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foozgarden 28-06-2018 11:57 AM

Quote:

Originally Posted by tangent314 (Post 115186388)
SA shielding comes into play in two situations

1. At age 55, your OA and SA is combined to form your RA up to the FRS. You want the money to be moved from OA not your SA, so that you can enjoy the higher interest rates of SA.

2. After age 55, you may want to top up your RA up to the ERS. Again, you shield your SA so that the top up monies will be taken from OA instead of SA.

This shielding is achieved by using CPFIS to invest your SA just before you reach 55, then liquidate the investment back into SA after everything is done.

Quote:

Originally Posted by BBCWatcher (Post 115186711)
Yes, and you can combine these actions into one "shield" event if you wish.

Step 1: Raise your "SA shield" strictly before your 55th birthday. (Also one last chance for OA to SA transfers, if your SA has not yet reached the Full Retirement Sum.) That'll let you shield all but $40,000 of SA funds.

Step 2: Celebrate your 55th birthday. Your Retirement Account is created, starting with the ~$40K of unshielded SA funds followed by OA funds.

Step 3A: Withdraw funds (optional, not necessarily recommended unless you need the money). This withdrawal will all come from OA since your unshielded SA will be depleted to create the Retirement Account.

Step 3B: Top up your Retirement Account with cash (and/or with withdrawn funds, which CPF can do for you as a transfer transaction), up as high as the Enhanced Retirement Sum (ERS) if you wish. (Optional, recommended.)

Step 4: Lower the shield.

Spouses/partners can also do this, with your assistance perhaps and around their 55th birthdays.

RA is also 4% right?
so whats the difference to have it in SA or RA? or even to move from SA to RA?

also, which is actually a more "value for money? FRS or ERS? the payout does not seem to be linear/proportionate. infact BRS has the highest payout ratio?

w1rbelw1nd 28-06-2018 12:07 PM

Quote:

Originally Posted by revhappy (Post 115185044)
Local experts especially those bloggers you see favour heavy local allocation. Even Fundsupermart, I find it surprising how long they have been bullish on China and Asia and bearish on US and missed out the entire US bull run. This is criminal to me. FSM has been like the largest self service unit trust platform and instead of educating people about global allocation based on market cap, they have tried active management and scared people about high valuations in western markets etc and have failed. It is only after coming to this forum I learnt about ETFs and marketcap based allocation.

Sent from Xiaomi REDMI NOTE 4 using GAGT

The local "experts" are not fiduciaries. If you are talking about bloggers, frankly, how many of them are even adequately educated on financial matters?

There is nothing criminal about how FSM and these bloggers work. I think as responsible retail investors, we need to at least know if the party that we are relying on has conflict of interest with us, and are adequately informed of both what they know and what they dont know.

I do have friends (the one or two odd exceptions) that are fairly well-versed in financial matters, but we gotta realise the people with a real understanding, the investment bankers/fund managers/listed-co middle/snr managers are not likely to share online, and hence we get a very limited understanding on the risks of certain investment types.

BBCWatcher 28-06-2018 12:34 PM

Quote:

Originally Posted by foozgarden (Post 115187839)
RA is also 4% right?
so whats the difference to have it in SA or RA? or even to move from SA to RA?

Yes, the interest rate is the same. RA is set aside for your CPF LIFE payouts, and of course that's perfectly fine. Remaining, and any additional, SA funds can be withdrawn from age 55. (They shouldn't be withdrawn, though, unless and until you actually need them. On demand funds earning 4% are absolutely lovely.)

Quote:

also, which is actually a more "value for money? FRS or ERS? the payout does not seem to be linear/proportionate. infact BRS has the highest payout ratio?
All CPF LIFE levels are great values in lifetime annuities, the very best value Singapore dollar lifetime retirement annuities available. They're so good that they rival the best Wall Street has to offer, and Wall Street isn't really offering the same thing.

The only question, really, is how much longevity insurance you want. None of the CPF LIFE payout levels are lavish, so I'd just opt for ERS-level CPF LIFE (and for my spouse/partner too), and most likely pick the Escalating Plan and start payouts from age 70. For relatively well-to-do and higher people, that's the smartest and best play available. I certainly wouldn't downgrade from FRS-level with a property pledge, even if I could.

