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Old 30-08-2018, 05:29 PM   #571
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Hi BBC,

On a separate topic, since you have lived long enough in both US and Singapore, what would be the major differences you observe between these 2 countries? What factors would you consider when deciding whether to migrate from one country to another?

I know it is a very broad question. Apologies that I do not have a more detailed question to ask. However, I hope we can drill down from there.

Thank you, BBC!
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Old 30-08-2018, 06:26 PM   #572
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Old 30-08-2018, 06:29 PM   #573
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[QUOTE]

MA: Typically starting early in a working career, each late January (for maximum interest with tax relief), each early January (if at the BHS, to push back up to the new BHS), and/or after each withdrawal (such as MediShield Life or Integrated Shield premium withdrawals). Must have reasonable CPF Annual Limit visibility.
Hi BBC, a question here on "each late January (for maximum interest with tax relief)" vs "each early January (if at the BHS, to push back up to the new BHS)". What is the rationale here for late vs early Jan?

SA: Prioritize after MA, in late January (for maximum interest with tax relief).
Yup! MA is to be prioritized since the mandatory contribution will be closer to CPF annual limit as working years increase.

RA: Late in the calendar month you turn 55, and then in late January thereafter as the ERS increases.
I assume that ERS increase is announced and effective in Jan? The top up should be in the month that the ERS increases become effective, right?


“All Three”: Late in any month, preferably in late January, and generally attractive from age 50 onward with MA pegged at the BHS. Must have reasonable CPF Annual Limit visibility.
Another question on why "MA pegged at the BHS" is an factor here. If MA is at BHS, more money will be contributed to SA or OA (If SA is at FRS). The effect is about the same whether the fund is in SA or MA. Or is it because if MA is no at BHS, we should prioritize MA top up?
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Old 30-08-2018, 06:50 PM   #574
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On a separate topic, since you have lived long enough in both US and Singapore, what would be the major differences you observe between these 2 countries? What factors would you consider when deciding whether to migrate from one country to another?

I know it is a very broad question.
Yes, that is a broad question.

Humans aren't too dissimilar around our planet, but there are a few differences between those two particular countries. The United States is the third largest country in land area and the largest national economy in the world. It's almost incomprehensibly bigger than Singapore. Chances are, no matter what you're into, it's available in the United States, usually with lots of fellow travelers. The sheer diversity of experiences is incredible, perhaps even overwhelming.

Along with that bigness comes some insularity, although that's changing. For example, in 1994 about 10% of Americans had passports. Now the percentage is over 40%.

There's more violent crime in the United States than in Singapore, but Singapore's violent crime rate is particularly globally low. However, crime rates have fallen a lot in the U.S. Yes, there are some well publicized mass shootings in the U.S., and the gun manufacturers (and their lobby) deserve much of the blame. But it's still a pretty safe place that's generally still getting safer.

The so-called "Obamacare" reforms represented a major improvement in the U.S. healthcare system, including for immigrants. Unfortunately, one major party wants to go backwards. It'll take another election or two to get back to sanity. If you have (and hang onto, which isn't always easy) employer-provided medical insurance, or qualify for Medicare (at age 65 and after at least 10 years of payroll contributions), you're in pretty good shape. So far Obamacare is remarkably robust, but it won't be truly nailed down and improved without a party change.

Imagine if the ethnic Chinese community in Singapore were to become 50% of the population (and falling) rather than >70%, and you have a rough idea of the roots of the social angst in the United States right now. The United States will very soon become a majority-minority country, and that's exciting and wonderful. The diversity is a major national strength. However, there are some people who don't like these demographic changes, much like some of their ancestors didn't like slavery. So it's one of the few countries that has ever elected a member of a racial minority as its national leader, twice, and then the same country elected (with millions fewer votes -- that's another oddity) Donald Trump. Now that's a special country!

Attitudes are changing quickly. For example, the LGBT community has made and continues to make enormous strides in civil rights and acceptance, and same sex marriage is officially recognized everywhere in the United States. Most people have absolutely no problem with this, and those that still do are dying off. As another example, marijuana legalization is quite popular, and I think it's only a matter of time before the United States follows in Canada's national footsteps. Marijuana is already legal at the state level in many places, with more states to follow in this 2018 election cycle. Federal legalization is really necessary to make it work, though.

