I would like to seek your opinion. I am turning 35 this year and just started my investing journey with small amount. I am also getting married next year with plans to get a 4RM resale flat with a budget of 450-500K.
Congratulations on the marriage! Of course you'll need to muster a down payment (some of which can be from CPF Ordinary Accounts if you wish) and a certain amount of budget for settling in, and that particular portion of your combined household wealth should be in something short-term and safe.
Both me and my fiancee are working.
Just remember next time that your fiancée (and then spouse) always comes first.
I earn about 5.8K monthly while she earns 4K monthly. Currently I DCA 500$ (60% STI ETF, 40% MBH) every month via FSMOne. I also just started investing 250$ monthly in SYFE 100% reits.
I don't like that last one at all, and just a comment here (that you've already realized) that you're 100% invested in Singapore-based assets. That's not what I'd consider "at least reasonably well diversified" since you're lacking geographic distribution, and I think it's important to have some diversification to improve the odds of a more successful, long-term outcome. But it looks like you've already figured that out, so that's great.
I am now looking at investing in foreign etf and would like to add VWRA for diversification. I am planning to do it long term for about 20 years with investment of 500$ monthly in VWRA. May I know which platform will you recommend?
At that pace you're probably going to be best served (currently) by Standard Chartered, with S$1,500 buys every calendar quarter let's suppose. If you could drop the S-REIT and do S$1,500 every two months (or S$2,250 every quarter), that'd be even better in my view.
And when is the good time to do it? We plan to have kids 2 years later.
Well, you already have a long-term investment flow with a lack of geographic diversity, so you'd fix that now. Whether your household should have a long-term investment flow (above CPF)
at all primarily depends on whether you have set aside sufficient emergency reserve funds and covered your genuine insurance necessities first. (Plus you've got the home purchase coming up, but I assume you've both set aside some OA and cash for that.) If that's all done, congratulations, carry on.
I am also looking at cpf as another form of diversification. I have plan to top up 7K yearly. I have about 141K in my OA and my fiancee has about 77K in her OA. I have plan to tell her that we will use cpf OA for the HDB down payment and for monthly installment, we will use cash to pay.
You'll still need some cash. Also take a look at how much OA you actually need (for the portion that can be used for a down payment and for mortgage servicing) since $218K seems like rather a lot. If you have surplus/excess OA (likely), then consider transferring the surplus/excess to SA. And try to do that in a balanced way on a household basis. Your fiancée's SA is probably lower than yours too (and with less tax relief), so that's probably the first SA in the house that ought to get some OA to SA transfer love. But both are possible.
Do you recommend HDB loan or Bank loan and how long the tenure should we take?
For tenure, that's easy: take the longest offered as long as there are no worse terms and conditions. You can always make a longer term mortgage a shorter one by accelerating repayment (as long as there's no prepayment penalty -- and make sure there isn't after the fixed interest rate period), but not the other way around (without refinancing, which may not be possible). It's probably not
wise to accelerate repayment, but it's possible.
As far as HDB loan versus bank loan, that's a
really interesting question. I'd say for a bank loan I'm just not interested in anything linked to an interest rate that the lender solely controls (for hopefully obvious reasons), so that really means looking for SIBOR-linked loans. You have a bigger down payment (OA and cash) you have to make with a bank loan. You can turn a HDB loan into a bank loan via refinancing, but not the other way around. And a HDB loan is less likely to rise above 2.6%, and if it does it'll only do so if the OA interest rate rises above its floor. HDB tends to be a very lenient lender if the household encounters tough times, and the Home Protection Scheme isn't a bad thing. If you value
stability, a HDB loan is really terrific. But then there are those sub-2.0% interest rates right now. And if you take a HDB loan there's the "HDB sweep," which only allows you to keep $20K each in your Ordinary Accounts. (Although you've anticipated this. OA to SA transfers neatly take care of that problem.)
It's a tough decision, truly. Both offers are quite excellent in their own ways, and it's always tough to choose between two great offers. If it were me I think I'd take the HDB loan since that'll allow you to preserve some more cash and liquidity outside CPF, not a bad thing when you're planning to start a family. You'll probably will need a little more life insurance, and the HPS is a nice affordable way to get a form of life insurance. Plus you can change your mind later on as your leasehold equity grows.
Speaking of which, will this resale unit have a remaining leasehold that takes the youngest spouse at least to age 110? I think that's a prudent thing to do if you can afford it, and judging by the estimated purchase price and unit size that seems like it's what you're doing. If the youngest spouse is age 30 right now, then a unit with 80 or more years of leasehold remaining gets the job done.
