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tangent314 22-07-2018 11:18 PM

Quote:

Originally Posted by MrHighlander (Post 115627777)
Thank you BBCW. Just to clarify a bit more, SA cash top ups will form the *first* amounts of one’s FRS up to as much as possible, and then the rest will be from employer/employee contributions? Is that correct ? Using an example, so if my OA is 150K and SA 200K (out of the SA 200k is 40K cash top up) - based on the currrent FRS of 161K, one can withdraw anything above 161K (I.e. 189K at age 55) ? The SA cash top up will definitely from the FRS sum (i.e freeing up the *non* top up monies to be withdrawn)?

At age 55, the FRS of $171k is simply taken from your SA, leaving you with $150k in your OA and $29k in your SA.

If you use the SA shielding trick by making use of CPFIS to invest $160k of your SA, then $40k is taken from your SA and $131k from your OA. This will leave you with $19k in OA and $160k in SA after you cash out your CPFIS investments.

Quote:

In addition, what do you think of SRS? I am thinking of opening SRS to buy ES3 through Vickers to earn on tax relief. I know there is a 5% penalty on early withdrawal but the tax relief sounds great. And if am unemployed for whatever reason for a period of time later on I can withdraw those funds (full tax I know at that time but may easily slot into much lower tax brackets since I am unemployed). Any views ?
For most people, SRS is a good idea that will save you money. However there is an extreme case where if for some reason you are earning a LOT more money at retirement age than at current age, you might end up paying more tax because 50% of your withdrawals is subjected to tax.

Just remember you have enough emergency funds in cash so that you should not have to resort to early withdrawal from SRS.

MrHighlander 22-07-2018 11:27 PM

Quote:

Originally Posted by tangent314 (Post 115628360)
At age 55, the FRS of $171k is simply taken from your SA, leaving you with $150k in your OA and $29k in your SA.

If you use the SA shielding trick by making use of CPFIS to invest $160k of your SA, then $40k is taken from your SA and $131k from your OA. This will leave you with $19k in OA and $160k in SA after you cash out your CPFIS investments.



For most people, SRS is a good idea that will save you money. However there is an extreme case where if for some reason you are earning a LOT more money at retirement age than at current age, you might end up paying more tax because 50% of your withdrawals is subjected to tax.

Just remember you have enough emergency funds in cash so that you should not have to resort to early withdrawal from SRS.

Ahh typo on my part earlier - have since edited it to reflect the FRS sum of 171K.

My understanding is that cash top up to SA can’t be used for CPF investment scheme. Also,on my earlier question that TOP up must will be used first to form the FRS (freeing up non top up monies to be withdrawn at 55) - is that true ?

gameterminator 22-07-2018 11:44 PM

Dear BBC,

I have followed through your thread and will like to seek your advice as my scenario was slightly different from typical Singaporeans. I am 34yr old currently based in HK for 1 yr+ as my wife is HK-er (not planning to have kids). Current portfolio:

SGD$60,000 in cash deposits
HKD$240,000 in cash deposits
Coverage of $500k in TPD under Aviva Mindef Term life
Coverage of $200k in CI under AXA DPI
Coverage of $400k in PA under Aviva Mindef
Basic shield plan from Income - Enhanced Incomeshield Advantage with assist rider advantage

We are not sure that we will retire in Sg or HK. First of all, I am a firm believer of BTIR. I guessed i have covered myself sufficiently for insurance coverage and emergency fund for 6 months. Based on ST & your recommendation, I shall allocate:
38% for ES3, 38% for IWDA and 24% for A35 (or maybe SSB?)
As for the bond allocation, i have checked HK ETF bonds, and is mostly linked to China and the yield is quite low, so shall i stick to Sg bonds instead. As for local stock & bond allocation, I am okay to go for HK or SG ETF as long as it benefit me. I can set aside HKD$6k to $10k per month to invest. Should i open an account with SCB, IB or platform from HK to trade? As for my cash on hand currently, shall i do it in lump sum or dump it in monthly?

