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BBCWatcher

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I want to check with you, how or what do I read from IBKR reports on my performance for IWDA for the past 1 year or so?
Interactive Brokers offers a rich set of custom account statements you can run. Log into the account management (or client portal) section, and you should find the statements section.
 

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Having Trouble Saving?

The BBC reports on some interesting “tricks” you can apply to encourage yourself to save consistently. Researchers in India trialed a “two envelope” scheme. Workers were paid the same wages but split into two envelopes, one with a picture of their children on it. Sure enough, the workers who received their pay split into two envelopes were more reluctant to rip into their children (literally), and they saved more.

You can use the same technique. Pay yourself first — i.e. make the savings portion automatic, using automatic FAST or GIRO deductions, for example — and then attach a photo that’s meaningful to you to that account. It could be a tiled mosaic photo of your first home (if you’re saving for a down payment), with each square filled in as you make progress to your goal. It could be a picture of your child or grandchild, as in the Indian experiment. Or maybe a photo of your parents or grandparents enjoying their retirement in some lovely setting. Whatever works for you.

I recommend doing the same thing with credit cards, by the way: put them on automatic full balance monthly GIRO.
 

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BBCWatcher's Relatively Simple Guide to CPF

Updated February 22, 2023

Here's my simple, general advice on getting the most out of CPF. Exceptions sometimes apply, but this advice is how I would optimize CPF over a lifetime in the majority of cases.

Now

1. Make a CPF nomination. Update your nomination if/as needed.

Early Working Career

2. Make top ups to your own MediSave Account if you qualify for tax relief. MA voluntary contributions must fit within the Basic Healthcare Sum. Up to $8,000 per year is eligible for tax relief.

When You Have a Medical Expense

3. If your MA has reached the Basic Healthcare Sum, if you have a MA payable medical expense, and if you can make a MA top up with tax relief, try paying the medical bill with MA then top up MA within the same calendar month as the deduction and before your payroll cycle MA contribution and any insurance repayment. Otherwise, consider paying in cash so you can collect a credit card rebate (for example) and also avoid losing any MA interest.

Early and/or Mid Working Career

4. In late January every year make a $8,000 (total) Voluntary Contribution/top up to your own MediSave Account and/or Special Account if you qualify for tax relief. Your Voluntary Contribution to MA must fit within the Basic Healthcare Sum. Your top up to your Special Account must fit within the Full Retirement Sum.

5. In late January every year, make another $8,000 (total) Voluntary Contribution/top up to a qualified family member's (such as a nonworking spouse's or elder's) MediSave Account and/or Special Account (or Retirement Account if the recipient is age 55+) if you qualify for tax relief. The same MA and SA limits apply. RA top ups below the Full Retirement Sum qualify for tax relief.

6. If you have at least some Ordinary Account dollars piling up that you won't need specifically for housing, transfer them to your Special Account in every month you have an excess. All such transfers must fit within the Full Retirement Sum and are only possible before your 55th birthday. (However, when market interest rates are exceptionally high you might instead buy some Singapore Government Securities to enjoy higher interest rates.)

7. If you have Ordinary Account dollars still piling up, and if your Special Account has reached the Full Retirement Sum, consider participating in the CPF Investment Scheme (OA) using the lowest cost CPF Investment Account provider and a prudent, low cost investment choice. Don't choose too many separate investment vehicles since each one incurs fees.

8. Don't forget your spouse or partner! For example, if your spouse hasn't yet qualified for maximum CPF bonus interest, try to help him/her out.

Just Before You Take a HDB Loan

9. Consider transferring your (and your spouse's) OA dollars above $20,000 to your Special Account if you wish to avoid the "HDB sweep."

If You're Self-Employed in Singapore

10. You're obligated to make MediSave Account contributions, but consider making "all three account" Voluntary Contributions since they're eligible for tax relief, too.

As You Approach Your 55th Birthday

11. Consider using the Special Account "shielding" technique so that your new Retirement Account is funded primarily from Ordinary Account dollars.

On Your 55th Birthday

12. If you want to withdraw some funds, do it on your 55th birthday from your Ordinary Account while your Special Account "shield" is raised.

13. Consider topping up your new Retirement Account all the way to the Enhanced Retirement Sum. You can transfer OA dollars to RA while your SA is "shielded."

