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MrHighlander 24-07-2018 10:34 AM

Is there a maximum age to do CPF VC? If so, is it till age 55?

BBCWatcher 24-07-2018 10:53 AM

Quote:

Originally Posted by MrHighlander (Post 115649523)
Is there a maximum age to do CPF VC? If so, is it till age 55?

No, there's no maximum age. CPF Form VC/1 is available here.

qazamy 24-07-2018 01:23 PM

Come in support. Finally have your own thread like ST :)

tangent314 24-07-2018 01:56 PM

Quote:

Originally Posted by gameterminator (Post 115645150)
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?


With just US$50k, you are looking at minimum commission charges of US$120/year = 0.24% 'platform fee'. Sounds fairly reasonable to me, especially since whatever commission you incur will be 'rebated' by this 'platform fee' (up to US$10/month). Mainly it saves you the trouble and fees associated with using a more expensive broker and then transferring the shares over to IB later.

MrHighlander 24-07-2018 02:03 PM

Thank you BBCW.

So I can VC to my CPF accounts up to the annual limit? My total employer and employee contribution to CPF already hit the $37,740 last year, not sure however what is my total employer and employee contribution *this year* (I only know what is my bonus for the previous year in Jan - i.e. I only know the bonus for my year of work in 2018 in Jan 2019). With that in mind, can I still do VC top up to medisave *this year* ?

Quote:

Originally Posted by BBCWatcher (Post 115649777)
No, there's no maximum age. CPF Form VC/1 is available here.


BBCWatcher 24-07-2018 05:28 PM

Quote:

Originally Posted by MrHighlander (Post 115652927)
So I can VC to my CPF accounts up to the annual limit?

Here's a quick summary of the rules on self top-ups:

1. You can top up your Medisave Account, with tax relief. Your MA top-up must fit within both the Basic Healthcare Sum (BHS) and CPF Annual Limit.

2A. You can top up your Special Account, with tax relief for the first $7,000. Your SA top-up must fit within the Full Retirement Sum (FRS), but no other limits apply.

2B. You can transfer Ordinary Account funds to your Special Account. There is no additional tax relief for this transfer, and again the only limit is the FRS.

3. You can top up all three of your CPF subaccounts using CPF Form VC/1 or electronic equivalent, with no tax relief. Your "all three" top-up must fit within the CPF Annual Limit.

You can check your CPF contribution history online to see where you stand in terms of room below the CPF Annual Limit. If your bonus paid in January was credited as "December 2017" in your CPF contribution history, then you should be able to ignore it when calculating how far along you are toward this year's CPF Annual Limit.

Don't forget about your spouse, if your spouse is a CPF member, particularly if your spouse has not yet maxed out CPF bonus interest.

MrHighlander 24-07-2018 05:43 PM

Thank you, BBCW!

I checked - the bonus is indicated on CPF Contribution History as for the month of Jan 2018, so there won’t be any room for VC for me this year

Quote:

Originally Posted by BBCWatcher (Post 115656210)
Here's a quick summary of the rules on self top-ups:

1. You can top up your Medisave Account, with tax relief. Your MA top-up must fit within both the Basic Healthcare Sum (BHS) and CPF Annual Limit.

2A. You can top up your Special Account, with tax relief for the first $7,000. Your SA top-up must fit within the Full Retirement Sum (FRS), but no other limits apply.

2B. You can transfer Ordinary Account funds to your Special Account. There is no additional tax relief for this transfer, and again the only limit is the FRS.

3. You can top up all three of your CPF subaccounts using CPF Form VC/1 or electronic equivalent, with no tax relief. Your "all three" top-up must fit within the CPF Annual Limit.

You can check your CPF contribution history online to see where you stand in terms of room below the CPF Annual Limit. If your bonus paid in January was credited as "December 2017" in your CPF contribution history, then you should be able to ignore it when calculating how far along you are toward this year's CPF Annual Limit.

Don't forget about your spouse, if your spouse is a CPF member, particularly if your spouse has not yet maxed out CPF bonus interest.


BBCWatcher 24-07-2018 06:09 PM

Quote:

Originally Posted by MrHighlander (Post 115656461)
I checked - the bonus is indicated on CPF Contribution History as for the month of Jan 2018, so there won’t be any room for VC for me this year

You can still voluntarily top up your Special Account since there's no CPF Annual Limit on that. If your SA has not yet reached the Full Retirement Sum.