You also mention that i can do tax relief by topping up my SA or SRS account, but since i don't pay tax in SG currently, i can skip this part until i return back to SG for work?

As for re balancing, do i need to do re balancing every month if i DCA every month, or i just blindly stick to my allocation regardless of the price increase or decrease and do re balancing during May n Nov?

Shall wait for your great advice. Thanks

tangent314 23-07-2018 12:37 AM

Quote:

Originally Posted by MrHighlander (Post 115628475)
My understanding is that cash top up to SA can’t be used for CPF investment scheme. Also,on my earlier question that TOP up minors will be used first to form the FRS (freeing up non top up monies to be withdrawn at 55) - is that true ?

From what I've read on the CPF documents, I don't see any distinction between how cash top ups and normal contributions with regards on how they can be used. The only restriction I can see is that you cannot use CPFIS on the first $20k of OA or $40k of SA. I've never seen anyone suggest otherwise before either.

tangent314 23-07-2018 12:59 AM

Quote:

Originally Posted by gameterminator (Post 115628710)
Dear BBC,

I have followed through your thread and will like to seek your advice as my scenario was slightly different from typical Singaporeans. I am 34yr old currently based in HK for 1 yr+ as my wife is HK-er (not planning to have kids). Current portfolio:

SGD$60,000 in cash deposits
HKD$240,000 in cash deposits
Coverage of $500k in TPD under Aviva Mindef Term life
Coverage of $200k in CI under AXA DPI
Coverage of $400k in PA under Aviva Mindef
Basic shield plan from Income - Enhanced Incomeshield Advantage with assist rider advantage

We are not sure that we will retire in Sg or HK. First of all, I am a firm believer of BTIR. I guessed i have covered myself sufficiently for insurance coverage and emergency fund for 6 months. Based on ST & your recommendation, I shall allocate:
38% for ES3, 38% for IWDA and 24% for A35 (or maybe SSB?)
As for the bond allocation, i have checked HK ETF bonds, and is mostly linked to China and the yield is quite low, so shall i stick to Sg bonds instead. As for local stock & bond allocation, I am okay to go for HK or SG ETF as long as it benefit me. I can set aside HKD$6k to $10k per month to invest. Should i open an account with SCB, IB or platform from HK to trade? As for my cash on hand currently, shall i do it in lump sum or dump it in monthly?

You also mention that i can do tax relief by topping up my SA or SRS account, but since i don't pay tax in SG currently, i can skip this part until i return back to SG for work?

As for re balancing, do i need to do re balancing every month if i DCA every month, or i just blindly stick to my allocation regardless of the price increase or decrease and do re balancing during May n Nov?

Shall wait for your great advice. Thanks

I would open an IB account. With your current holdings, there will be some charges, but it will be quite small and eventually it will disappear when you hit US$100k. The best part is, you may be able to get around the restriction that prevents SG residents from buying from SGX through IB.

Instead of using A35 or SSB for your bond portion, I would simply top up CPF SA. 4% is hard to beat especially if you are getting an additional 1% on the first $40k-60k. Caveat is that the money will eventually be funneled into CPF Life and you get it back as a life annuity in SGD, but that may not be a bad thing.

BBCW would tell you to allocate more (80% of equities) to IWDA than ST recommends (50%). In your case you may also want to allocate some into something like 2800.HK also. So perhaps something like 15% ES3, 15% 2800, 70% IWDA.

Statistically speaking, it is nett win to do a lump sum investment. However if you lose, you can lose a LOT, so splitting it over 6 months is more than acceptable.

There are various strategies to re-balancing. Ideally you simply change your monthly allocation to the one instrument that will bring you back closer to your target allocation. This results in the lowest fees.