In Your Golden Years

13. If you have spare cash and would like to boost your retirement income for life, consider top ups to your Retirement Account every time the Enhanced Retirement Sum is raised.

14. If you'd like an attractive place to park some funds (at least when market interest rates are low), consider making an "all three" Voluntary Contribution into your OA/SA/MA. If your MA has reached the Basic Healthcare Sum then that portion of your contribution will spill over into your SA (if you haven't reached the Full Retirement Sum yet) or OA. This contribution must fit within the CPF Annual Limit.

15. Unless you're in poor health and/or in financial distress, start your CPF LIFE payouts at age 70 on the Escalating Plan.

16. Don't make your loved ones wait for a bequest that might never come if you merely live past a certain age. With your foundational standard of living assured with ERS-level CPF LIFE, age 70 payout start, Escalating Plan, be generous to your loved ones right away, while you're still around for shared enjoyment. If they'd like to invest your gifts into prudent long-term investments, sometimes including CPF, that's a great way to build truly dynastic wealth. And/or education, a down payment on a house, starting a new business, etc.

When You're a New Singapore Permanent Resident

17. The above advice applies, but (if able, and if market interest rates are low) you should consider slamming lots of dollars into CPF especially during the first couple years when you're subject to reduced compulsory contributions and have more room below applicable limits. As soon as your get your NRIC number assigned you should be able to make CPF contributions. To some degree you can control when your NRIC number is issued, so try to get that done as quickly as possible after your In Principle Approval (IPA) letter.

If You're a U.S. Person (or Become One)

18. CPF is still attractive, but you should completely avoid the CPF Investment Scheme due to PFIC complications except for simple vehicles such as Singapore Government Securities. You'll need to report your employer's share of CPF contributions as earned, non-excludable income. All interest credited across all CPF subaccounts should be reported every year and is U.S. taxable. Thus there is no U.S. tax on lump sum CPF withdrawals (except for the final bit of interest) since all the income and interest is reported and taxed as/when it flows. CPF LIFE annuity payouts will be subject to the IRS's after-tax annuity rules. Your CPF account should be reported annually in FinCEN Form 114 ("FBAR") and IRS Form 8938 ("FATCA"), as applicable. CPF may effectively reduce your U.S. Social Security retirement benefits via the Windfall Elimination Provision (WEP). Be aware of such impacts and plan for them. You can probably avoid WEP by making a full withdrawal from CPF before age 65 (if able), but of course a full withdrawal also ends your CPF interest earning and forecloses CPF LIFE payouts.

If You Become a Tax Resident of Another Country

19. Singapore has very few tax treaties with other countries, and in most cases CPF (and your other assets and income) will fall under the tax system of your country of residence without any special considerations or favors. Report and pay taxes according to the tax laws and tax rules in your country of residence.

If You Have an Elder with Little or No Retirement Savings

20. Deposit some dollars into his/her Retirement Account to boost his/her lifetime income. Matching dollars from the government and/or tax relief may be available.
 
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bobobob

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Hi bbc, how would you approach retirement drawdown for someone with both a boglehead style portfolio of stock + bond, and a healthy, ers level cpf stash?

I know a safe drawdown rate from the stock /bond portfolio would be 3% pa, but is there any adjustments that should be made when accounting for cpf life pay outs that begin at 65-70 years of age?
 

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Hi bbc, how would you approach retirement drawdown for someone with both a boglehead style portfolio of stock + bond, and a healthy, ers level cpf stash?

I know a safe drawdown rate from the stock /bond portfolio would be 3% pa, but is there any adjustments that should be made when accounting for cpf life pay outs that begin at 65-70 years of age?
If you have a CPF LIFE payout stream in your pipeline, especially if it's an Escalating Plan stream, and if you feel 3%/year is a safe rate of drawdown, then you can "front load" (pull forward) the drawdown somewhat. In other words, you should be able to exceed 3%/year before starting CPF LIFE payouts if you're then going to aim below 3%/year thereafter.

But it's not 3.5%/year before and 2.5%/year after, for example (+0.5% before, -0.5% after). When you "front load" a drawdown you're giving up some future yield. You should take that into account.