Also, while you can reasonably forecast you'll hit the CPF Annual Limit, it hasn't happened yet. If you're fired or must quit your job before the end of the year, and if you have a gap in your employment income, then you probably won't hit the Annual Limit.

workingmen 24-07-2018 08:50 PM

Hi BBCWatcher,

I have been following your thread for quite some time and will like your advice on Emergency Fund, optimizing mortgage payment and growing a small investment pool.

Profile
early thirties
Mortgage Liability - $600k @ 30 year loan @1.8% interest together with wife
Savings - $2.5k/mth (not inclusive of bonus)
Expenses - $5k/mth (joint account expense/savings, $1.2k/mth mortgage, insurance, income tax etc)


Plan
Emergency Fund - $70k
$30k (SSB ) + $25k (OCBC 360) + $15k (Maxigain)
Open Maxigain account and let the counter reach 12 before shifing $15k from OCBC 360 to Maxigain or buying another $20k of SSB and not open Maxigain account

Stocks - $30k

$8k (SGX 78% reits) +$22k (investing cash)
Invest $1k per mth of ES3 (30%) and IWDA (70%) via SC brokerage. $5k added to investing cash per year.

Mortgage -
Savings of $35k - $40k/yr (after contributing $5k to investing cash) to pay off principle of loan until loan is $300k to reduce monthly obligation and overall liability. Plan to use cash to service monthly payment and CPF contribution from employer will act as safety net with higher OA interest earned.

Also contemplating if i should use my excess cash top up SRS or CPF and not pay off the loan?

Appreciate your input if there can a better way to manage the above.

Thanks!

BBCWatcher 24-07-2018 10:51 PM

Quote:

Originally Posted by workingmen (Post 115659230)
Profile
early thirties
Mortgage Liability - $600k @ 30 year loan @1.8% interest together with wife
Savings - $2.5k/mth (not inclusive of bonus)
Expenses - $5k/mth (joint account expense/savings, $1.2k/mth mortgage, insurance, income tax etc)

So that's $7.5K/month in take home pay (after CPF deductions), is that correct? Is that from one or two income earning spouses?

Feel like taking a guesstimate what a realistic income trajectory might look like? That could be up or down, or both. For example, one spouse might take some time off if/when there's an addition to the family.

Quote:

Plan
Emergency Fund - $70k
I'll pause here and say "bravo." That's equal to 14 months at your current non-emergency spending level, and that's pretty special.

Any major expenses coming up?

Quote:

$30k (SSB ) + $25k (OCBC 360) + $15k (Maxigain)
Open Maxigain account and let the counter reach 12 before shifing $15k from OCBC 360 to Maxigain or buying another $20k of SSB and not open Maxigain account
Citibank's Maxigain is a nice account, but Citibank can and probably will change the rules any time it wishes. That's quite different than a 10 year government guarantee on a particular pre-defined step-up interest schedule, which is what a SSB offers.

There are no hard and fast rules here about how you split this, except that you shouldn't depend on SSBs for the first two emergency months since SSB redemption requests are processed on monthly cycles. Also, try to avoid going above $50K (or $75K from April 1, 2019) in a bank (per depositor), which is the SDIC bank deposit insurance limit.

Quote:


Stocks - $30k

$8k (SGX 78% reits) +$22k (investing cash)
That's really $8K in stocks right now, then, with $22K cash on standby, right?

Quote:

Invest $1k per mth of ES3 (30%) and IWDA (70%) via SC brokerage. $5k added to investing cash per year.
I'm a max 20% STI sort of person, as you might have read. But let's see if I have the math right first. Let's leave the $8K out of the picture for now. It appears you've got $22K ready to roll into investments (stocks, bonds, whatever), another $2.5K/month also available to save, and some or all of an annual bonus (to save) of $5K/year. So that's $22K now and $35K/year to follow. Is that math right?

If that is correct, I can't quite square it with the $1K/30% number for ES3. So let me see if I can offer a suggestion or two.

Assuming you're aiming for the traditional starting drawdown age of 65, you've got over 30 years to run. For the next 20+ years I'd be comfortable if you were up to an 80:20 ratio of stocks and stock-likes to bonds and bond-likes, looking across your total household wealth. If you want to make it really simple, you can count the growing equity in your home and that $8K of REITs as part of the "stocks" portion, and CPF, emergency reserve funds, and ordinary bank balances as part of the bonds/bond-likes. When you're starting out you'll be far from 80:20, and that's perfectly OK.

OK, so now you've got that 14+ month emergency reserve nailed down, so you can start the dogged, decades-long sustained process (I hope) of working on the stocks part, mainly. For simplicity I prefer IWDA (or VWRD) for the lion's share. I prefer the local stocks to be no greater than 20% during the accumulation/saving years. So I might quibble with your 30-70 split there, but that's my preference.