One exception: if you already have excellent or better longevity insurance (guaranteed lifetime annuities). As it happens, I/we do. So my decision is more complicated, but at the moment I'm aiming for FRS-level CPF LIFE across the household (still Escalating Plan, age 70).

To net it out, in my view you make CPF LIFE the best it can possibly be as longevity insurance, and that's FRS-level (or preferably above if CPF LIFE is your only longevity insurance), Escalating Plan, age 70. If you can afford it, of course, and most people in this forum can (or will).

Then...and here's the truly magical part...go have FUN, lots of it, knowing that you've got a guaranteed stream of lifetime retirement income that'll take you all the way to the end, even if that's age 108. Money is only useful to exchange for goods and services, at some point in time. That's the only thing it can do. So nail down the long tail well and best, and then have fun.

Maeda_Toshiie 28-06-2018 01:13 PM

Quote:

Originally Posted by w1rbelw1nd (Post 115187989)
The local "experts" are not fiduciaries. If you are talking about bloggers, frankly, how many of them are even adequately educated on financial matters?

There is nothing criminal about how FSM and these bloggers work. I think as responsible retail investors, we need to at least know if the party that we are relying on has conflict of interest with us, and are adequately informed of both what they know and what they dont know.

I do have friends (the one or two odd exceptions) that are fairly well-versed in financial matters, but we gotta realise the people with a real understanding, the investment bankers/fund managers/listed-co middle/snr managers are not likely to share online, and hence we get a very limited understanding on the risks of certain investment types.

Wilfred Ling is one of the few.

tangent314 28-06-2018 02:20 PM

Quote:

Originally Posted by foozgarden (Post 115187839)
also, which is actually a more "value for money? FRS or ERS? the payout does not seem to be linear/proportionate. infact BRS has the highest payout ratio?


Yes the first 30k gets 2% bonus interest and the next 30k gets 1%, so the payout won't be proportional compared to the principle. It's unlikely you will get a better life annuity plan elsewhere though. Of course, if your spouse does not have much CPF it makes sense to ensure he or she has RA topped up to at least 60k.

BBCWatcher 28-06-2018 03:42 PM

A lot of people think that if the government requires you to do something at a minimum level, that:

(a) Whatever you're obliged to do must itself be bad (otherwise why would it be required?), but you have no choice;
(b) Doing more than minimum must also be bad.

Both (a) and (b) are logical fallacies. You certainly cannot and should assume them.

For example, the government requires you to send your kids to primary and secondary school. Therefore (a) school must be bad, and (b) university education must also be bad. Right? :s22:

Sometimes, or even rather often, the government requires you to do something because you'd be an idiot if you didn't. The government has a few guardrails, in other words, to try to prevent you from doing grave damage to yourself and to your loved ones.

As a notable example, if you don't have at least a BRS-level CPF LIFE retirement income stream (and assuming an owner-occupied home, which is what the property pledge is about), even if you could have afforded that level of set aside during your working career, then you run a serious risk of utter destitution at some point in retirement. If you want to substitute private longevity insurance in place of CPF LIFE, you can, but a very little bit of longevity insurance is now obligatory, if you can afford it (via contributions from work in Singapore). Because there's too much risk of elder destitution without it, so it's an important guardrail. It's a new guardrail in Singapore, true, but in Germany (as one example) the equivalent guardrail has been around for over a century.

As it happens, the total CPF LIFE deal is genuinely excellent value for money. The private market cannot beat it, not even close. So doing more than the minimum is generally a very smart thing for the aspiring wealthy (and already wealthy) to do financially. And when anybody offers a genuinely good deal, I'm interested. If Great Eastern (to pick a random example) wants to offer a better longevity insurance deal, great, I'm perfectly willing to listen.

tangent314 28-06-2018 04:03 PM

Quote:

Originally Posted by BBCWatcher (Post 115186916)
Tangent314, are you able to run a simulation which involves simply leaving the policy running and taking the cash coupons as cash, to be reinvested elsewhere?