We will both keep about 20K behind in OA for emergency fund for our monthly installment.
That's all you're allowed to keep with a HDB loan -- or rather $20K per spouse ($40K total). But that's usually a good amount of buffer, and (if you want it to) the buffer builds back up after you pick up the keys and continue working. Yes, OA to SA transfers and (secondarily, once your SA hits the Full Retirement Sum) the CPF Investment Scheme (OA) can "shield" from the sweep.
How much should we keep for our OA as I am thinking the balance can be transferred to SA. I have about 41K in my SA and 54K in my MA.
Ooops, one of these OA figures is not right. Is the figure above actually the total CPF number (OA+SA+MA)?
You really just want to estimate how much "buffer" you feel comfortable maintaining in terms of months of mortgage payments. And you'd probably just use the HDB loan monthly payment (at maximum available term) as your payment estimate, even if you haven't made a decision about financing yet. Do that on a household basis, so you can maintain up to S$40K in your OAs ($20K each) with a HDB loan. How many months of loan payments does S$40K represent? It should be a pretty good number, actually.
Should I top up my MA first before the 7000 yearly to my SA?
I would if you're chasing tax relief. MA funds can be useful at any/every age, they also earn 4%, and they're tougher to squeeze in as your progress in your career because they must fit within both the CPF Annual Limit and Basic Healthcare Sum. Also, once your MA hits the BHS those MA dollars from your compulsory contributions "spill over" into your SA and fill it up to the Full Retirement Sum, and so does MA interest. (Then, with MA at BHS and SA at FRS, the MA portion of compulsory contributions "double spills" into OA.) So those spillovers start to light a rocket under your SA anyway. It doesn't work the other way around -- there's no "spillover" from SA to MA.
And when is the good time to do the OA transfer to SA and also also topping up the MA and SA respectively?
OA to SA transfers you should do as soon as you identify a "surplus" dollar in OA. That could be every month, as payroll contributions stream in. But you want to try to do it strictly before the end of the month, even if that's 11:00 p.m. on the last day of the month. If your payroll contributions are typically landing in your CPF accounts on the last or second to last day of the month, then it's advantageous to swoop in and do the transfer within that same month if possible. That's because the dollars transferred start earning the higher SA interest backdated to the first of the same calendar month.
For MA and SA top ups, much same thing: second to last day of the month via PayNow QR, I'd recommend. That's because the cash you're using to make the top ups is presumably earning a little bit of interest outside CPF, and CPF won't pay any interest on those top ups until starting the first day of the next calendar month, so near the end of the month is good. One exception: if you're trying to beat a payroll cycle. For example, the Basic Healthcare Sum is raised on January 1, and that could open up a gap between your MA balance and the new BHS. Your December payroll cycle might get credited on January 10th (let's suppose). In that case you might want to beat the payroll cycle with a MA top up on January 6th (let's suppose), assuming you don't expect to exceed the CPF Annual Limit in that new year and want to get some tax relief.
I am personally covered for AIA Term insurance with TPD and CI rider until 60yo and AIA Max essential A. Do you think is wise for me downgrade to AIA A Saver?
Yes, or the new rider. The "zero dollar" riders never made much financial sense in this country with compulsory medical savings.
Capping out of pocket costs for covered services is a good thing for insurance to do, but zero deductibles and co-pays is unnecessary. Keep in mind a private hospital plan of any sort is quite expensive, and you'll experience the double joys of higher medical inflation and age-based premium escalations aboard this particular train.
Where's your disability income insurance (DII)?
May i seek your opinion on legacy plan from GE which is a single premium plan with guaranteed and non guaranteed bonuses?
The selling point is you only need to come out with the estimated 30% down payment and the rest of the premium can be financed by bank with interest tagged to sibor. The income generated by the legacy plan will cover the monthly financing. Its concept is similar to buying a investment property for tenancy but in a more simpler manner.
Well, what's the spread above SIBOR, what's the insurer guaranteed return, and what pain is involved to get out (what's the surrender value look like initially and over time)? Presumably this isn't a sure fire money making machine.
For perspective, Interactive Brokers is currently (as I write this) charging a 1.56%/year margin interest rate on U.S. dollar margin. You
could borrow on margin at that rate, in that currency, to go do anything IB can facilitate with U.S. dollars. Is that wise? Well....