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Old 30-10-2020, 07:04 PM   #2896
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BBCWatcher

I want to understand more about why DII priorities EC ( or CI as a whole).

I know accidents is not counted as CI thus DII wins over ECI (or CI as a whole) for financial loss compensation.

But when critical illness strikes, am not very sure how difficult for doctor to certify the insured is “ unable to perform work” as this is subjective to doctor’s experience (I might be wrong)

Could you also list out some other situations which are commonly occurring but ECI unable to cover?
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Old 30-10-2020, 07:34 PM   #2897
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I want to understand more about why DII priorities EC ( or CI as a whole)....
OK, what's your plan if you're disabled tomorrow, cannot work, you lose all the income (millions, probably) you expected to earn for the rest of your working career, and you linger -- you live to 85, for example? That's it, really; it's that simple. What's your plan in that scenario?

OK, once you've figured out your best available plan (hint: DII), here's the next scenario: what happens if you get cancer? What's the plan? I'll tell you my plan. I'll go get good medical advice and care, and Integrated Shield coverage works rather well to handle the lion's share of big medical bills. If I can continue working, I'll work. If the cancer is particularly nasty and I'm unable to work, then I'll file a DII claim. Hopefully I'll get better, but if I pass on too early then my survivors will be financially well defended. If I want to take some unpaid time off from work, I'll do that: I can afford it.

Are there any gaps in my plan? It seems realistic and viable. So I don't need so-called CI, ECI, or PA insurance.
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Old 30-10-2020, 11:27 PM   #2898
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Hi BBCWatcher,

I'm getting a HDB house in around 1.5 years time. I intend to take HDB loan at 2.6% interest.

Instead of letting my CPF OA get wiped out when I collect the keys in 1.5years time, I intend to DCA almost 90% of the amt in CPF OA into STI ETF.
I'm in the opinion that STI ETF at current price will out perform 2.9% per year.( 2.6 + 0.3% expense ratio of STI ETF).

Do you think this is super risky compared to using the money in CPF OA and pay off part of the HDB housing loan straight away?
What will you do if you were in my shoes instead?
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Old 31-10-2020, 12:35 AM   #2899
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OK, what's your plan if you're disabled tomorrow, cannot work, you lose all the income (millions, probably) you expected to earn for the rest of your working career, and you linger -- you live to 85, for example? That's it, really; it's that simple. What's your plan in that scenario?

OK, once you've figured out your best available plan (hint: DII), here's the next scenario: what happens if you get cancer? What's the plan? I'll tell you my plan. I'll go get good medical advice and care, and Integrated Shield coverage works rather well to handle the lion's share of big medical bills. If I can continue working, I'll work. If the cancer is particularly nasty and I'm unable to work, then I'll file a DII claim. Hopefully I'll get better, but if I pass on too early then my survivors will be financially well defended. If I want to take some unpaid time off from work, I'll do that: I can afford it.

Are there any gaps in my plan? It seems realistic and viable. So I don't need so-called CI, ECI, or PA insurance.
Fantastic explanation. Thanks!
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Old 31-10-2020, 08:26 AM   #2900
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Hi BBCWatcher,

I'm getting a HDB house in around 1.5 years time. I intend to take HDB loan at 2.6% interest.

Instead of letting my CPF OA get wiped out when I collect the keys in 1.5years time, I intend to DCA almost 90% of the amt in CPF OA into STI ETF.
I'm in the opinion that STI ETF at current price will out perform 2.9% per year.( 2.6 + 0.3% expense ratio of STI ETF).

Do you think this is super risky compared to using the money in CPF OA and pay off part of the HDB housing loan straight away?
What will you do if you were in my shoes instead?
Would i be right to say that the true interest cost would be 5.1% since you also forgo the 2.5% interest in OA accounts? If so, the number you need to beat would be 2.5+2.6+0.3
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Old 31-10-2020, 09:58 AM   #2901
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I'm getting a HDB house in around 1.5 years time. I intend to take HDB loan at 2.6% interest.

