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BBCWatcher 23-12-2018 08:45 PM

Quote:

Originally Posted by linusz (Post 118251076)
If OA = SA > 171k, what should be done?

I don’t really understand that equation. Can you clarify?

Quote:

(a) empty OA for mortgage loan about 100k; though the interest rate is lower than 2.5%
Definitely not! As long as you’re reliably earning a higher yield than your mortgage interest rate, you would never rationally accelerate repayment on that mortgage. That’s a sure loser — you’re leaving free money on the table, and I don’t like that. If and when the interest rates flip, then you’d consider accelerating repayment. But a cheap, more than sustainable mortgage is absolutely wonderful, and you should enjoy that happy and weird interest rate inversion as long as it lasts.

Quote:

(b) move OA to SA?
I’m a fan of that move when you’ve determined that at least some portion of your Ordinary Account is no longer needed as OA funds, for housing. Personally I transfer all OA dollars to my SA, every month, since I simply don’t need OA dollars for housing. Fortunately I’ve got plenty of other resources for housing. So since those dollars have to be in OA or SA, I pick the higher yield, and I still have my housing however I want. Some people are fortunate that way. If you’re also partially or fully that fortunate at this point in your life, sure, transfer some or all of your OA dollars to SA.

Note that once your SA reaches the Full Retirement Sum you cannot transfer OA into SA. Your SA reaches the FRS that much faster when it’s fuller sooner. And, after that, your OA dollars start piling up again from compulsory contributions and (if applicable) from MediSave overflow dollars, if your MA is also “full” (at the Basic Healthcare Sum). So it’s not as if you’ll never see OA dollars again.

Extech 23-12-2018 08:57 PM

Thanks for the reply BBCWatcher. Have went to get the bills from the hospitals and am checking with the insurance coys.

May I know your thoughts on legacy planning? Dad is now 55 and is considering his strategy of CPF. Parents seem pretty adverse to the idea of CPF life(As the bequest will reduce to zero over time). They are currently consider pledging property and withdraw CPF out and place it into NTUC's RevoRetire- the idea is that when they pass on, the principal(200K) will, unlike CPF "gone/eaten" and will "remain".

linusz 23-12-2018 09:05 PM

Quote:

Originally Posted by BBCWatcher (Post 118253789)
I donít really understand that equation. Can you clarify?


Definitely not! As long as youíre reliably earning a higher yield than your mortgage interest rate, you would never rationally accelerate repayment on that mortgage. Thatís a sure loser ó youíre leaving free money on the table, and I donít like that. If and when the interest rates flip, then youíd consider accelerating repayment. But a cheap, more than sustainable mortgage is absolutely wonderful, and you should enjoy that happy and weird interest rate inversion as long as it lasts.


Iím a fan of that move when youíve determined that at least some portion of your Ordinary Account is no longer needed as OA funds, for housing. Personally I transfer all OA dollars to my SA, every month, since I simply donít need OA dollars for housing. Fortunately Iíve got plenty of other resources for housing. So since those dollars have to be in OA or SA, I pick the higher yield, and I still have my housing however I want. Some people are fortunate that way. If youíre also partially or fully that fortunate at this point in your life, sure, transfer some or all of your OA dollars to SA.

Note that once your SA reaches the Full Retirement Sum you cannot transfer OA into SA. Your SA reaches the FRS that much faster when itís fuller sooner. And, after that, your OA dollars start piling up again from compulsory contributions and (if applicable) from MediSave overflow dollars, if your MA is also ďfullĒ (at the Basic Healthcare Sum). So itís not as if youíll never see OA dollars again.

SA
thanks for replying. SA has met FRS; so was wondering what could be done about it. I guess if if SA can't be topped up with cash (to get tax benefits); or transfer OA into it (SA); then it have to be left alone earning that 4%.

mortgage
agree that mortgage repayment is now best done using cash.

Medisave
Reached BHS (so will do top up in first couple of days in Jan 2019)

SRS
Will use that to get tax rebates and go for SRS

OA
its probably safer to get 2.5% from CPF. but anything I can do with this?

BBCWatcher 23-12-2018 09:12 PM

Quote:

Originally Posted by Extech (Post 118254009)
May I know your thoughts on legacy planning? Dad is now 55 and is considering his strategy of CPF. Parents seem pretty adverse to the idea of CPF life(As the bequest will reduce to zero over time).