The U.S. economy is rather strong at the moment, so it's a pretty good time to be in the labor market there. The late 1990s were better in that respect, but it's pretty good right now.

I'll stop there for now.
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Old 30-08-2018, 07:29 PM   #575
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Hi BBC, a question here on "each late January (for maximum interest with tax relief)" vs "each early January (if at the BHS, to push back up to the new BHS)". What is the rationale here for late vs early Jan?
When chasing the new BHS, it's best to top up your MA before the January payroll contribution hits. Other top-ups can wait until late in the month.

Yup! MA is to be prioritized since the mandatory contribution will be closer to CPF annual limit as working years increase.
That's right, and also because MA can be useful at any/every age.

I assume that ERS increase is announced and effective in Jan? The top up should be in the month that the ERS increases become effective, right?
Yes, it increases on January 1, or at least that'll be true for the next few years.

Another question on why "MA pegged at the BHS" is an factor here. If MA is at BHS, more money will be contributed to SA or OA (If SA is at FRS). The effect is about the same whether the fund is in SA or MA. Or is it because if MA is no at BHS, we should prioritize MA top up?
If MA is pegged at the BHS, and assuming the Retirement Account is funded, then an "all three" top-up can all be withdrawn at age 55+. In other words, CPF turns into an interesting little piggybank at that point, where you can deposit up to $37,740 per year, earn a lovely interest rate (>2.5% blended rate), and withdraw funds whenever you wish. If your MA is not pegged to the BHS it's still a pretty nice deal, but some portion of your "all three" top-up will flow into your MA.

As an aside, the Medisave Account can be a pretty decent bequest vehicle, if that's your goal.
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Old 31-08-2018, 02:00 AM   #576
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<Screenshot>

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The image's a bit too low-res; could you post a better/higher quality one, please?
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Old 31-08-2018, 07:29 AM   #577
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suppose my SA and MA have reached FRS/BHS.
if i were to do a VC of 37,740 into my CPF. will the VC deposit be distribute across 3 acct? will there be any overflow to OA?
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Old 31-08-2018, 08:01 AM   #578
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suppose my SA and MA have reached FRS/BHS.
if i were to do a VC of 37,740 into my CPF. will the VC deposit be distribute across 3 acct? will there be any overflow to OA?
First of all, you might not be able to top up $37,740. That’ll depend on whether you have any other contributions that year against your CPF Annual Limit. Or, more precisely, you might be able to make the top up, but any overage will be returned to you, eventually, and without interest.

OK, that potential problem aside, if your Medisave Account has reached the Basic Healthcare Sum and if your Special Account has reached the Full Retirement Sum then the MA and OA portions will flow into OA and the SA portion will still flow into SA. The split depends on the normal allocation percentages for your age.
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Old 31-08-2018, 10:20 PM   #579
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Such as what?
I decided to buy GX18090T SSB rather than NY05100N SGS bond.
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Old 01-09-2018, 01:27 AM   #580
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Please go take this CPF "discussion" to any number of dedicated CPF threads, including this one.
When chasing the new BHS, it's best to top up your MA before the January payroll contribution hits. Other top-ups can wait until late in the month.


That's right, and also because MA can be useful at any/every age.


Yes, it increases on January 1, or at least that'll be true for the next few years.


If MA is pegged at the BHS, and assuming the Retirement Account is funded, then an "all three" top-up can all be withdrawn at age 55+. In other words, CPF turns into an interesting little piggybank at that point, where you can deposit up to $37,740 per year, earn a lovely interest rate (>2.5% blended rate), and withdraw funds whenever you wish. If your MA is not pegged to the BHS it's still a pretty nice deal, but some portion of your "all three" top-up will flow into your MA.