Instead of letting my CPF OA get wiped out when I collect the keys in 1.5years time, I intend to DCA almost 90% of the amt in CPF OA into STI ETF.
First of all, your OA won’t be “wiped out.” You can keep up to $20,000 per individual (so as much as $40,000 per couple). You can also use OA dollars for all of the 10% down payment when you take a HDB loan. So, for example, if it’s a $300,000 BTO then that’s another $30,000 you can use from OA.

I'm in the opinion that STI ETF at current price will out perform 2.9% per year.( 2.6 + 0.3% expense ratio of STI ETF).

Do you think this is super risky compared to using the money in CPF OA and pay off part of the HDB housing loan straight away?
What will you do if you were in my shoes instead?
I would transfer the excess to SA. As much as $40,000, with more streaming in each month you work for an employer in Singapore, is a heck of a lot of buffer to keep paying your HDB loan. How many months (years?) would it be?

Also, the CPF Investment Scheme has some more costs involved. You have the purchase commission, sale commission, and CPF Investment Account charges. SA is a straight up 4.0% (or more if you qualify for bonus interest). I’d take the 4.0% interest first.

Would i be right to say that the true interest cost would be 5.1% since you also forgo the 2.5% interest in OA accounts? If so, the number you need to beat would be 2.5+2.6+0.3
No, it would not be correct.
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Old 31-10-2020, 02:16 PM   #2902
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No, it would not be correct.
Hmm, what am i missing?
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Old 31-10-2020, 03:11 PM   #2903
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BBCWatcher,

on tax saving/investment:

Managed to save around 34k SGD this year for purely tax savings/investments. I do have emergency fund in another account.

Am 28 yo, single, never touched stock before, a fan of Low cost index fund and ride through market volatility given my age. I also agree with “ treat CPF as bond, treat SRS as local stock, treat cash as international stock”.

My arrangement as follows:

- 7k SGD go to CPF SA to save 11.5% tax and earn risk free return.
- 7k SGD go to SRS to save 11.5% tax, invest into ES3 with Low cost.
- 20k SGD go to mortgage prepayment. My refinanced interest rate is 1.45%

A few questions:

Q1: STI: This index, along with Singapore economy, has sideway for years. DCA on a horizontal or even downward line is not a wise choice. What’s your thoughts?

Q2: mortgage prepayment: I understand from the bank that prepayment once a year, with advanced notice and within limit incurred no charge and all fund goes directly to principle. I treat mortage prepayment as a risk-reduction move with slight interest saving which is almost equivalent to the mortgage interest of prevailing year. What’s your thoughts?

Q3: do you have any other suggestions in terms of handling this 34k SGD investment fund?

Thanks!
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Old 31-10-2020, 09:23 PM   #2904
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....My arrangement as follows:

- 7k SGD go to CPF SA to save 11.5% tax and earn risk free return.
I like leaning into MediSave first, but it depends on whether you have room below the CPF Annual Limit and Basic Healthcare Sum.

- 7k SGD go to SRS to save 11.5% tax, invest into ES3 with Low cost.
- 20k SGD go to mortgage prepayment. My refinanced interest rate is 1.45%
No, not the last one — not smart. Singlife for example is offering 2.0% on a $10,000 deposit, and so you can literally print at least that much risk free money as long as that deal lasts: borrow at 1.45%, earn 2.0%. What’s not to like? There are other possible things you could do. Even OA repayment would be better (2.5%), but accelerating repayment on a 1.45% mortgage doesn’t even rank.

A few questions:

Q1: STI: This index, along with Singapore economy, has sideway for years. DCA on a horizontal or even downward line is not a wise choice. What’s your thoughts?
True, but it still kicks off great dividends, so a DCA’ing investor with dividend reinvestment has done not horribly.

Q2: mortgage prepayment: I understand from the bank that prepayment once a year, with advanced notice and within limit incurred no charge and all fund goes directly to principle. I treat mortage prepayment as a risk-reduction move with slight interest saving which is almost equivalent to the mortgage interest of prevailing year. What’s your thoughts?
Particularly if it’s HDB, you’re increasing certain risks, notably cash flow risks, when you’re paying down such cheap money any faster than you need to.