It's a bit trickier because there are two 'bonus' coupons, one at the end of this year. It you surrenders the plan at the end of the year after collecting the $3000 coupon and before paying for the next year's premium, receiving ~$20857 and then put it into say, CPF OA, for 2.5% interest and then RSP $1532 into OA, then you will end up with $73311 at the time of maturity.

maple96 28-06-2018 04:20 PM

Quote:

Originally Posted by a4973 (Post 115158109)
Hi BBCW, I've received a policy coupon from AIA. It's $xxxx.00 & it's 10% of the face amount of the policy. Now I'm deciding whether to return it to my accumulation account or withdraw it & VC into cpf. I've asked my agent if I return it what's the interest on it and he says it's currently 3.25%. which is not really very clear to me. ie if return does the 3.25% get added onto the sum then accumulate into my account or what?
It's a Life policy BTW.
My question here is does anyone know how this 3.25% interest actually work so I can make an informed decision whether to return or withdraw? If this is too general a question, please let me know what other info I should get & provide to get a clearer picture of it. Thanks

Sent from Motorola NEXUS 6 using GAGT

It is a very common feature of endowment plans which give u a cashback (coupon), so u can use it to pay your next premium, however that will reduce your maturity value. If u choose not to withdraw, then the insurer will pay u estimated interest of 3.25% (your case, non guaranteed) on the coupon amt until maturity, this will increase your maturity value.

Based on what u posted in the later post, it is an endowment plan for 35 years, already completed 14 years? How many coupons have u received todate?

tangent314 28-06-2018 04:30 PM

Quote:

Originally Posted by a4973 (Post 115158109)
Hi BBCW, I've received a policy coupon from AIA. It's $xxxx.00 & it's 10% of the face amount of the policy. Now I'm deciding whether to return it to my accumulation account or withdraw it & VC into cpf. I've asked my agent if I return it what's the interest on it and he says it's currently 3.25%. which is not really very clear to me. ie if return does the 3.25% get added onto the sum then accumulate into my account or what?
It's a Life policy BTW.
My question here is does anyone know how this 3.25% interest actually work so I can make an informed decision whether to return or withdraw? If this is too general a question, please let me know what other info I should get & provide to get a clearer picture of it. Thanks

Sorry, I just saw this part above.

3.25% is likely to be the value used to calculate the projected returns. Which means the projected returns will be exactly what you will get IF the participating fund performs at 3.25%. If the par fund performs better than that then you will get more, if it is less than that, you will get less. There's another thread somewhere in this forum that lists the performance of all the insurance companies par funds for the past 10 years.

I've already calculated that the projected returns for you looks like 2.16%. Which pretty much means that if AIA earns 3.25%, they will give you 2.16% and keep the rest. If you instead surrender your policy at the end of this year and take out around $20857 and invest that money yourself in a portfolio similar to the par fund and top up $1532 every year, you will end up with $81770 if you achieve the same 3.25% on your portfolio.

BBCWatcher 28-06-2018 04:39 PM

Tangent314, usually the surrender value is awful, so I'm curious what you'd project in the "middle ground" case: stick with the policy to the end, but take the coupons and reinvest them elsewhere. How about saving those coupons into a forecast 2.5% yielding SSB portfolio, for example?

a4973 28-06-2018 05:12 PM

Quote:

Originally Posted by maple96 (Post 115192147)
It is a very common feature of endowment plans which give u a cashback (coupon), so u can use it to pay your next premium, however that will reduce your maturity value. If u choose not to withdraw, then the insurer will pay u estimated interest of 3.25% (your case, non guaranteed) on the coupon amt until maturity, this will increase your maturity value.

Based on what u posted in the later post, it is an endowment plan for 35 years, already completed 14 years? How many coupons have u received todate?

sorry the screen capture was truncated at 35 / 73
actual BI shows i have to pay $1532 / PA till 47/85 yO
accumulated coupons + interest is $8375.xx

foozgarden 28-06-2018 05:17 PM

Quote:

Originally Posted by BBCWatcher (Post 115188454)
Yes, the interest rate is the same. RA is set aside for your CPF LIFE payouts, and of course that's perfectly fine. Remaining, and any additional, SA funds can be withdrawn from age 55. (They shouldn't be withdrawn, though, unless and until you actually need them. On demand funds earning 4% are absolutely lovely.)


All CPF LIFE levels are great values in lifetime annuities, the very best value Singapore dollar lifetime retirement annuities available. They're so good that they rival the best Wall Street has to offer, and Wall Street isn't really offering the same thing.

The only question, really, is how much longevity insurance you want. None of the CPF LIFE payout levels are lavish, so I'd just opt for ERS-level CPF LIFE (and for my spouse/partner too), and most likely pick the Escalating Plan and start payouts from age 70. For relatively well-to-do and higher people, that's the smartest and best play available. I certainly wouldn't downgrade from FRS-level with a property pledge, even if I could.

