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celtosaxon 12-10-2018 10:07 PM

BBCW, you have mentioned using target date funds as a guide for equity allocation by age. You have also mentioned being a fan of John Bogle. Bogle’s rule was to just take 120 minus your age and use that for equity allocation. Bogle also recommends considering any social insurance as part of your bond allocation. Bob Brinker always espoused a strict 50/50 in retirement regardless of age, but did not believe social insurance should be considered.

Do you know if US target date funds make any assumption about social security in their allocation? What are your thoughts on the right allocation by age and should insurance (social or otherwise) play a part?

BBCWatcher 12-10-2018 11:04 PM

Quote:

Originally Posted by celtosaxon (Post 117002887)
Do you know if US target date funds make any assumption about social security in their allocation?

No explicit assumption.

Quote:

What are your thoughts on the right allocation by age and should insurance (social or otherwise) play a part?
I like Vanguard's "Target" program.

Social insurance ought to be factored into financial planning, sure, but (hopefully!) it won't have much impact on portfolio allocations since you'll be just so darn wealthy. ;)

whucarezz 17-10-2018 12:25 AM

BBCW

What are your thoughts on doing periodic lump sum contributions to the CPF accounts of young children in order to make full use of the 4% interest rate?

The objective is simply for legacy planning, such that the children can tap on their CPF monies for housing/education if they so wish when they are of age, or otherwise leave the funds in their CPF accounts to accumulate interest for their retirement purposes.

BBCWatcher 17-10-2018 08:58 AM

Quote:

Originally Posted by whucarezz (Post 117075014)
What are your thoughts on doing periodic lump sum contributions to the CPF accounts of young children in order to make full use of the 4% interest rate?

The objective is simply for legacy planning, such that the children can tap on their CPF monies for housing/education if they so wish when they are of age, or otherwise leave the funds in their CPF accounts to accumulate interest for their retirement purposes.

I'm in favor of grabbing every Child Development Account dollar of government matching funds.

I have mixed feelings about making CPF deposits for children. There are some fairly exotic situations when it makes a bit of sense. As one example, if a Singaporean child is born overseas and probably will remain overseas for his/her lifetime -- a "loosely attached" expatriate household situation, basically -- then CPF deposits can make some sense. There are also some weird corner cases when it might make some sense to deposit a little extra money (not much) in a child's Medisave account and for that child to pay for his/her own Integrated Shield premiums. As a third example, a seriously disabled child who is unlikely to enter the workforce could be an excellent candidate to receive lots of CPF dollars.

Any particular situation you'd like me to consider?

celtosaxon 19-10-2018 11:34 PM

BBCW,

You have convinced me on the merits of aiming for ERS instead of BRS or FRS with CPF LIFE. While it is true that BRS has a bit higher IRR for the same plans as compared to FRS/ERS, it doesn’t diminish the fact that there is still value in FRS/ERS (at least when looking at the value of hedging longevity risk).

However, I’m still not sure about the plan choice under ERS. I’ve run the IRR calculations for all ages and plans. There is a very stark difference in IRR for Basic up to your mid-80’s when comparing to Standard or Escalating.

Basic | Std | Esc
65 0% 0% 0%
70 3.0% 0% 0%
75 3.2% 0% 0%
80 3.3% 0% 0%
85 3.4% 2.5% 2.0%
90 3.5% 4.0% 3.9%
95 4.0% 4.8% 4.9%
100 4.6% 5.3% 5.5%

Obviously, if you don’t have beneficiaries it’s moot point, but if you do and you want the best odds of a maximum IRR on your sum, then Basic seems like a no brainer. I would say it is akin to exchanging some of that longevity insurance for a some
life insurance (at least until age 90).

What do you think?

BBCWatcher 20-10-2018 07:45 AM

My view is you let CPF LIFE be CPF LIFE. That is, let it be what itís best at being: longevity insurance.

Hereís the logic. First, none of the CPF LIFE payout plans guarantee a bequest. Simply live long enough, and the residual falls to zero. Moreover, the entire rest of your wealth (upon your death) is your bequest, including an owner-occupied and fully paid home. And your Medisave residual, which is the one part of CPF that is (oddly enough) the best bequest vehicle. Also, inflation really exists. The hazards of longevity risk are most acute at the end of life, by definition. The CPF LIFE Escalating Plan (and starting payouts at age 70, preferably) ďbackloadsĒ as much of CPF LIFE as possible, so itís the most heavily focused on mitigating that particular risk. And thatís how you get maximum longevity insurance out of the program, which is all it can really guarantee.