Q3: do you have any other suggestions in terms of handling this 34k SGD investment fund?
What’s wrong with dollar cost averaging some portion into a low cost global stock index fund?
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Old 31-10-2020, 11:00 PM   #2905
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I like leaning into MediSave first, but it depends on whether you have room below the CPF Annual Limit and Basic Healthcare Sum.


No, not the last one — not smart. Singlife for example is offering 2.0% on a $10,000 deposit, and so you can literally print at least that much risk free money as long as that deal lasts: borrow at 1.45%, earn 2.0%. What’s not to like? There are other possible things you could do. Even OA repayment would be better (2.5%), but accelerating repayment on a 1.45% mortgage doesn’t even rank.


True, but it still kicks off great dividends, so a DCA’ing investor with dividend reinvestment has done not horribly.


Particularly if it’s HDB, you’re increasing certain risks, notably cash flow risks, when you’re paying down such cheap money any faster than you need to.


What’s wrong with dollar cost averaging some portion into a low cost global stock index fund?
For CPF MA, I still have room to contribute. But I do have a concern about its liquidity given that you can’t withdraw even after retirement unless to pay for huge medical bills for dreadful disease. Mind to share your thoughts about the trade off?

For mortage prepayment, agree with your point. Will try to research on SingLife. Another product I can think of is “OCBC 360 account” or similar which command a higher interest rate than mortgage and much better liquidity.

For STI, agree with your point. Plus I have 34 years horizon ahead. Hope SG can progress!

For international exposure, I also have a USD deposit which I intend to open an account with IBKR and DCA invest into IWDA or similar Low cost non-distribution funds as ST suggest. But given the bubble of US stocks now, I prefer to hold until further. But do let me know if you have a different suggestion here.

Thanks very much for your explanation!
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Old 01-11-2020, 08:13 AM   #2906
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For CPF MA, I still have room to contribute. But I do have a concern about its liquidity given that you can’t withdraw even after retirement unless to pay for huge medical bills for dreadful disease. Mind to share your thoughts about the trade off?
No, I disagree, for several reasons:

1. The "dreadful disease" can occur at any age, and so you have liquidity for that purpose, or similar, now. Not only for yourself but for family members. (You don't have to use own MediSave for own care.)

2. You will be paying CareShield Life premiums starting at age 30.

3. It's harder to squeeze in MediSave top ups for tax relief because of the double limit (CPF Annual Limit, Basic Healthcare Sum). You've got more time with your Special Account, and tax relief is limited to $7,000/year. (Of course you can do both, but I think it's less attractive to do SA without MA when you're early in your career and can do MA.)

4. The way "spillovers" work. Once your MediSave Account hits the Basic Healthcare Sum -- which happens faster if you're adding funds to it -- the portion of your compulsory contributions allocated to MediSave will then spill over into your Special Account. Unless your Special Account has reached the Full Retirement Sum, whereupon there's a "double spillover": that MediSave portion actually ends up in your Ordinary Account. Whereupon it's then available to pay your mortgage, if you wish. (Or to transfer to a family member's SA or RA.)

5. Some people care about maintaining the option to withdraw funds from a Retirement Account at age 55+ below the Full Retirement Sum. If you have more MA voluntary contributions for tax relief and fewer SA top ups for tax relief, you'll end up with a more liquid RA -- even while getting the same overall amount of tax relief over your working career. (I don't think this factor is particularly important, but you did mention liquidity.)

Sure, how this all unfolds depends on income levels, contributions, age, etc., but really the only reason you'd be worried about MediSave's liquidity is if you plan to be "CPF poor," in essence. If your MA is destined to reach the BHS -- if that's your expectation -- then you might as well make it happen faster (for the attractive interest and tax savings) and enjoy the greater liquidity advantages of MA before age 55.