They are obliged to participate in CPF LIFE.

Quote:

They are currently consider pledging property and withdraw CPF out and place it into NTUC's RevoRetire- the idea is that when they pass on, the principal(200K) will, unlike CPF "gone/eaten" and will "remain".
Nah. I think they’ve got this one backwards, and I’m pretty sure I’ve cracked the code.

Suppose they could figure out exactly what they need for the rest of their lives, however long those lives last, and then, right now, give away every surplus dollar. And go have fun with the kids and grandkids, pay for the grandkids’ university educations, etc., etc. Wouldn’t that be fabulous? It would.

And that’s what a reliable real lifetime income stream provides. It provides absolute freedom to give away everything else, NOW, if you wish. Because you’ve always got your lifestyle assured for the rest of your life. So that’s how to approach CPF LIFE, in my view. You use it as a tool not to deliver bequests — they’re quite correct that it’s not designed to do that — but rather as a powerful tool to defend bequests and, better yet, lifetime gifts. Properly exploited and optimized, it gives them the freedom to be more generous in the here and now, while they’re still around to have fun and share the smiles. It’s truly a wonderful thing.

RevoRetire doesn’t work well because it isn’t guaranteed lifetime, and it isn’t real income (it gets whacked by inflation over time). If you merely live to your 95th birthday — very possible — RevoRetire runs out, and that’s if you pick the age 65 payout starting age and a 30 year payout period, which is the longest you can go. It’s also not a terrific deal in financial terms. CPF LIFE is always Singapore’s best annuity deal. The private carriers are all less attractive in value for money. That doesn’t mean the private carriers are necessarily bad, just that you’d always want to max out CPF LIFE first on anything involving annuities, because it has the lowest premiums per payout amount.

I applaud their willingness to help out their kids and grandkids. But the problem with bequests is that the kids and grandkids have to wait until they die, then they get some residual. Why wait? Are the grandkids supposed to wait until age 30 or 35 before grandma/grandpa dies and the university tuition is affordable? That’s...weird. If you engineer a retirement that is lifetime secure, in real lifestyle terms, then you have full freedom to give. It’s absolutely awesome that way, and it can certainly be done with CPF LIFE as part of the formula.

kent07 23-12-2018 10:19 PM

Quote:

Originally Posted by BBCWatcher (Post 118229352)
Just a friendly reminder that there are some looming 2018 deadlines. Don't wait until the last possible minute, though!

1. CPF: The absolute latest deadline to credit CPF contributions in 2018 (for tax relief in your 2019 IRAS Notice of Assessment) is 10:00 a.m. on Monday, December 31, 2018 -- and that's only if you visit a CPF office with a paper check and contribution form in hand. PayNow QR is the next fastest payment method, but you cannot make MediSave top-ups via PayNow QR. AXS, e-Cashier, and other channels take about 3 business days, typically. It's getting tight now, as I write this, so make your decisions quickly and get the top-ups done. And don't forget your spouse/partner!

just a minor point to note, i just did a medisave topup via e-cashier from the portal, am i missing something?

BBCWatcher 23-12-2018 10:24 PM

Quote:

Originally Posted by kent07 (Post 118255543)
just a minor point to note, i just did a medisave topup via e-cashier from the portal, am i missing something?

No, that should still be timely for 2018 crediting.

Extech 24-12-2018 11:38 AM

Quote:

Originally Posted by Extech (Post 118254009)
Thanks for the reply BBCWatcher.
May I know your thoughts on legacy planning? Dad is now 55 and is considering his strategy of CPF. Parents seem pretty adverse to the idea of CPF life(As the bequest will reduce to zero over time). They are currently consider pledging property and withdraw CPF out and place it into NTUC's RevoRetire- the idea is that when they pass on, the principal(200K) will, unlike CPF "gone/eaten" and will "remain".

Quote:

Originally Posted by BBCWatcher (Post 118254265)
They are obliged to participate in CPF LIFE.


Nah. I think they’ve got this one backwards, and I’m pretty sure I’ve cracked the code.

Suppose they could figure out exactly what they need for the rest of their lives, however long those lives last, and then, right now, give away every surplus dollar. And go have fun with the kids and grandkids, pay for the grandkids’ university educations, etc., etc. Wouldn’t that be fabulous? It would.