The Escalating Plan can be helpful because it's the most "back loaded" CPF LIFE payout stream, meaning it allows you to be that much more "front loaded" when drawing down from other assets.

Of course you're not required to spend accumulated wealth, although (as I often suggest) it's quite nice to give more earlier to others, such as to loved ones and to charities.
 

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Hi BBCWatcher, I am keen to get VDTY - Vanguard USD Treasury Bond UCITS ETF from LSE using IB. I am a Singaporean, not a US citizen or PR.

I am concerned that there may be a foreign withholding tax there. From my limited understanding, there should not be withholding tax for USD Treasury Bond directly.

However, I am not sure for US bond ETF though. Do you have any idea on the above-mentioned?
 

BBCWatcher

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Hi BBCWatcher, I am keen to get VDTY - Vanguard USD Treasury Bond UCITS ETF from LSE using IB. I am a Singaporean, not a US citizen or PR.

I am concerned that there may be a foreign withholding tax there. From my limited understanding, there should not be withholding tax for USD Treasury Bond directly.

However, I am not sure for US bond ETF though. Do you have any idea on the above-mentioned?
Check the prospectus, but I think you're OK in that respect.

VDTY is a distributing fund. If you prefer an accumulating fund that holds similar maturity U.S. Treasuries, take a look at CBU0 (Blackrock iShares). The expense ratio is slightly higher (0.20% versus 0.12%), but you avoid broker commissions if you're reinvesting dividends. And VDTY distributes dividends monthly, so there are a lot of dividends to reinvest. Both VDTY and CBU0 are relatively small funds, so trading volumes will be low. However, CBU0 is bigger, so it should have narrower bid-ask spreads and be somewhat less dependent on the market makers.

Why do you want VDTY, though? If you're betting on a U.S. recession that market consensus hasn't already priced in fully, there might be some better ways to place such a bet.
 

MrHighlander

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Hi BBCW, what are your views on the better ways to bet that market hasn’t fully priced in the recession ? Would be interested to have your thoughts

Check the prospectus, but I think you're OK in that respect.

VDTY is a distributing fund. If you prefer an accumulating fund that holds similar maturity U.S. Treasuries, take a look at CBU0 (Blackrock iShares). The expense ratio is slightly higher (0.20% versus 0.12%), but you avoid broker commissions if you're reinvesting dividends. And VDTY distributes dividends monthly, so there are a lot of dividends to reinvest. Both VDTY and CBU0 are relatively small funds, so trading volumes will be low. However, CBU0 is bigger, so it should have narrower bid-ask spreads and be somewhat less dependent on the market makers.

Why do you want VDTY, though? If you're betting on a U.S. recession that market consensus hasn't already priced in fully, there might be some better ways to place such a bet.
 

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Hi BBCW, what are your views on the better ways to bet that market hasn’t fully priced in the recession ? Would be interested to have your thoughts
I don’t recommend you do this, but I’ll answer the question.

There are government bond plays, yes, but the options and futures markets offer more powerful pro-recessionary bets atop the bonds. You could short sell stocks that do poorly in recessions or go long on stocks that do well. In this last category some likely, random examples include Walmart, Dollar Tree, Dollar General, Yum! Brands (Taco Bell, KFC, Pizza Hut), Del Taco, Denny’s, beer companies (particularly companies selling cheap beer), and the really budget-oriented food companies (example: B&G Foods, which makes B&M baked beans and Underwood canned meat).
 

Clay Pot

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Thank you for replying. I am interested in a distributing fund because I am planning to FIRE and am thinking of ways to increase passive income, besides relying on REITS dividends. Are there any distributing fund you know of with stable income?

Check the prospectus, but I think you're OK in that respect.

VDTY is a distributing fund. If you prefer an accumulating fund that holds similar maturity U.S. Treasuries, take a look at CBU0 (Blackrock iShares). The expense ratio is slightly higher (0.20% versus 0.12%), but you avoid broker commissions if you're reinvesting dividends. And VDTY distributes dividends monthly, so there are a lot of dividends to reinvest. Both VDTY and CBU0 are relatively small funds, so trading volumes will be low. However, CBU0 is bigger, so it should have narrower bid-ask spreads and be somewhat less dependent on the market makers.