BBCWatcher 23-07-2018 08:06 AM

To repeat, SA funds transferred from OA are not treated any differently than any other SA funds. The only SA funds that are treated any differently, and then only if you are trying to participate in CPF LIFE at the Basic Retirement Sum (BRS) level — not something I’d recommend! — are cash top-up funds directed into your SA via the Retirement Sum Topping-Up Scheme. RSTS funds are still your funds, still earning 4+% interest, and they will be paid out in CPF LIFE annuities (or to your CPF nominee if you should die too early and still have a residual).

Quote:

Originally Posted by tangent314 (Post 115628360)
For most people, SRS is a good idea that will save you money. However there is an extreme case where if for some reason you are earning a LOT more money at retirement age than at current age, you might end up paying more tax because 50% of your withdrawals is subjected to tax.

Or if you have been highly successful in your investing, and your SRS grows to be so big that you cannot avoid income tax. Or some combination.

CPF and Child Development Account incentives (tax relief, matching funds) are more attractive than SRS, so you should use your savings dollars to exhaust those opportunities first. SRS then can be attractive in your mid to late working career, typically. SRS does not work well if you expect moderate or higher taxable income in your retirement years, notably property rental income. Also, SRS is only mildly Singapore tax advantaged. If you move to another country while you have a SRS account, whether you’re eligible to withdraw or not, then that country’s tax code will probably tax your SRS along the way.

BBCWatcher 23-07-2018 08:30 AM

I’ll add a few thoughts....

Quote:

Originally Posted by gameterminator (Post 115628710)
Basic shield plan from Income - Enhanced Incomeshield Advantage with assist rider advantage

I wouldn’t call that coverage “basic.” That’s a public hospital A ward coverage plan with capped out-of-pocket/Medisave costs for covered services. It’s at least a little more than basic.

Quote:

We are not sure that we will retire in Sg or HK. First of all, I am a firm believer of BTIR. I guessed i have covered myself sufficiently for insurance coverage and emergency fund for 6 months.
You’ve got a nice emergency reserve fund, yes. As for insurance, I get concerned when you don’t have disability income insurance (DII), a.k.a. income protection insurance in some countries. I think TPD, CI, and PA are not super essential, but even if you think they are, DII is really foundational, in my view. Everything you’ve described hinges on continuation of an income, and that’s the stuff you want to insure: your ability to earn an income. The mosaic of TPD/CI/PA only very imperfectly does that. DII is at least much closer to the ideal protection against loss of that future earning potential. That said, it appears you’ve got the MINDEF group disability insurance from Aviva, and that’s a “weird” policy. It’s not really DII, but it’s a little more than TPD, as I understand it. It’s a TPD policy with a couple DII pretentions.

I’m just describing how I feel about insurance needs. There’s also the fact that it’s difficult to get and to keep DII when you’re internationally mobile. There are a couple specialist carriers that offer it, and it might be available in Hong Kong.

Quote:

Based on ST & your recommendation, I shall allocate:
38% for ES3, 38% for IWDA and 24% for A35 (or maybe SSB?)
Not my recommendation. ;)

At age 34, I don’t think there’s any urgency to restrict your stock investing to “on shore” market(s). Shiny Things and I might disagree about that. There’s stronger merit for “on shore” bonds, especially when you’ve got some good opportunities. I agree that there’s still some merit in giving CPF some attention even while outside Singapore. SSBes are good too, agreed. (I think SSBes beat A35 for long-term investors until you get to quite high amounts of wealth.) As for stocks, since you’re not sure where you want to retire, I think you can just keep it simple and go global. If you want to have some “on shore” stocks then I’d just add a little — something like 10% of your stocks in the STI and 10% in the HSI. I wouldn’t go higher than that at this point in time — most should be global, in my view. (Lower is OK.) Since you’re a resident of Hong Kong you can do all your stock investing via Interactive Brokers if you wish, including the Singapore part.

Quote:

As for the bond allocation, i have checked HK ETF bonds, and is mostly linked to China and the yield is quite low, so shall i stick to Sg bonds instead.
No, I’d still include some. If there’s an investment grade, low cost, Hong Kong dollar denominated corporate bond fund, you could consider that. Or you could do something like ticker symbol CORP, the Blackrock iShares fund traded in London/domiciled in Ireland.