One assumption Iím implicitly making is that all CPF LIFE payouts plans are actuarially fair, to a reasonable or better degree. Thatís a safe assumption, but if you want to test it you can compare CPF LIFE with various private life annuities.

Iím also assuming you donít have ďtoo muchĒ longevity insurance, which is technically possible but rare, especially in the Singapore context. CPF LIFE payouts are never lavish.

To repeat, this is a moot issue when a CPF member exits Singapore. Under current rules, youíre not allowed to participate in CPF LIFE if youíre no longer a citizen or permanent resident. Moreover, you donít make any payout plan decision until just before your payout start date, which can be (and should generally be, if you can afford it) as late as age 70.

Han Shot First 20-10-2018 01:32 PM

How does one estimate the probable price of a new Singapore Government Securities T-bill before the auction date? (e.g. how to determine the probable price of BY18103Z which will be issued on 31 Oct 2018?) The actual price of the T-bill will be determined by an auction.

For a bid amount of SGD 1,000 the probable price would be SGD 9wx.yz . How to estimate wx.yz ?

BBCWatcher 20-10-2018 02:51 PM

Quote:

Originally Posted by Han Shot First (Post 117135951)
How does one estimate the probable price of a new Singapore Government Securities T-bill before the auction date?

Just look at the current market yield on the government bond with the closest matching maturity date. That information is published every business day at the SGS Web Site.

celtosaxon 20-10-2018 09:30 PM

Quote:

Originally Posted by BBCWatcher (Post 117131534)
My view is you let CPF LIFE be CPF LIFE. That is, let it be what it’s best at being: longevity insurance.

Here’s the logic. First, none of the CPF LIFE payout plans guarantee a bequest. Simply live long enough, and the residual falls to zero. Moreover, the entire rest of your wealth (upon your death) is your bequest, including an owner-occupied and fully paid home. And your Medisave residual, which is the one part of CPF that is (oddly enough) the best bequest vehicle. Also, inflation really exists. The hazards of longevity risk are most acute at the end of life, by definition. The CPF LIFE Escalating Plan (and starting payouts at age 70, preferably) “backloads” as much of CPF LIFE as possible, so it’s the most heavily focused on mitigating that particular risk. And that’s how you get maximum longevity insurance out of the program, which is all it can really guarantee.

That is all it can guarantee in the end, provided we outlive the bequest period... but if we don’t, then the bequest comes into play.

Looking at the pairwise differences in total accumulated cash benefits received under ERS for both Basic and Escalating projected when we turn 65 onwards... I’m seeing differences above 6 figures between the ages of 72 to 85 with a peak of just over $200k at age 81. The differences are similar when we compare Standard vs. Basic, and it’s only an 8.9% reduction in payment amount.

While it’s true that the bequest doesn’t matter if we live beyond age 80 for Standard & Escalating, or 90 for Basic. However, we are not so “well off” to say that six figures doesn’t matter to us. If we do outlive it, at least we hedged the possibility of not doing so - and potentially added 6 figures to the net worth of the surviving spouse (who may really need it at some point).

I’m still open to the idea that I may be wrong. Appreciate your perspective as always.

zzt231 20-10-2018 09:52 PM

Hi.
I m 40 year old.
Been yolo my whole life.
Decide to stop fooling around.
I only have 20k cash now.
Every month I can use another 2 to 3k to buy more.

Can advise me which stock to buy ?

Thanks

Sent from 风雨中抱紧自由 using GAGT

BBCWatcher 21-10-2018 07:17 AM

Quote:

Originally Posted by celtosaxon (Post 117143730)
That is all it can guarantee in the end, provided we outlive the bequest period... but if we don’t, then the bequest comes into play.

OK, you’ve identified why each spouse needs his/her own independent CPF LIFE income stream since CPF LIFE is not designed as a joint life annuity. I wish it were, actually.(*) But it’s also lousy life insurance. If you want/need life insurance, then buy that. (To the extent any part of CPF is like life insurance, it’s Medisave, oddly enough.)