To the extent you do bond/bond-like saving at this point in time, I would suggest CPF MA and/or SA to the extent you and your spouse qualify for tax relief. Mortgage strategy comes next....

Quote:

Mortgage -
Savings of $35k - $40k/yr (after contributing $5k to investing cash) to pay off principle of loan until loan is $300k to reduce monthly obligation and overall liability. Plan to use cash to service monthly payment and CPF contribution from employer will act as safety net with higher OA interest earned.
Yes, this one is "interesting."

First of all, I hate debt, too -- I get it. It doesn't feel "right." However, a 1.8% mortgage interest rate on Singapore dollars is genuinely cheap money. The lowest risk 12 month Singapore government t-bill is paying right around 1.8%, and that's a bit crazy. So you really, really don't want to accelerate repayment on a 1.8% mortgage, especially (but not only) if there's a prepayment penalty. For the moment, the bank is throwing cheap money at you, and it's best to enjoy it while it lasts and put your savings dollars to more productive use.

The problem occurs when your interest rate goes up. What about 2.0%, for example? Well, that's still cheap given other available options. Your CPF Ordinary Account is earning 2.5%, for example. How about 2.2%? 2.4%? Higher? At some point the currently cheap money might not be as cheap, and at some point you might get more interested in accelerating repayment. And you'd like to be in a position to accelerate repayment then, since $600K of mortgage debt (or maybe $570K by that point, let's suppose) is pretty chunky.

....But accelerating now is the wrong choice. You will reliably have more money to accelerate repayment on your mortgage when/if the mortgage gets expensive if you direct your savings to higher yielding outlets. Heck, ICBC is offering 1.85% on a one year fixed deposit -- crazy, isn't it? That might seem hard to grasp at first, but it really is true. While the water is free (or nearly free), fill your buckets as much as you can as full as you can, so that when water is expensive you'll be able to cope much better -- it's that kind of logic, and it is logical.

On occasion, I've taken out loans when somebody was offering 0% interest, or 1.9% interest. That happens in certain countries for certain large purchases, such as cars that aren't selling as well as the manufacturer hoped. And it makes perfect sense to take that low interest loan, of course, when bonds are reliably yielding 2.X% and stocks (over the long term) would probably yield 6% or better. (STI maybe lower.) Yes, it feels weird because it is weird -- this all shouldn't be! But if you get such opportunities to enjoy cheap money for a while, enjoy it as long as you can.

Why do you have a 1.8% interest mortgage (so far)? Well, for some odd reasons lots of Singaporeans have tons of cash parked in bank deposits earning much lower interest rates. I'm slightly guilty of this particular "sin," I must admit. The loans are still cheap, for now, and the cost of capital (bank deposits) to the banks is even cheaper, still.

When's the first interest rate adjustment happening on your mortgage?

workingmen 25-07-2018 08:14 AM

Quote:

Originally Posted by BBCWatcher (Post 115661323)
So that's $7.5K/month in take home pay (after CPF deductions), is that correct? Is that from one or two income earning spouses?

Feel like taking a guesstimate what a realistic income trajectory might look like? That could be up or down, or both. For example, one spouse might take some time off if/when there's an addition to the family.

Yes, that's the take home of one income and trajectory might be flat for a few years.

Quote:

Originally Posted by BBCWatcher (Post 115661323)
I'll pause here and say "bravo." That's equal to 14 months at your current non-emergency spending level, and that's pretty special.

Any major expenses coming up?

There will be a couple of major expenses coming up but it should be covered by our the monthly contribution my spouse and i saved into our joint account for the last 2 years which is separate from the emergency fund. The joint account should deplete from the now $42k to probably $5k for our new house but our monthly contribution of $2k per month should have a net surplus of $1k after incurring our common expenses ( utilities, internet, conservancy charges etc).

Quote:

Originally Posted by BBCWatcher (Post 115661323)

Citibank's Maxigain is a nice account, but Citibank can and probably will change the rules any time it wishes. That's quite different than a 10 year government guarantee on a particular pre-defined step-up interest schedule, which is what a SSB offers.

There are no hard and fast rules here about how you split this, except that you shouldn't depend on SSBs for the first two emergency months since SSB redemption requests are processed on monthly cycles. Also, try to avoid going above $50K (or $75K from April 1, 2019) in a bank (per depositor), which is the SDIC bank deposit insurance limit.

I am skeptical about Maxigain and believe that they will adjust their rates when SIBOR increases beyond a certain point. I will park more of my Emergency fund to SSB then.


