.com), comment on our blog, or drop us a message via Facebook or Instagram.

Answer:
When it comes to CPF, there is not really a one-size-fits-all solution.
There are some flexibility and restrictions that you will have to consider before making such an important decision.

Assuming you apply for the Silver Housing Bonus
If you sell your home, and your net proceeds from the sale is less than or equal $60,000, immediately all of the proceeds will go into your CPF RA.
Under this scenario, you get only $1 for every $3 you put back into your CPF RA.
Eg; if you put into your RA only $30,000, you only get $10,000 in Silver Housing Bonus instead of $20,000.
If your net proceeds exceed $60,000, the bonus will be capped at $20,000.
Below is an image from HDB on the calculations for SHB

Source: HDB

Recommended Read: 6 things to do with your CNY money

Conclusion
If your goal is to have cash after you downsize your home, then this might not be suitable for you because it is possible for you to end up with no cash if the net proceeds is less than $60,000 (Of course if you managed to exceed your cohort's CPF Retirement Sum after you topped up $60,000 + any SHB to your CPF, you will be able to withdraw the excess. So that's another consideration you can and need to consider).

But if your goal is to ensure you have enough for retirement (in terms of monthly payout from CPF), then SHB is a pretty good option for you because, by downsizing, you get an extra $20,000 from the government to support you during your retirement.
Our motto is always 'Free money just take'; but of course that is after you understand all the conditions attached to it.

So, it really depends on what is the end goal you want (immediate cash or monthly retirement income).
You could discuss further in details with an HDB officer or a financial adviser to assist you in making the decision.
Like we said, there is no one-size-fits-all solution, it really depends on what you want and what your circumstances are.

WSG can provide you with a career coach that is able to help you with that. 

And if you are looking for a free career coach, visit Workforce Singapore via the link below.

They can link you up with the career coach and you 

might be able to find new opportunities on their jobs portal.

http://ow.ly/GY8150wlfrF

Recommended Read: CPF LIFE in the Year 2020

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

And for helping us help you, we are going to have a lucky draw.
5 lucky readers who fill in the survey will be selected at random to win $5 Grab voucher.
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Is Technology After Your Job?

In 10 years, the pilot and the cameraman lost their jobs, but new jobs like drone pilot sprang up.
There will always be jobs in the economy, but are we able to take up that job if we do not upkeep our skillsets.
In the past, the pilot and the cameraman have to take on great risk in order to do 360 degrees kind of shots in the sky (imagine spinning the aircraft).
Today, just a drone will do, and if anything goes wrong, it is the drone that gets killed, not the people on board the aircraft.

Ford & Horse Carriages
We might think that technology is killing jobs, killing good jobs like pilots and cameraman.
But that is how capitalism, or how the world works.
Imagine your great-great-grandfather was trained to be a horse-carriage driver and was making a decent living until Henry Ford came in with his cars and completely killed the horse-carriage industry.
Your great-great-grandfather would probably feel angry at Ford and might blame his government for not protecting the horse-carriage industry or his job.
But fast forward to today, do you miss horse-carriage?
Do you think the world would be a better place if everyone owned a horse or rode in a horse-carriage?
Same goes for the elevator operators, people who operate lifts for you so that you can go up or down (Yes, there used to be such a job in case you are too young to know 😉, and back then lifts were a lot more complex than pushing a few buttons).
Can you imagine how much more expensive things will be if we did not improve the lift technology to make it simpler?
Just imagine every HDB, every unit has to contribute a sum of money to pay the lift operators' salary (and we probably need a few on shift work) in order to go up and down the block.

Recommended Read: 6 things to do with your CNY money

Conclusion
Back then, if you make horse-carriages for a living, had you upskill yourself when the car industry came in, you might be able to get a job in the car industry, or maybe in carpentry (since horse-carriages and carpentry seem similar in nature).
If you rode a horse and ferried people around, you could upskill yourself by getting a driver's license and ferry people around in cars.
Technology will continue to change, so will how we live our lives.
The unfortunate thing is, change is going to become ever faster.

Source: reddit

You can sit back and grumble all you want about how you hate this change and how you want things to go back to where it was when it was easier for you, but it is not going to happen.
Change hit the horse-carriage drivers; it hit the elevator operators; it definitely is going to hit you some point in life.
So it might be better if you pick yourself up, train and upgrade your skillsets so that when the unavoidable change comes, you are better prepared for it.

WSG can provide you with a career coach that is able to help you with that. 

And if you are looking for a free career coach, visit Workforce Singapore via the link below.

They can link you up with the career coach and you 

might be able to find new opportunities on their jobs portal.

http://ow.ly/GY8150wlfrF

Recommended Read: CPF LIFE in the Year 2020

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

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5 lucky readers who fill in the survey will be selected at random to win $5 Grab voucher.
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6 things to do with your CNY money

1. Save
Emergency fund, HDB down payment, wedding down payment, car down payment, investment war chest.
These are all good reasons to save your Ang Pow money for.
Your Ang Pow is like a windfall, and like all windfall, you should try and save preferably 50% of it at least.
If you are below 26 years old, you might want to consider Standard Chartered JumpStart savings account - it gives 2% interest on the first $20,000.