You’re also neglecting that higher payouts, preferably escalating and deferred, don’t disappear. They keep the household from descending into poverty and drawing down wealth that a surviving spouse might need. You’re still allowed not to spend any/all of the CPF LIFE payouts — and to push them into a spouse’s CPF accounts, for example.

Now, if you can predict with high confidence a particular date of death to a reasonable degree of precision (plus or minus a couple years), then maybe you can play some games in plan selection. And you can decide at age 69.9 assuming an age 70 payout start date; don’t decide now. The plans are probably going to change anyway decades from now. They already have, a couple times, and CPF LIFE is not even 10 years old.

(*) That’d be a nice improvement to the program, and there are a couple straightforward ways it could be done.

JuniorLion 21-10-2018 07:34 AM

Quote:

Originally Posted by zzt231 (Post 117144203)
Hi.
I m 40 year old.
Been yolo my whole life.
Decide to stop fooling around.
I only have 20k cash now.
Every month I can use another 2 to 3k to buy more.

Can advise me which stock to buy ?

Thanks

Sent from 风雨中抱紧自由 using GAGT

Buy IWDA ETF through Interactive Brokers.

celtosaxon 21-10-2018 12:58 PM

Quote:

Originally Posted by BBCWatcher (Post 117148346)
OK, you’ve identified why each spouse needs his/her own independent CPF LIFE income stream since CPF LIFE is not designed as a joint life annuity. I wish it were, actually.(*) But it’s also lousy life insurance. If you want/need life insurance, then buy that. (To the extent any part of CPF is like life insurance, it’s Medisave, oddly enough.)

Is it possible to get term life 70? I have always assumed it would be almost impossible, or at least impossibly expensive.

Quote:

Originally Posted by BBCWatcher
Now, if you can predict with high confidence a particular date of death to a reasonable degree of precision (plus or minus a couple years), then maybe you can play some games in plan selection. And you can decide at age 69.9 assuming an age 70 payout start date; don’t decide now. The plans are probably going to change anyway decades from now. They already have, a couple times, and CPF LIFE is not even 10 years old.

Our situation is also a bit unique since I’m on SS and she is on CPF. Based on what we expect to receive, her CPF Life should be roughly equivalent to the SS spousal benefit (0.5) or half of my SS (1.0).

While we are both alive our combined benefits should be double my SS (2.0). If something happens to me she will get my full SS plus CPF Life (1.5 total). But if something happens to her, I will only get my full SS (1.0 total), that is the weak spot.

ravi2653 21-10-2018 05:25 PM

Hi BBCW,

Hope you are well.

Earlier you advised me to buy LG All Season Fund (Standard/Conservative) to gain global exposure through my SRS contribution. As such, I explored couple of platforms to buy it. First one, OCBC online - OCBC website is mentioning 0.88% online sales charge plus TER of 0.5%. Second option, FSM - its mentions 0.25% as management fee plus 0.0875% per quarter (0.35%/year) as platform fee. Both options seems to be not so cost effective. Am I missing something or reading something wrong? Any alternative option to buy this fund?

Also during my search for Global investment options available via SRS, I came across INFINITY GLOBAL STOCK INDEX FUND on OCBC online platform with a sales charge as 0.352% only. What you think of this index fund?

I'm a bit confused on pricing and want to seek your advice before I start investing via SRS in these funds through right platform.

Thanks much.

Regards,
Ravi

BuiBuiZai 21-10-2018 06:28 PM

Hi BBCW,

I'm in my mid 30s, have zero investment besides a fully paid 4br hdb with wife.

1. 300k savings
2. 3k monthly investment budget
3. 20k to 50k annual variable bonus

How should I go about investing? Understand the 80% shares and 20% bonds fixed with global exposure.

At this time of economic or stock performance, 300k to split into multiple interval purchase or full lump sum or should I enter when there is a correction say 30% with 50% funds and follow by DCA with balance funds and monthly wage?

Is it wise to purchase a new 1.5m 3bedroom dual key condo launch at this point of time to take advantage of the leverage potential (hopefully able to rent out studio at 1.5k a month) and balance funds put into stock n bonds purchase follow by DCA?

I actually started a new thread on my current dilemma with more details if you needed more info or would like to reply there directly.

The whole intend is for wealth accumulation and ultimately an earlier retirement say 20 years from now rather than the current 30 years prior to me reaching 65 year old.

Looking forward to your unbias advice. Thanks


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