Quote:

As for my cash on hand currently, shall i do it in lump sum or dump it in monthly?
Presumably you’ll need to hold back some as emergency reserve funds, although in Singapore SSBes work quite well for that (for emergency month 3 onward). For the part you wish to invest, I kind of like a 12 to 18 month buying program. For example, if you decide to invest S$48,000 (total), then you could push in S$4,000/month for 12 months, for example.

Quote:

You also mention that i can do tax relief by topping up my SA or SRS account, but since i don't pay tax in SG currently, i can skip this part until i return back to SG for work?
SA (and MA) are still paying 4% (or more if you qualify for bonus interest), and same for your spouse if a CPF member. Tax relief or not, that’s still quite attractive. The long bond (the 30 year Singapore government bond) isn’t paying anywhere near that much, and that’s almost exactly what a SA top-up is. You can consider CPF as part of your bond allocation for long-term investing.

Quote:

As for re balancing, do i need to do re balancing every month if i DCA every month, or i just blindly stick to my allocation regardless of the price increase or decrease and do re balancing during May n Nov?
The latter is fine, but even the latter is something you don’t have to be maniacal about. If you’re 1.8% out of balance, or whatever, it’s not an emergency. Just give your portfolio a gentle nudge every once in a while to keep it on your desired path, that’s all.

tmkedmw 23-07-2018 02:22 PM

1 year sgs Tbill, any advice on this :
Auction of BY18102F

Thinking of just treating the above as a 1yr FD, any good guesstimate of what the effective interest rate will be?

How do I go about putting in a non competitive bid?

BBCWatcher 23-07-2018 04:01 PM

Quote:

Originally Posted by tmkedmw (Post 115636573)
Thinking of just treating the above as a 1yr FD, any good guesstimate of what the effective interest rate will be?

If market interest rates don't change, it should be 1.7X% yield. Maybe, just maybe, 1.8%.

Quote:

How do I go about putting in a non competitive bid?
If you're using cash currently held in an ordinary bank account at one of the "big three" banks, and assuming you already have a CDP account (too late for this auction if you don't), then just log onto your bank's online banking Web site and place an order. At DBS/POSB, for example, look for the "Invest" menu option and choose "Singapore Government Securities." Then proceed through the prompts from there.

The t-bill order deadline for this issue is July 25, 2018, at 9:00 p.m. (bank deadline). You should practice this order ahead of time, but don't actually place the order until the morning of the deadline. The reason is that there's no advantage to ordering early, and you lose a little bit of bank interest if you order any earlier. So just order before the deadline, that's all. The morning of deadline day is perfect.

tmkedmw 23-07-2018 04:26 PM

Quote:

Originally Posted by BBCWatcher (Post 115638122)
If market interest rates don't change, it should be 1.7X% yield. Maybe, just maybe, 1.8%

Thanks for your reply. I am looking for >1.85% which is currently what the best bank FD can offer. Of course, bank sdic is $50k max whereas tbill is guaranteed by govt to whatever amount u bought, say $100k tbill. Is that right?

BBCWatcher 23-07-2018 05:30 PM

Quote:

Originally Posted by tmkedmw (Post 115638463)
Of course, bank sdic is $50k max whereas tbill is guaranteed by govt to whatever amount u bought, say $100k tbill. Is that right?

That is correct. Singapore government bonds, including t-bills, are backed by the full faith and credit of the AAA-rated Singapore government. Deposit insurance in Singapore is currently limited to S$50,000, rising to S$75,000 on April 1, 2019. That's per depositor per institution, not per account. (And deposit insurance does NOT cover any non-Singapore dollar deposits.)

T-bills can also be sold prior to maturity on the secondary market. There is no assurance that you will get any particular price for your t-bill in the secondary market, but you can sell it. Fixed deposits, no.