One exception: if you already have excellent or better longevity insurance (guaranteed lifetime annuities). As it happens, I/we do. So my decision is more complicated, but at the moment I'm aiming for FRS-level CPF LIFE across the household (still Escalating Plan, age 70).

To net it out, in my view you make CPF LIFE the best it can possibly be as longevity insurance, and that's FRS-level (or preferably above if CPF LIFE is your only longevity insurance), Escalating Plan, age 70. If you can afford it, of course, and most people in this forum can (or will).

Then...and here's the truly magical part...go have FUN, lots of it, knowing that you've got a guaranteed stream of lifetime retirement income that'll take you all the way to the end, even if that's age 108. Money is only useful to exchange for goods and services, at some point in time. That's the only thing it can do. So nail down the long tail well and best, and then have fun.

the last time i tried to work out the XIRR for,ERS vs FRS. i recall that the FRS(standard) , actually was the highest XIRR.
the "breakeven cost" is on the 13th-14th year..
so you need to live at least ( payout year + 14) in order for it worth while, per se.
not sure i did it correctly.
i am trying to find where i kept the excel.

just curious wats the longevity insurance (guaranteed lifetime annuities) that you have besides CPF.

tangent314 28-06-2018 05:59 PM

Quote:

Originally Posted by BBCWatcher (Post 115192460)
Tangent314, usually the surrender value is awful, so I'm curious what you'd project in the "middle ground" case: stick with the policy to the end, but take the coupons and reinvest them elsewhere. How about saving those coupons into a forecast 2.5% yielding SSB portfolio, for example?


It's actually better to look at the projected values nearer maturity to determine if it is better to stick with the policy. Many endowment plans have the bonuses structured to increase sharply nearer maturity. This is what makes it a bad choice to surrender the plan. If you look at this policy though, it does not have the feature, the cash value increases almost linearly.

So anyway, I did the calculations.
20 years RSP of $900/year at 2.5% + initial lump sum of $11375 + $2100 = FV(2.5%,20,-900,-11375-2100) = $45,070.55
5 years $2100 lump sum at 2.5% = FV(2.5%,5,0,-2100) = $2,375.96
Maturity cash value = $20490

Total = $67936.50

zuppeur 28-06-2018 06:26 PM

Quote:

Originally Posted by BBCWatcher (Post 115186711)
Yes, and you can combine these actions into one "shield" event if you wish.

Step 1: Raise your "SA shield" strictly before your 55th birthday. (Also one last chance for OA to SA transfers, if your SA has not yet reached the Full Retirement Sum.) That'll let you shield all but $40,000 of SA funds.

Step 2: Celebrate your 55th birthday. Your Retirement Account is created, starting with the ~$40K of unshielded SA funds followed by OA funds.

Step 3A: Withdraw funds (optional, not necessarily recommended unless you need the money). This withdrawal will all come from OA since your unshielded SA will be depleted to create the Retirement Account.

Step 3B: Top up your Retirement Account with cash (and/or with withdrawn funds, which CPF can do for you as a transfer transaction), up as high as the Enhanced Retirement Sum (ERS) if you wish. (Optional, recommended.)

Step 4: Lower the shield.

Spouses/partners can also do this, with your assistance perhaps and around their 55th birthdays.

Can you pls show a working example?

BBCWatcher 28-06-2018 06:43 PM

Quote:

Originally Posted by foozgarden
just curious wats the longevity insurance (guaranteed lifetime annuities) that you have besides CPF.

My spouse and I (in the aggregate) are qualified to receive lifetime retirement income streams from two high quality governments outside Singapore, in their currencies of course. Plus Singapore, we forecast. This is one reason why you might wish to consider a stint working overseas, provided you can work long enough to vest.

Quote:

Originally Posted by zuppeur (Post 115194052)
Can you pls show a working example?

Of a Special Account "shield"? It's anything that qualifies for the CPF Investment Scheme (SA). A Singapore government t-bill maturing just after one's 55th birthday would be a good choice, and a low volatility Singapore government bond fund/unit trust (purchased via a zero sales charge platform: Fundsupermart, POEMS, or DollarDex) would be another good choice for these purposes.


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