As an aside, the Medisave Account can be a pretty decent bequest vehicle, if that's your goal.
Can't hold your horses
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Old 04-09-2018, 10:08 AM   #581
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you've mentioned in one of your posts somewhere, that you typically avoid stock picking, and OCBC is one of the exception.

care to share more on the reason ?
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Old 04-09-2018, 10:43 AM   #582
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you've mentioned in one of your posts somewhere, that you typically avoid stock picking, and OCBC is one of the exception.
care to share more on the reason ?
Sure, but it's an arcane reason.

Since I am a U.S. person, I'm under the U.S. tax code. The U.S. tax code is quite hostile to "Passive Foreign Investment Companies" (PFICs).(*) So unit trusts, ETFs, and REITs outside the United States are not tax appropriate. Moreover, unfortunately many of the individual stocks listed in the Singapore Stock Exchange (SGX) would qualify for PFIC treatment. Ascendas Real Estate Investment Trust (symbol A17U) is an obvious example, but there are others.

Most banks and insurance companies won special exemptions from the PFIC rules, so direct holding of individual bank and insurance stocks is clearly OK for these purposes. (PFIC rules are a bit complicated, and even if a stock doesn't qualify as a PFIC this year it might next year. I prefer to avoid the complexity and re-definition risk.) OCBC is both a bank and an insurance company since it owns Great Eastern. DBS and UOB are also OK for these purposes, and UOB owns UOI. DBS has offices in the U.S., and that's good enough for these purposes. So, at least as I read (and others read) the PFIC rules, DBS, OCBC, and UOB stocks are not PFICs as defined in the U.S. tax code. (They're also publicly traded and easy to value for capital gains tax purposes when the time comes, and that's helpful.)

The U.S. tax rules still aren't terrific. Notably, any cash dividends that these three companies pay are taxed at the ordinary U.S. income tax rate rather than at the preferential qualified dividends tax rate. Consequently I prefer scrip dividends when offered.

Some percentage of investment in Singapore-listed stocks seems appropriate to me in a portfolio sense, but there aren't many tax friendly choices available. So that's why I make an exception and hold a couple individual SGX-listed stocks, specifically DBS and OCBC. I'm not opposed to UOB, but there's a little more cost in picking three horses instead of two. Two is enough for me, for these purposes.

Obviously this sort of logic doesn't apply to most residents of Singapore.

Corporate bonds (as long as they're simple ones, directly held, and not weird stuff like the Astrea notes), government bonds, traditional CPF assets (not most things in the CPF Investment Scheme), direct holding of individual real property, most (not all) insurance policies, and of course U.S. domiciled funds are all not PFICs.

I'm open to alternative suggestions, but that's my understanding how this all works.

So, why is the U.S. tax code so hostile to PFICs? It's mostly because some wealthy Americans pissed in the pool, as it were. (Gee, thanks, guys/gals.) There were all kinds of tax dodges involving offshore assets, and they cost the U.S. Treasury many billions. So Congress, with the President's agreement, clamped down. The tax code now effectively presumes that PFICs are bogus, so it shifts them to the doghouse. U.S. personhood is global in scope, so there you go.

(*) With PFICs there's an extra, complex form to fill out, IRS Form 8621. The IRS itself estimates 49 hours per year for recordkeeping, learning about the law and the form, and preparing and sending the form. What you would then do is make annual "mark to market" elections, i.e. you'd calculate how much the PFIC distributed and appreciated each year, then pay U.S. tax at ordinary rates on the interest/dividends/paper gains, every year. It can be done, but yuck. If the PFIC was a net loser, then there's no tax owed that year, but there are some limitations on how you can handle losses. If you don't make mark-to-market elections, or forgot, then it gets even more expensive. None of this makes any sense to me -- nothing that's a PFIC is attractive enough -- so I stay far away from this stuff.
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Last edited by BBCWatcher; 04-09-2018 at 11:02 AM..
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Old 04-09-2018, 01:23 PM   #583
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Sure, but it's an arcane reason.