And that’s what a reliable real lifetime income stream provides. It provides absolute freedom to give away everything else, NOW, if you wish. Because you’ve always got your lifestyle assured for the rest of your life. So that’s how to approach CPF LIFE, in my view. You use it as a tool not to deliver bequests — they’re quite correct that it’s not designed to do that — but rather as a powerful tool to defend bequests and, better yet, lifetime gifts. Properly exploited and optimized, it gives them the freedom to be more generous in the here and now, while they’re still around to have fun and share the smiles. It’s truly a wonderful thing.

RevoRetire doesn’t work well because it isn’t guaranteed lifetime, and it isn’t real income (it gets whacked by inflation over time). If you merely live to your 95th birthday — very possible — RevoRetire runs out, and that’s if you pick the age 65 payout starting age and a 30 year payout period, which is the longest you can go. It’s also not a terrific deal in financial terms. CPF LIFE is always Singapore’s best annuity deal. The private carriers are all less attractive in value for money. That doesn’t mean the private carriers are necessarily bad, just that you’d always want to max out CPF LIFE first on anything involving annuities, because it has the lowest premiums per payout amount.

I applaud their willingness to help out their kids and grandkids. But the problem with bequests is that the kids and grandkids have to wait until they die, then they get some residual. Why wait? Are the grandkids supposed to wait until age 30 or 35 before grandma/grandpa dies and the university tuition is affordable? That’s...weird. If you engineer a retirement that is lifetime secure, in real lifestyle terms, then you have full freedom to give. It’s absolutely awesome that way, and it can certainly be done with CPF LIFE as part of the formula.

Thanks for your input. They understand that they obliged to participate in CPF LIFE- just trying to work around a way to optimise it! I get your idea that CPF Life is not a tool to deliver a bequest, but I'm pretty sure that Singaporeans are fixated on leaving a bequest for their loved ones- given the cost of living, they want to give a leg-up/some breathing space for them. Could you elaborate more on your idea of using CPF Life to defend bequest and lifetime gifts? A numerical example would be most welcomed! Dad has about 300k in CPF

BBCWatcher 24-12-2018 03:27 PM

Quote:

Originally Posted by Extech (Post 118263513)
Thanks for your input. They understand that they obliged to participate in CPF LIFE- just trying to work around a way to optimise it! I get your idea that CPF Life is not a tool to deliver a bequest, but I'm pretty sure that Singaporeans are fixated on leaving a bequest for their loved ones- given the cost of living, they want to give a leg-up/some breathing space for them. Could you elaborate more on your idea of using CPF Life to defend bequest and lifetime gifts? A numerical example would be most welcomed! Dad has about 300k in CPF

I think it's pretty simple, but I'll try again.

How do you assure a particular bequest -- let's suppose $500,000 (2019 Singapore dollars)? Well, one way is you set aside that amount of money (or something similar) in something that should keep pace with inflation -- a Singapore Government Security (government bond) should do pretty well, for example -- and then never touch it. So that works....

....The problem is it doesn't work. All you have to do is just live long enough, run out of money to live on, and you'll have to raid that bond that was supposed to be your bequest. (And it's bizarre anyway, because why are you hanging onto the bond? Because "tradition"? Just give it away, now.)

In practice what happens, traditionally, is that elderly people hoard wealth, even suffer in lifestyle terms, and then try to leave some diminishing residual (both in real and nominal terms) for heirs as they spend down their wealth as slowly as possible. Because, "tradition."

....No, they don't have to do that. They can buy something called a lifetime escalating annuity which pays income for life, no matter how long that life lasts. That sets a threshold for living, and that means anything else can be allocated to bequests and/or lifetime gifts, reliably. So who sells such an amazing financial product, a product that provides monthly escalating income for life? Yes, that's right, CPF does. And it's the best Singapore dollar denominated deal (and one of the best in the world) among life annuities, meaning for each dollar you put in you get more lifetime payout (measured in net present value) than any other life annuity.

So, it's a tool, a powerful tool, to defend bequests and lifetime gifts.

What are other tools are available? Well, a classic one is one's home, but if it's an HDB leasehold that's a diminishing asset, at least as it gets closer to the end of the 99 year leasehold. It's pretty good, though. But it's an asset like anything else, and without assured real lifetime income that home must be raided to pay for ongoing living expenses. And HDB provides that tool, too: the HDB Lease Buyback Scheme. And it's a good tool, but invoking that tool means little or no bequest from the HDB unit.