2. Invest
What good is it if your money is just sitting in your bank account earning that miserable 0.1% interest.
Make it grow.
Invest in index funds, or stocks, or REITs, or assets that you are familiar with.
Never invest in anything you have no clue about.

3. Pay Debts
Pay down your debts if you have any.
Whether it's a credit card loan, mortgage loan, car loan, student loan, whatever debts you can think of.
Including the friends and family members that you owe money to (if any).
Aim to be debt-free fast!

Recommended Read: Why I Stopped Value Investing

4. CPF
Top up to your CPF or your loved ones' CPF account (Retirement or Special Account).
You get a tax deduction and by putting your money into CPF early, you allow it to earn more CPF interest (4%!)
Consider the top up as planning for your retirement.
If you are not well-versed in investing or have no idea how to do it, then CPF is actually not a bad place to park your retirement savings.

Click here to find out more about Retirement Sum Topping-Up Scheme and click here if you want to do the top-up.

5. Strengthen Relationships
Treat your family/friends/colleagues/subordinates to a meal or coffee.
Build relationships!
They are an important aspect of your life.
People who are healthier and live longer lives all have good relationships with the people around them.
It is a good return on investment if it benefits your physical and mental health.

6. Education
You are the engine of your wealth.
There is no better investment than an investment in yourself
Use the money to educate, upgrade, and upskill yourself.
Maximise your SkillsFuture credits and sign up for courses.
If you are thinking of changing job, WSG might be able to assist you in it.

WSG can provide you with a career coach that is able to help you with that. And if you are looking for a free career coach, visit Workforce Singapore via the link below.

They can link you up with the career coach and you might be able to find new opportunities on their jobs portal.

http://ow.ly/GY8150wlfrF

Recommended Read: CPF LIFE in the Year 2020

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

And for helping us help you, we are going to have a lucky draw.
5 lucky readers who fill in the survey will be selected at random to win $5 Grab voucher.
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!

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Why I Stopped Value Investing

There are many definitions as to what value investing is, it is the kind of question that you will get different answers depending on who you ask.
Generally, there are 2 kinds of value investing.

1. Asset-based: invest in companies selling below their net asset price
2. Income-based: invest in companies selling below their earnings potential

The kind that I stopped doing, is asset-based value investing.

Case Study with Properties:
You deal with buying and selling of properties.
There was a house that you were previously considering buying but did not do so because it was selling at $500k, which you think is not cheap enough.
However, due to a recession in the economy, the owner is now willing to sell the property for $400k if you are willing to sign the deal within 1 week.
This presents you with the opportunity to buy the house for $400k, then take your time and wait for the economy to recover, then find a buyer who is willing to buy the house at $500k, earning a good $100k in the process.
While waiting for the economy to recover, you also made some rental income ($10k per year) renting out the property.

The above scenario happens frequently in the stock market as well.
Just replace the words 'property' with 'stock', 'rental income' with 'dividend'.
A company can have net assets (total asset - total liabilities) of $500k, but the market capitalisation (price) can be $400k.
This presents an opportunity for investors to purchase the company at a discount, and earn a good return on investment when the stock market recognises in the future that it had previously undervalued this company.

Do a quick search on any stock screener and you will see many companies in Singapore selling at below their company's book value (net asset value).
On SGX, there are 156 companies that are selling at half their book value.
Does this mean they are all good investments?

Source: SGX

Recommended Read: CPF Accumulated Accrued Interest

Problems with Asset-Based Value Investing:
1. Time:
It takes time for the market to realise that it had undervalued the company, and subsequently revise the price to make it equal its value.
However, this can take some time, it could be in weeks, months, years, even never.
I have seen a fair number of companies who are undervalued and have remained undervalued for half a decade or more before they are priced to value in the stock market.

2. Worth More Dead Than Alive:
Net Asset Value (NAV) is the remaining value left in the company after all its assets are sold and all its liabilities paid.
It is kind of like declaring that the company is dead, you will cease operations and sell everything.
If you as a person, bought a $1 million dollar life insurance policy, do you call yourself a millionaire?
Well, you are not, but if you do pass away, your beneficiary will become a millionaire.
Same can be said for a company with huge NAV - unless it ceases operations, sells everything, and return those value to shareholders, shareholders will almost never get the value.
But, the chances are, a normal company even though worth more dead than alive, is never going to close itself down; just like how a normal person would not kill themself so that their beneficiary can be a millionaire.

I Still Value Invest
Don't get me wrong, I still do value investing.
Just that instead of asset-based value investing, I do income-based value investing.
To me, investing in a stock is like choosing a life partner, would you prefer

1. a partner who is earning more every year, or 
2. a partner that has a $1 million life insurance with earnings that has not been growing

I'll pick the first one any time, any day.
What about you?
Which will you pick?
Let us know in the comments below!



Recommended Read: Your HDB is like a Stock Option


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Unhappy with your job? There's something you can do about it.
A. Save up enough money from your job so that you can fire your boss - the problem is it might take some time and some effort
B: Find a new job, search for new opportunities. A career coach might be able to help you with that. And if you are looking for a free career coach, visit Workforce Singapore via the link below.
They can link you up with the career coach and you might be able to find new opportunities on their jobs portal.
http://ow.ly/GY8150wlfrF

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