It's also possible to use SRS and CPF Investment Scheme dollars to buy t-bills, although you would need to visit a primary dealer (bank) branch to get that done using the paper form that the average bank employee has great difficulty finding. But it can be done. Occasionally that makes sense. For example, if you're very near tax free (or at least tax reduced) SRS withdrawal age (age 62+) -- if you're age 60, for example -- then a t-bill isn't a bad choice for fresh SRS funds.

I would prioritize the Singapore Saving Bond (SSB) ahead of the t-bill, although the tricky part is that you don't know how much SSB you can place in a given month since they've been oversubscribing routinely lately. A t-bill is very unlikely to oversubscribe when you make a noncompetitive bid, the only kind of bid you should make (I would strongly advise). You can place effectively unlimited amounts in a t-bill. (Millions if you wish.) But the SSB is principal guaranteed redeemable in any/every month, with pro-rated interest, and it has step up interest guaranteed for 10 years.

BBCWatcher 23-07-2018 05:38 PM

Quote:

Originally Posted by tmkedmw (Post 115638463)
Thanks for your reply. I am looking for >1.85% which is currently what the best bank FD can offer.

Who's offering 1.85%, by the way? The best I see at this instant is CIMB at 1.8% on a 12 month fixed deposit. HL Bank has 1.85% on a 24 month fixed deposit, I see.

Answering my own question: ICBC.

yyhwin 23-07-2018 05:38 PM

SSB interest rate is rather low at the moment.

gameterminator 23-07-2018 11:32 PM

Quote:

Originally Posted by BBCWatcher (Post 115631078)
I’ll add a few thoughts....


I wouldn’t call that coverage “basic.” That’s a public hospital A ward coverage plan with capped out-of-pocket/Medisave costs for covered services. It’s at least a little more than basic.


You’ve got a nice emergency reserve fund, yes. As for insurance, I get concerned when you don’t have disability income insurance (DII), a.k.a. income protection insurance in some countries. I think TPD, CI, and PA are not super essential, but even if you think they are, DII is really foundational, in my view. Everything you’ve described hinges on continuation of an income, and that’s the stuff you want to insure: your ability to earn an income. The mosaic of TPD/CI/PA only very imperfectly does that. DII is at least much closer to the ideal protection against loss of that future earning potential. That said, it appears you’ve got the MINDEF group disability insurance from Aviva, and that’s a “weird” policy. It’s not really DII, but it’s a little more than TPD, as I understand it. It’s a TPD policy with a couple DII pretentions.

I’m just describing how I feel about insurance needs. There’s also the fact that it’s difficult to get and to keep DII when you’re internationally mobile. There are a couple specialist carriers that offer it, and it might be available in Hong Kong.


Not my recommendation. ;)

At age 34, I don’t think there’s any urgency to restrict your stock investing to “on shore” market(s). Shiny Things and I might disagree about that. There’s stronger merit for “on shore” bonds, especially when you’ve got some good opportunities. I agree that there’s still some merit in giving CPF some attention even while outside Singapore. SSBes are good too, agreed. (I think SSBes beat A35 for long-term investors until you get to quite high amounts of wealth.) As for stocks, since you’re not sure where you want to retire, I think you can just keep it simple and go global. If you want to have some “on shore” stocks then I’d just add a little — something like 10% of your stocks in the STI and 10% in the HSI. I wouldn’t go higher than that at this point in time — most should be global, in my view. (Lower is OK.) Since you’re a resident of Hong Kong you can do all your stock investing via Interactive Brokers if you wish, including the Singapore part.


No, I’d still include some. If there’s an investment grade, low cost, Hong Kong dollar denominated corporate bond fund, you could consider that. Or you could do something like ticker symbol CORP, the Blackrock iShares fund traded in London/domiciled in Ireland.


Presumably you’ll need to hold back some as emergency reserve funds, although in Singapore SSBes work quite well for that (for emergency month 3 onward). For the part you wish to invest, I kind of like a 12 to 18 month buying program. For example, if you decide to invest S$48,000 (total), then you could push in S$4,000/month for 12 months, for example.