How about CPF MediSave? Oddly enough, that's a pretty decent bequest vehicle. If you keep topping up MediSave and then don't use it (or don't use all of it), the balance goes to nominated CPF heirs. And it earns 4% interest, which is hard to beat.

fujitsu555 26-12-2018 11:29 PM

Hi BBCWatcher, I would like to seek your advice on my mother's CPF account. She is 63 this year (born in 1955, stopped working since 2011) and her CPF balances for OA/SA/MA/RA are 2.6k/6.6k/1.7k/2.6k, respectively.

My questions are:
(1) Should she apply for CPF Life?
(2) Should she transfer her OA & SA to RA?
(3) What other actions should she/I take to 'maximise' her CPF?

Thanks in advance!

fujitsu555 27-12-2018 07:56 AM

Another question: my wife opened a SRS account many years back, deposited $5k, and never touched it since. What's the best tool to grow it? We're in our mid 30s. Thanks again.

lifeafter41 27-12-2018 09:54 AM

Quote:

Originally Posted by BBCWatcher (Post 118267619)
I think it's pretty simple, but I'll try again.

How do you assure a particular bequest -- let's suppose $500,000 (2019 Singapore dollars)? Well, one way is you set aside that amount of money (or something similar) in something that should keep pace with inflation -- a Singapore Government Security (government bond) should do pretty well, for example -- and then never touch it. So that works....

....The problem is it doesn't work. All you have to do is just live long enough, run out of money to live on, and you'll have to raid that bond that was supposed to be your bequest. (And it's bizarre anyway, because why are you hanging onto the bond? Because "tradition"? Just give it away, now.)

In practice what happens, traditionally, is that elderly people hoard wealth, even suffer in lifestyle terms, and then try to leave some diminishing residual (both in real and nominal terms) for heirs as they spend down their wealth as slowly as possible. Because, "tradition."

....No, they don't have to do that. They can buy something called a lifetime escalating annuity which pays income for life, no matter how long that life lasts. That sets a threshold for living, and that means anything else can be allocated to bequests and/or lifetime gifts, reliably. So who sells such an amazing financial product, a product that provides monthly escalating income for life? Yes, that's right, CPF does. And it's the best Singapore dollar denominated deal (and one of the best in the world) among life annuities, meaning for each dollar you put in you get more lifetime payout (measured in net present value) than any other life annuity.

So, it's a tool, a powerful tool, to defend bequests and lifetime gifts.

What are other tools are available? Well, a classic one is one's home, but if it's an HDB leasehold that's a diminishing asset, at least as it gets closer to the end of the 99 year leasehold. It's pretty good, though. But it's an asset like anything else, and without assured real lifetime income that home must be raided to pay for ongoing living expenses. And HDB provides that tool, too: the HDB Lease Buyback Scheme. And it's a good tool, but invoking that tool means little or no bequest from the HDB unit.

How about CPF MediSave? Oddly enough, that's a pretty decent bequest vehicle. If you keep topping up MediSave and then don't use it (or don't use all of it), the balance goes to nominated CPF heirs. And it earns 4% interest, which is hard to beat.

A very refreshing way of looking at bequest and also the setting the threshold For living.

It does make me wonder if you are working for the CPF board.....lol.

Nevertheless, will relook on your advice. Thanks!!

tangent314 27-12-2018 04:57 PM

Quote:

Originally Posted by fujitsu555 (Post 118308975)
Hi BBCWatcher, I would like to seek your advice on my mother's CPF account. She is 63 this year (born in 1955, stopped working since 2011) and her CPF balances for OA/SA/MA/RA are 2.6k/6.6k/1.7k/2.6k, respectively.

My questions are:
(1) Should she apply for CPF Life?
(2) Should she transfer her OA & SA to RA?
(3) What other actions should she/I take to 'maximise' her CPF?

Thanks in advance!

1. Yes
2. Yes.
3. You really want to make sure there is $60k total in all accounts to earn all the extra interest. There a few ways to do the CPF RSTU, however the most urgent one is yourself (and/or your siblings / spouse) topping up $7k into her RA before the year end (only 1 or 2 working days left) which is fully tax deductible for the year 2018.

https://www.cpf.gov.sg/Members/Schem...ping-up-scheme

Quote:

Originally Posted by fujitsu555 (Post 118312285)
Another question: my wife opened a SRS account many years back, deposited $5k, and never touched it since. What's the best tool to grow it? We're in our mid 30s. Thanks again.