Why do you want VDTY, though? If you're betting on a U.S. recession that market consensus hasn't already priced in fully, there might be some better ways to place such a bet.
 

BBCWatcher

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I am interested in a distributing fund because I am planning to FIRE and am thinking of ways to increase passive income, besides relying on REITS dividends.
That’s not a requirement, really. Just sell some shares every calendar quarter, and you’ve got your distribution. And if you’re doing that at a very safe withdrawal rate, no problem.

Yes, I know, there are thousands of people running around shouting the words “passive income,” as if it’s some magical spell, for every one person who asks “Don’t total returns net of costs matter?”

There are some multi-billionaires who have little or no passive income. You know what some of them do? Borrow, using a tiny fraction of their wealth as collateral. Then they refinance, borrowing more. Loop, repeat. And you know why they do that? Because they end up paying little or no tax, and interest rates on secured loans are low. No passive income — imagine that. ;)

Are there any distributing fund you know of with stable income?
Well, OK, answering your question, you could take a look at so-called “equity income” funds. WQDV traded in London is such an example. Also, the classic “grandmother” approach was to buy the stocks of regulated utilities, and to some extent that’s still possible via IUUS, especially if you don’t mind your electric utilities generating U.S. dollars specifically. But that’s an accumulating fund, and evidently you don’t like those. :s22:
 
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As reported previously, I have the happy problem of cash piling up, so starting from December, 2018, I bumped my monthly flow into investments (with no change to investment allocations) by about 8% to a new, higher flow rate. Fortunately, I’ve never had to skip a month or to reduce the flow rate, which is just how I like it/planned it. Whenever I make a change like this I expect it to be sustainable, and it has been. If cash continues to pile up, I’ll raise this monthly flow rate again.
....And I've decided to do exactly that. I'm bumping the monthly flow up again, same increment.
 

Listopad

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....And I've decided to do exactly that. I'm bumping the monthly flow up again, same increment.

could you share what's your portfolio allocation like?

what do you mean by increasing monthly flow? without this increased flow to vesting, you have left it in just cash ?
 

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could you share what's your portfolio allocation like?
Low cost stock and bond index funds, well diversified, with minor percentages in property, a few individual stocks, a few directly held government bonds and bond-likes, and (of course) bank deposits. Age, risk, and U.S. tax appropriate, with almost no manual effort required.

It's pretty simple, but it could be simpler, with fewer elements. I expect I can simplify things a bit within the next few months.

what do you mean by increasing monthly flow? without this increased flow to vesting, you have left it in just cash ?
Increasing the monthly amount used to purchase the stock index funds, in particular. When I feel there's a new, higher flow level that I can sustain for years to come, and to avoid too much cash accumulating (a happy problem, but a problem), I raise the monthly investment flow amount. Fortunately I've never missed a month and have never reduced the amount.

Some of the monthly flow is allocated to investment gifts. I believe in being generous sooner rather than later.
 

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Low cost stock and bond index funds, well diversified, with minor percentages in property, a few individual stocks, a few directly held government bonds and bond-likes, and (of course) bank deposits. Age, risk, and U.S. tax appropriate, with almost no manual effort required.

It's pretty simple, but it could be simpler, with fewer elements. I expect I can simplify things a bit within the next few months.


Increasing the monthly amount used to purchase the stock index funds, in particular. When I feel there's a new, higher flow level that I can sustain for years to come, and to avoid too much cash accumulating (a happy problem, but a problem), I raise the monthly investment flow amount. Fortunately I've never missed a month and have never reduced the amount.

Some of the monthly flow is allocated to investment gifts. I believe in being generous sooner rather than later.

investment gifts?

what's the usage of bank deposits?
 

BBCWatcher

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investment gifts?
Sure. Gifts to others in the form of mutually agreed investment accounts, and in appropriate, compliant ways.

what's the usage of bank deposits?
I do like to eat, and I pay the electric bill every month, as examples. One needs a little money on account for day to day expenses.
 

Listopad

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Sure. Gifts to others in the form of mutually agreed investment accounts, and in appropriate, compliant ways.


I do like to eat, and I pay the electric bill every month, as examples. One needs a little money on account for day to day expenses.

haha of course. I was wondering if these were fixed deposits of certain tenor. ok get you.
 
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