You know I'm seriously considering this now. The income from the options should certainly fund a sizeable term life policy...
However,it does seem like a hassle to get the funds back after taxes- not sure if I want the family to have to go through all that, so need to see how that portion can simplified first.
No, not actually. The broker is responsible for withholding U.S. dividend tax, but the broker is not responsible for withholding U.S. estate tax, absent some extraordinary compliance-related or international sanctions-related event (which isn't estate tax specific). The U.S. estate tax is owed 9 months after the decedent's death and the executor has the legal duty to pay it. But that's plenty of time for a life insurance payout to be processed and received, and it's not as if your survivor(s) ought to be liquidating the inherited IB account assets any time soon anyway. Total, rapid liquidation could be the worst thing to do from an investment point of view, and there's no forced sale required, at least neither a quick nor a complete one. The smartest move may be simply for the executor to arrange for IB to transfer the account to a new account in your survivor's name, settle the estate tax about 8 months after you die (from life insurance proceeds), then gradually, gently reorient the portfolio to a posture that's more appropriate for your survivor's needs -- maybe more conservative (more bonds, fewer stocks) -- if that's even necessary.
Currently I contributing 900 of my monthly income to investment, specifically 100 to STI through POSB RSP and the rest to a stock.
Which stock?
Come later this June I will be able to raise the investment amount to 1500.
OK, before I beat up on you gently -- and please take it as minor quibbles really -- the big part is "Congratulations." Overall you're chugging along nicely, it appears. I'd tweak a few things (my opinions), and let's get to that now....
Current Holdings
REITs : 35K
I'm not a big fan. When you buy ES3 or G3B (Straits Times Index funds), and of course your home, you're already heavily investing in Singapore real estate. The STI includes stocks like Ascendas and CapitaLand that are REITs. It's pretty insane, really. One of these days I expect the cup of coffee I sometimes buy at 7-11 to come with a sticker on the side of the cup that says "Here's your 0.001 share certificate in XYZ REIT."
You're not in any danger of being underweighted in Singapore real estate. The bigger danger is being overweighted. Anyway, for your Singapore leg of your portfolio, just keep it simple and buy ES3 or G3B. And the real estate part takes care of itself, automatically.
Cash: 40K (20K To be spent on wedding related expenses soon)
Am I invited?
You could tuck the wedding money away in a Singapore Savings Bond if "soon" is "a few months from now" or more.
HDB Loan Balance of around 300K
OA : 8k
SA : 20K
MA : 25K
How do your spouse's/partner's CPF balances look?
With respect to CPF, one important point is that you haven't yet maxed out your bonus interest, which applies to the first $60,000 (you're at $53,000). And there's a tax relief opportunity, too. So if you can make a top up for tax relief this month, that'd be nice. A 5% interest rate plus tax relief is tough to beat. That could be a top up to MediSave (if you expect to have room below the CPF Annual Limit this year), to your Special Account (up to $7,000 is eligible for tax relief there), or some of both.
My initial aim is going for a lifestyle supported by passive income through REITS and dividend yielding stocks.
Why?
I get a little upset with this "passive income" fetish, so let me vent briefly. You're working, earning an income, and saving from that income, presumably. So why do you need income distributed from your investments? You don't. Total returns net of costs are what matter, and that's the combination of capital gains, dividends, and interest. If you invest in something tomorrow, and it doubles in value next week, keeps doubling every 5 years, and never pays any dividends, would that upset you? I hope not.
The second point is that there's actually often a higher cost, including a higher tax, when a stock or other investment distributes dividends versus reinvesting in the company or even just buying back its own stock through share repurchases. So if you're actively seeking dividends, you're also in a very real sense actively seeking investments that have higher cost structures and that pay higher taxes. I'm all in favor of that if you're the one doing it since I like many government-provided goods and services that taxes support, so thank you for being so generous to me that way. But, if I were you, I wouldn't
volunteer to pay higher direct or indirect taxes when investing.
Anyway, focus on age appropriate, prudent, long-term investing that strives for total returns net of costs. And if those total returns are in the form of capital gains (which are generally more tax efficient, at least to non-U.S. persons resident in Singapore), fantastic!
I do know the importance of holding an ETF for diversification (persauded by your comments on Japan's economy as well as a book) so I think going for a global ETF would be a good idea (after saving enough for the 100K minimum account amount to avoid the monthly inactivity fees for IB).
No, that's not a problem (IB's monthly minimum commission). You have to pay some level of broker commissions anywhere and everywhere when you're buying a global stock fund such as IWDA or VWRD, and IB charges a minimum of US$120/year (US$10/month) for total account values between US$2,000 and US$100,000. But US$120 is also the maximum commission if you're a typical (or even somewhat atypical) long-term investor accumulating one global ETF such as IWDA or VWRD. And US$120/year is a very competitive commission, so attractive that it still beats everyone else under reasonable assumptions.
The STI is going to be used to fund my 2nd child's university fee (projected to be around 46K in 27 years time).
That's planning ahead! The key assumption is that your second child will attend university in Singapore and pay a tuition bill in Singapore dollars, because the STI is somewhat correlated with Singapore dollars. That's not a given, though, is it? If your second child attends Harvard or Oxford or the University of Tokyo (as examples), it's a different story.
Since this bill (in whatever currency) is 27 years out, I think I'd just roll it into your overall savings/investing plan, and your allocations/mix of local versus global and stocks versus bonds wouldn't be much different, really. As you get closer to "T-Date" (tuition date), you could gradually ease into some investment grade or government bonds in the expected currency.
We also aim to reduce our HDB loan every year by contributing 5k in total annually.
$5K extra, I assume you mean (or about $400/month extra). Well, I'm not enthusiastic about that idea when your HDB loan is at 2.6% and those dollars would probably be working harder and generating more medium-term and long-term wealth elsewhere. I consider 2.6% to be comparatively somewhat cheap money in today's environment, and that 2.6% is not going to budge unless and until market interest rates move upward a lot -- whereupon your CPF interest rates will ratchet up, too. And you always have the future option of refinancing with a bank loan if/when interest rates fall back to historically low levels -- not now, since the HDB loan at 2.6% is reasonably attractive, I'd say.
Anyway, to net it out, that's cheap money, really. Maybe getting cheaper in the coming months and years as it stays fixed but bank mortgage interest rates creep up. (We'll see.) I would just continue paying that mortgage at normal, scheduled pace -- and continue accumulating wealth that's working harder for you, meaning I'm not giving you permission to go buy 3 iPhones instead of saving/investing that $5,000 extra.