Since I am a U.S. person, I'm under the U.S. tax code. The U.S. tax code is quite hostile to "Passive Foreign Investment Companies" (PFICs).(*) So unit trusts, ETFs, and REITs outside the United States are not tax appropriate. Moreover, unfortunately many of the individual stocks listed in the Singapore Stock Exchange (SGX) would qualify for PFIC treatment. Ascendas Real Estate Investment Trust (symbol A17U) is an obvious example, but there are others.

Most banks and insurance companies won special exemptions from the PFIC rules, so direct holding of individual bank and insurance stocks is clearly OK for these purposes. (PFIC rules are a bit complicated, and even if a stock doesn't qualify as a PFIC this year it might next year. I prefer to avoid the complexity and re-definition risk.) OCBC is both a bank and an insurance company since it owns Great Eastern. DBS and UOB are also OK for these purposes, and UOB owns UOI. DBS has offices in the U.S., and that's good enough for these purposes. So, at least as I read (and others read) the PFIC rules, DBS, OCBC, and UOB stocks are not PFICs as defined in the U.S. tax code. (They're also publicly traded and easy to value for capital gains tax purposes when the time comes, and that's helpful.)

The U.S. tax rules still aren't terrific. Notably, any cash dividends that these three companies pay are taxed at the ordinary U.S. income tax rate rather than at the preferential qualified dividends tax rate. Consequently I prefer scrip dividends when offered.

Some percentage of investment in Singapore-listed stocks seems appropriate to me in a portfolio sense, but there aren't many tax friendly choices available. So that's why I make an exception and hold a couple individual SGX-listed stocks, specifically DBS and OCBC. I'm not opposed to UOB, but there's a little more cost in picking three horses instead of two. Two is enough for me, for these purposes.

Obviously this sort of logic doesn't apply to most residents of Singapore.

Corporate bonds (as long as they're simple ones, directly held, and not weird stuff like the Astrea notes), government bonds, traditional CPF assets (not most things in the CPF Investment Scheme), direct holding of individual real property, most (not all) insurance policies, and of course U.S. domiciled funds are all not PFICs.

I'm open to alternative suggestions, but that's my understanding how this all works.

So, why is the U.S. tax code so hostile to PFICs? It's mostly because some wealthy Americans pissed in the pool, as it were. (Gee, thanks, guys/gals.) There were all kinds of tax dodges involving offshore assets, and they cost the U.S. Treasury many billions. So Congress, with the President's agreement, clamped down. The tax code now effectively presumes that PFICs are bogus, so it shifts them to the doghouse. U.S. personhood is global in scope, so there you go.

(*) With PFICs there's an extra, complex form to fill out, IRS Form 8621. The IRS itself estimates 49 hours per year for recordkeeping, learning about the law and the form, and preparing and sending the form. What you would then do is make annual "mark to market" elections, i.e. you'd calculate how much the PFIC distributed and appreciated each year, then pay U.S. tax at ordinary rates on the interest/dividends/paper gains, every year. It can be done, but yuck. If the PFIC was a net loser, then there's no tax owed that year, but there are some limitations on how you can handle losses. If you don't make mark-to-market elections, or forgot, then it gets even more expensive. None of this makes any sense to me -- nothing that's a PFIC is attractive enough -- so I stay far away from this stuff.
thanks , I learned something new every day! appreciate it.
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Old 04-09-2018, 01:28 PM   #584
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any comments on having some bank perps (say likes of OCBC/DBS/HSBC) in a portfolio, say capping at less than 5% of total portfolio?
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Old 04-09-2018, 01:43 PM   #585
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any comments on having some bank perps (say likes of OCBC/DBS/HSBC) in a portfolio, say capping at less than 5% of total portfolio?
I’m not a fan. Since they have S$250K minimums (generally), they would only ever be appropriate for someone with high net worth. I think the government requires a minimum S$2 million net worth to be accredited to buy them, but I’d advise S$5 million as a more realistic minimum. They’re also painfully difficult to buy and sell, with generally wide bid-ask spreads. And they’re almost always callable, often, plus most of them have clauses that allow the bank to bail on them first if the bank has any material financial trouble.

You can get more easily digestible exposure to a large collection of Singapore dollar denominated bonds, mostly high quality corporate bonds, through the new MBH ETF.
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