There are a few possibilities

1. Singapore Saving Bonds
2. ETFs: MBH, A35 or ES3
3. Unit Trust: Lion Global All Seasons Fund (Standard or Growth), or Infinity Global Stock Index Fund

Personally I went with All Seasons (Growth). The TER is higher than going with the ETFs, but far lower than just about all other UTs and it's the only decent option that tracks global equities. I will happily live with the local bonds component, though not so much for Asia bonds.

blue_line 27-12-2018 05:10 PM

Quote:

Originally Posted by tangent314 (Post 118320558)
1. Yes
2. Yes.
3. You really want to make sure there is $60k total in all accounts to earn all the extra interest. There a few ways to do the CPF RSTU, however the most urgent one is yourself (and/or your siblings / spouse) topping up $7k into her RA before the year end (only 1 or 2 working days left) which is fully tax deductible for the year 2018.

https://www.cpf.gov.sg/Members/Schem...ping-up-scheme



There are a few possibilities

1. Singapore Saving Bonds
2. ETFs: MBH, A35 or ES3
3. Unit Trust: Lion Global All Seasons Fund (Standard or Growth), or Infinity Global Stock Index Fund

Personally I went with All Seasons (Growth). The TER is higher than going with the ETFs, but far lower than just about all other UTs and it's the only decent option that tracks global equities. I will happily live with the local bonds component, though not so much for Asia bonds.

I'd rather she transfer to her MA as the amount inside is quite low.

BBCWatcher 28-12-2018 12:17 AM

I probably agree with Tangent314, but let me ask a couple more questions....

Quote:

Originally Posted by fujitsu555 (Post 118308975)
(1) Should she apply for CPF Life?

Probably but is she expecting any other lifetime retirement income, such as a traditional pension?

Quote:

(2) Should she transfer her OA & SA to RA?
SA/OA transfers to RA are available, but it's equivalent to two separate transactions: a withdrawal, followed by a deposit. As Tangent314 started to describe, it's better to do the OA/SA withdrawal as a separate transaction, hand the money to someone who qualifies for tax relief (who could be your mother, or you, or a sibling, or all of the above), then make $7,000 top-ups for tax relief to her RA.

I know you mentioned that your mother stopped working, but if she's receiving enough rental income (for example) then she could owe some income tax on that and, thus, qualify for some tax relief. It's a longshot, but I thought I'd mention it.

Quote:

(3) What other actions should she/I take to 'maximise' her CPF?
I'm not sure I agree with blue_line about MediSave since she's still got so much room to grow her RA, and with somebody probably getting some tax relief there.

Does she have a co-resident spouse with some bigger CPF balances by any chance? Or is she on her own?

fujitsu555 28-12-2018 10:02 AM

Thanks, tangent314 and BBCW for your replies!

Quote:

Originally Posted by BBCWatcher (Post 118327381)
Probably but is she expecting any other lifetime retirement income, such as a traditional pension?

No, she has no other income other than pocket money from me and my siblings.

Quote:

Originally Posted by BBCWatcher (Post 118327381)
SA/OA transfers to RA are available, but it's equivalent to two separate transactions: a withdrawal, followed by a deposit. As Tangent314 started to describe, it's better to do the OA/SA withdrawal as a separate transaction, hand the money to someone who qualifies for tax relief (who could be your mother, or you, or a sibling, or all of the above), then make $7,000 top-ups for tax relief to her RA.

Oh, I didn't know she can withdraw OS/SA now at age 63. Will do as advised.

Quote:

Originally Posted by BBCWatcher (Post 118327381)
I know you mentioned that your mother stopped working, but if she's receiving enough rental income (for example) then she could owe some income tax on that and, thus, qualify for some tax relief. It's a longshot, but I thought I'd mention it.

I'm not sure I agree with blue_line about MediSave since she's still got so much room to grow her RA, and with somebody probably getting some tax relief there.

Does she have a co-resident spouse with some bigger CPF balances by any chance? Or is she on her own?

Thanks for pointing it out, but she doesn't have any income. So the priority should be RA? And we as children should maximise her RA (to at least $30k/$60k) to benefit from the bonus interest (6%/5%)?

My father's CPF balances is just as low.

Thanks!


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