SA (and MA) are still paying 4% (or more if you qualify for bonus interest), and same for your spouse if a CPF member. Tax relief or not, that’s still quite attractive. The long bond (the 30 year Singapore government bond) isn’t paying anywhere near that much, and that’s almost exactly what a SA top-up is. You can consider CPF as part of your bond allocation for long-term investing.


The latter is fine, but even the latter is something you don’t have to be maniacal about. If you’re 1.8% out of balance, or whatever, it’s not an emergency. Just give your portfolio a gentle nudge every once in a while to keep it on your desired path, that’s all.

Thx BBC for your great input. I might be wrong, but are you suggesting that my allocation should be:

56% IWDA, 10% STI ETF, 10% HSI ETF, 24% (SSB,A35 or CORP)
Do u mean the above can be done entirely via IB, even with 10% ES3 or A35 as well? Assuming i do not have USD$100k in IB now, it is still better to trade all in IB rather than IB & SCB?

As for IB platform, should i be trading via fixed rates or tiered plans?Sorry for many qns asked.

BBCWatcher 24-07-2018 08:22 AM

Quote:

Originally Posted by gameterminator (Post 115645150)
Thx BBC for your great input. I might be wrong, but are you suggesting that my allocation should be:
56% IWDA, 10% STI ETF, 10% HSI ETF, 24% (SSB,A35 or CORP)

As percentages of total net worth, I'd be OK with this posture at your age:
64% VWRD (or 57.6% IWDA, 6.4% EIMI), 8% ES3, 8% HSI ETF, 20% bonds/bond-likes (CORP at no more than a third of that, I'd suggest)

If you're going to start drawdown at age 65, let's suppose (and let's suppose retirement in Singapore), then starting 7 to 10 years out (55th to 58th birthday) you'd start an adjustment program such that by the time you reach age 65 you'd be in this posture:

15% VWRD (or 13.5% IWDA, 1.5% EIMI), 15% ES3, 70% bonds/bond-likes (CORP capped at 14% of total, I'd suggest -- 20% of bonds/bond-likes)

Over that 7 to 10 year window you'd adjust gradually, progressively, steadily. When you hit the target date, you've then got an income-oriented portfolio.

The "age minus" rule of thumb is only a rule of thumb. I prefer to have a "rectangle" of 80:20 stocks:bonds until 7 to 10 years before drawdown age, then a "triangle" (rhombus?) that shifts from 80:20 to 30:70 over that 7 to 10 year span. If you're conservative, pick a 10 year triangle. If you're aggressive, choose a 7. If you're somewhere in between, pick something in between. The "age minus" seems like you're constantly trying to hit different percentages, year by year, and that's unnecessarily too complicated. I'd keep it simpler: cruise along for decades, then "fade out" within a decade. If you prefer the "age minus" rule of thumb, I have no strong objection -- I'm just describing something that seems simpler to me that has the same objectives in mind.

One possible caveat: I don't know what Hong Kong's tax treatment of Irish domiciled/London listed funds is. Or of Singapore listed/traded funds such as ES3. Please check that first.

Quote:

Do u mean the above can be done entirely via IB, even with 10% ES3 or A35 as well?
Yes, that's possible for a resident of Hong Kong, which you are. By the way, I prefer direct holding of SSBs ahead of A35. When you've hit $100K in SSBs (individual limit), then you can look for other choices. But that'll be a fairly long time from now.

Quote:

Assuming i do not have USD$100k in IB now, it is still better to trade all in IB rather than IB & SCB?
It's up to you, but SSBs are not available via Interactive Brokers. Those you'd be buying directly, in Singapore.

Quote:

As for IB platform, should i be trading via fixed rates or tiered plans?Sorry for many qns asked.
Tiered probably works slightly better for you, but try their demo account both ways to check that.


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