Quote:

Originally Posted by BBCWatcher (Post 115661323)

That's really $8K in stocks right now, then, with $22K cash on standby, right?


I'm a max 20% STI sort of person, as you might have read. But let's see if I have the math right first. Let's leave the $8K out of the picture for now. It appears you've got $22K ready to roll into investments (stocks, bonds, whatever), another $2.5K/month also available to save, and some or all of an annual bonus (to save) of $5K/year. So that's $22K now and $35K/year to follow. Is that math right?

If that is correct, I can't quite square it with the $1K/30% number for ES3. So let me see if I can offer a suggestion or two.

Assuming you're aiming for the traditional starting drawdown age of 65, you've got over 30 years to run. For the next 20+ years I'd be comfortable if you were up to an 80:20 ratio of stocks and stock-likes to bonds and bond-likes, looking across your total household wealth. If you want to make it really simple, you can count the growing equity in your home and that $8K of REITs as part of the "stocks" portion, and CPF, emergency reserve funds, and ordinary bank balances as part of the bonds/bond-likes. When you're starting out you'll be far from 80:20, and that's perfectly OK.

OK, so now you've got that 14+ month emergency reserve nailed down, so you can start the dogged, decades-long sustained process (I hope) of working on the stocks part, mainly. For simplicity I prefer IWDA (or VWRD) for the lion's share. I prefer the local stocks to be no greater than 20% during the accumulation/saving years. So I might quibble with your 30-70 split there, but that's my preference.

To the extent you do bond/bond-like saving at this point in time, I would suggest CPF MA and/or SA to the extent you and your spouse qualify for tax relief. Mortgage strategy comes next....

$22k on standby now for investing and the $1k per month was set arbitrary. So i will have a 22 mth DCA of $1k/mth on ES3 (20%) and IWDA (80%)?
Is this 22 month too long/short? or should i increase the amount and do over a shorter period?


Quote:

Originally Posted by BBCWatcher (Post 115661323)

Yes, this one is "interesting."

First of all, I hate debt, too -- I get it. It doesn't feel "right." However, a 1.8% mortgage interest rate on Singapore dollars is genuinely cheap money. The lowest risk 12 month Singapore government t-bill is paying right around 1.8%, and that's a bit crazy. So you really, really don't want to accelerate repayment on a 1.8% mortgage, especially (but not only) if there's a prepayment penalty. For the moment, the bank is throwing cheap money at you, and it's best to enjoy it while it lasts and put your savings dollars to more productive use.

The problem occurs when your interest rate goes up. What about 2.0%, for example? Well, that's still cheap given other available options. Your CPF Ordinary Account is earning 2.5%, for example. How about 2.2%? 2.4%? Higher? At some point the currently cheap money might not be as cheap, and at some point you might get more interested in accelerating repayment. And you'd like to be in a position to accelerate repayment then, since $600K of mortgage debt (or maybe $570K by that point, let's suppose) is pretty chunky.

....But accelerating now is the wrong choice. You will reliably have more money to accelerate repayment on your mortgage when/if the mortgage gets expensive if you direct your savings to higher yielding outlets. Heck, ICBC is offering 1.85% on a one year fixed deposit -- crazy, isn't it? That might seem hard to grasp at first, but it really is true. While the water is free (or nearly free), fill your buckets as much as you can as full as you can, so that when water is expensive you'll be able to cope much better -- it's that kind of logic, and it is logical.

On occasion, I've taken out loans when somebody was offering 0% interest, or 1.9% interest. That happens in certain countries for certain large purchases, such as cars that aren't selling as well as the manufacturer hoped. And it makes perfect sense to take that low interest loan, of course, when bonds are reliably yielding 2.X% and stocks (over the long term) would probably yield 6% or better. (STI maybe lower.) Yes, it feels weird because it is weird -- this all shouldn't be! But if you get such opportunities to enjoy cheap money for a while, enjoy it as long as you can.

Why do you have a 1.8% interest mortgage (so far)? Well, for some odd reasons lots of Singaporeans have tons of cash parked in bank deposits earning much lower interest rates. I'm slightly guilty of this particular "sin," I must admit. The loans are still cheap, for now, and the cost of capital (bank deposits) to the banks is even cheaper, still.

When's the first interest rate adjustment happening on your mortgage?

My mortgage has no lock in and early pre-payment penalty but it is pegged to fixed deposit rate plus a constant. Hence, the bank will increase the interest rate of my loan when they adjust the interest rate they give for fixed deposit.