For mortage prepayment, agree with your point. Will try to research on SingLife. Another product I can think of is “OCBC 360 account” or similar which command a higher interest rate than mortgage and much better liquidity.
Lots of vehicles currently reliably yield >1.45%, including all CPF accounts. But it's also reasonable, even better than reasonable, to allocate that savings flow to your long-term portfolio.

For international exposure, I also have a USD deposit which I intend to open an account with IBKR and DCA invest into IWDA or similar Low cost non-distribution funds as ST suggest. But given the bubble of US stocks now, I prefer to hold until further. But do let me know if you have a different suggestion here.
I do. Just start dollar cost averaging now. For all you know the global stock markets will dip, correct, or crash next week. You've presumably got 3+ decades of saving and investing ahead. Start now.

Last edited by BBCWatcher; 01-11-2020 at 08:16 AM..
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Old 01-11-2020, 08:04 PM   #2907
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..to BBCWatcher as I dunno how to reply partial thread

Yeap, completely agree with your points on MA:

if we can reach BHS soon, then any mandatory contribution to MA will flow to SA ( at least I have not reached FRS yet).

So in the end, we will still end up with a handsome amount in SA and enjoy great tax saving at the same time.

Good point!
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Old 02-11-2020, 12:31 AM   #2908
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After reading all the posts above .. i am confused abt all the acronyms being used. In short, is the recommendation to top up Medisave rather than SA for more effective tax saving approach.

Subsequently, excess Medisave will flow to RA when you hit the age?
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Old 02-11-2020, 10:19 AM   #2909
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After reading all the posts above .. i am confused abt all the acronyms being used. In short, is the recommendation to top up Medisave rather than SA for more effective tax saving approach.

Subsequently, excess Medisave will flow to RA when you hit the age?
Just try to summaries a bit for tax relief:


Option 1: top up SRS, up to 15300/35700 SGD

Option 2: top up CPF SA, up to 7k SGD but within CPF annual limit (37740 SGD)

Option 3: top up CPF MA, within BHS (60k) and CPF annual limit (37740 SGD)

MA actually has a better liquidity to SA because you can use it on medical bills for you/your dependents (which include your parents) while SA need to be merged with OA to RA and you can withdraw whatever higher than FRS (which is becoming higher) at age 55 (which is becoming older).

Besides, it’s easier to reach BHS, so better do voluntarily contribution to MA first to enjoy tax saving. But if your income is really high, also contribute to SA and SRS as well.

Once BHS is reached, mandatory contribution to MA will flow to SA account which will fill up SA faster.
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Old 02-11-2020, 11:55 AM   #2910
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Just try to summaries a bit for tax relief:

Option 1: top up SRS, up to 15300/35700 SGD
The $35,700/year SRS limit is not relevant to (current) CPF members. That higher limit only applies to foreigners.

Option 2: top up CPF SA, up to 7k SGD but within CPF annual limit (37740 SGD)
Corrections: (1) The CPF Annual Limit does not apply to SA and RA top ups. You can deposit the whole Full Retirement Sum in a Singaporean newborn's Special Account in one go if you wish. (2) The maximum available tax relief is $14,000 per year: up to $7,000 for your own SA/RA, and up to $7,000 when you make a cash deposit into a qualified family member's SA/RA. (Can be more than one qualified family member totaling to $7,000.) That's only the tax relief limit, though, not the contribution limit.

Option 3: top up CPF MA, within BHS (60k) and CPF annual limit (37740 SGD)

MA actually has a better liquidity to SA because you can use it on medical bills for you/your dependents (which include your parents) while SA need to be merged with OA to RA and you can withdraw whatever higher than FRS (which is becoming higher) at age 55 (which is becoming older).

Besides, it’s easier to reach BHS, so better do voluntarily contribution to MA first to enjoy tax saving. But if your income is really high, also contribute to SA and SRS as well.

Once BHS is reached, mandatory contribution to MA will flow to SA account which will fill up SA faster.
Yes, until your SA reaches the Full Retirement Sum, whereupon the MA portion of compulsory contributions "double spills over" into OA.
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