BBCWatcher 25-07-2018 09:27 AM

Quote:

Originally Posted by workingmen (Post 115664490)
I am skeptical about Maxigain and believe that they will adjust their rates when SIBOR increases beyond a certain point.

Me too. However, it’s fun while it lasts, and I like Citibank’s “Tap and Save” debit/ATM card that goes along with their Tap and Save account. I don’t like Citibank’s $15,000 minimum (across all accounts) to avoid a monthly fee, but their Maxigain account is a reasonable way to keep that minimum in place.


Quote:

$22k on standby now for investing and the $1k per month was set arbitrary. So i will have a 22 mth DCA of $1k/mth on ES3 (20%) and IWDA (80%)?
Is this 22 month too long/short? or should i increase the amount and do over a shorter period?
I’d pick up the pace a bit. Especially if the transaction costs are lower, try $2K every 6 weeks, for example. Then it’d take only 66 weeks (a little over a year) to move $22K into position. ES3 should be good for at least 3.X% on a long-term basis, and I think 22 months is too long to get ~30+ year money into position.

Quote:

My mortgage has no lock in and early pre-payment penalty but it is pegged to fixed deposit rate plus a constant. Hence, the bank will increase the interest rate of my loan when they adjust the interest rate they give for fixed deposit.
OK. So the same advice applies: enjoy the 1.8% while it lasts. Just maintain regular payments at normal pace for now. If the overall savings/investment environment is broadly similar in the future, but the bank raises your mortgage to 1.95% for example, still no cause for panic — it’s still cheap money. Every once in a while you just evaluate whether it’s still cheap money or not. If it’s no longer cheap money at some point in the future — if the next best use of your dollars is to accelerate repayment — then you do that. But not before.

You can sanity check this assessment every once in a while fairly easily. Just look at external “benchmark” alternatives. For example, if the 12 month t-bill yield is basically the same as your mortgage (yes), or if a 12 month bank fixed deposit is basically the same as your mortgage (yes, ICBC is offering 1.85% right now), then you certainly have a cheap mortgage. On the other hand, if a significant gap opens up — if the mortgage rate is about one percentage point or more above those other things, for example — then the mortgage is getting more expensive, and you’d consider accelerating repayment. And note there are degrees of acceleration. If you were laboring under a 8% mortgage interest rate today with everything else the same (t-bill yields, CPF yields, likely stock market yields, etc.) then of course you’d throw a lot of money toward paying down that 8% loan — you’d accelerate quite aggressively. That would be a lovely guaranteed yield, to accelerate repayment of an expensive loan like that. If the mortgage is only a little expensive, or might be expensive (you’re not sure — it’s a close call), then you could accelerate a little, maybe add $100/month.

Tiger9119 26-07-2018 12:24 AM

Hi BBCWatcher,

What is your opinion on the following investment (Structured Deposit??):

Equity Fixed Coupon Memory Callable Investment (With Monthly Knock-In)
Entity: VIAB, BIDU & CVS
Fixed Coupon Rate 0.6667% per month (8% pa)
Knock-In Price: VIAB - USD20.09, BIDU - USD117.98 USD, CVS - USD45.87
Investment Period: 6 months
Investment Currency: USD

Shiny Things 26-07-2018 04:48 AM

Quote:

Originally Posted by Tiger9119 (Post 115679416)
Hi BBCWatcher,

What is your opinion on the following investment (Structured Deposit??):

Equity Fixed Coupon Memory Callable Investment (With Monthly Knock-In)
Entity: VIAB, BIDU & CVS
Fixed Coupon Rate 0.6667% per month (8% pa)
Knock-In Price: VIAB - USD20.09, BIDU - USD117.98 USD, CVS - USD45.87
Investment Period: 6 months
Investment Currency: USD

There's no such thing as a good structured deposit, to be quite frank; they're all an exercise in gouging fees out of you and sticking you with terrible risks.

I'm going to guess that if any of those stocks closes below that knock-in price in any one of the six months, that you get stuck with the returns of the stock... after it's dropped 20-30%. That's a pretty awful deal!

And do you know anything about Viacom, Baidu, or CVS that makes you want to own the stock? Not just "I know this is a company", but do you know about Baidu's corporate structure? Do you know about Viacom's wrangling with CBS and National Amusements? Do you have a view on how the US retail and pharma sectors are going to be affected by Donny Two Scoops' economic policies?

BBCWatcher 26-07-2018 09:08 AM

Quote:

Originally Posted by Tiger9119 (Post 115679416)
What is your opinion on the following investment (Structured Deposit??)....

How’s this: WTF? :eek:


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