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Jeremiah15 08-01-2019 01:45 PM

Hi BBC Watcher, you've once recommended the SWDA as a way of utilising some GBP. My GBP deposit is finally maturing and I am thinking of sending them into IB to buy some ETF. May I ask what is the fundamental differences between IWDA or SWDA or are they fundamentally similar - just that they are listed in different currencies?

Thanks for your help!

BBCWatcher 08-01-2019 03:22 PM

Quote:

Originally Posted by Jeremiah15 (Post 118530444)
May I ask what is the fundamental differences between IWDA or SWDA or are they fundamentally similar - just that they are listed in different currencies?

The latter. They're identical, except for the listing/quotation currency.

Jeremiah15 08-01-2019 04:00 PM

Quote:

Originally Posted by BBCWatcher (Post 118532168)
The latter. They're identical, except for the listing/quotation currency.

Thank you! Glad to find a useful place to park my GBP.

bobobob 08-01-2019 04:16 PM

If you're using IB, currency conversion rate is 0.002%. Might want to just change out and buy all your stock in the same currency for convenience.

Jeremiah15 08-01-2019 04:30 PM

Quote:

Originally Posted by bobobob (Post 118533323)
If you're using IB, currency conversion rate is 0.002%. Might want to just change out and buy all your stock in the same currency for convenience.

Makes sense. Thanks for the suggestion.

blue_line 08-01-2019 06:09 PM

Quote:

Originally Posted by bobobob (Post 118533323)
If you're using IB, currency conversion rate is 0.002%. Might want to just change out and buy all your stock in the same currency for convenience.

aren't there fees for converting as well?

BBCWatcher 08-01-2019 06:53 PM

Folks, it's just not going to matter with the possible exception of day trading (please don't). There's a SGD-GBP conversion available, so if you want to buy the GBP version of IWDA (SWDA) from here on out, that works too. Or have both IWDA and SWDA, *fine*. It all works. This isn't a big deal.

bobobob 08-01-2019 07:45 PM

Quote:

Originally Posted by blue_line (Post 118535780)
aren't there fees for converting as well?

Fee is 0.002%, minimum of 2USD, that's it.

aaaaarrrgghhh 08-01-2019 09:23 PM

Hi BBCWatcher,
My heads spinning after reading all the stuff around CPF, and will try to make this question concise!
1) Currently max'ing CPF -SA topup for self, and SRS. Wife's income now >4k, so not topping up.
2) Was Paying mortgage with cash, since CPF-OA interest is higher, and I was not doing anything with my cash
3) Started investing this year, and now built portfolio of ETFs on LSE - dividends about 3% on portfolio
4) The questions at this stage (objective is to retire at 55 hopefully)
Q1. Should I start using CPF-OA to pay off mortgage since cash is now been put to use?
Q2. Should I instead invest CPFIS-OA? The fees of that route seem higher (my DIY portfolio is TER 0.19%)
Q3. Or invest CPFIS-SA, and move OA to SA? At current rates of contribution and cash topups, i expect my SA to reach future FRS when I'm 55).
Q4. The complication comes from the fact that I will need to pay for college starting my age 55, so I need the money in something I can withdraw, hence thinking of CPF-OA instead of SA.
Q5. From a retirement perpective, my 'exposure' right now is the period between 55 and 62(when i can start withdrawing SRS as well) - i will be retired and still paying mortgage.
Q6. of course, I can always only semi-retire at 55...but that's not a great option!

BBCWatcher 09-01-2019 12:35 AM

Quote:

Originally Posted by aaaaarrrgghhh (Post 118539559)
1) Currently max'ing CPF -SA topup for self, and SRS. Wife's income now >4k, so not topping up.

OK, but does she qualify for tax relief if she tops up her own Special Account and/or MediSave Account? Bonus interest?

Quote:

2) Was Paying mortgage with cash, since CPF-OA interest is higher, and I was not doing anything with my cash
If your mortgage interest rate is low (as today), then that means you shouldn’t accelerate repayment of your mortgage. As far as source of funds to service your mortgage at normal pace, it’s really the latter (“I was not doing anything with my cash”) that governs. But you could probably fix (or have fixed) that particular problem.

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3) Started investing this year, and now built portfolio of ETFs on LSE - dividends about 3% on portfolio
OK, but who said dividends mattered? Total returns net of costs, on a long-term basis, do.

It’s easy to have a 20% dividend rate. Just take X dollars, divide by 5, and distribute one fifth every year. That’s 20%. Can you spot the problem? ;)

How many ETFs are we talking about here? One is a typical good answer, and plural isn’t usually necessary.

Quote:

4) The questions at this stage (objective is to retire at 55 hopefully)
Why? Hate your job? Find a better one, now.

Quote:

Q1. Should I start using CPF-OA to pay off mortgage since cash is now been put to use?
Yes, or transfer OA funds to SA (4% interest), or some of both.

Quote:

Q2. Should I instead invest CPFIS-OA? The fees of that route seem higher (my DIY portfolio is TER 0.19%)
I don’t think you use the CPFIS-OA until your SA has reached the Full Retirement Sum, meaning you’ve exhausted whatever OA to SA transfer opportunities you’re going to execute. The SA’s 4% interest is more attractive on balance.

Quote:

Q3. Or invest CPFIS-SA, and move OA to SA?
No, the CPFIS-SA is not attractive (except for SA shielding purposes).

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Q4. The complication comes from the fact that I will need to pay for college starting my age 55, so I need the money in something I can withdraw, hence thinking of CPF-OA instead of SA.
Although you can use OA for university expenses (locally anyway), I don’t think it’s a terrific source of university funding. But see how quickly your OA is likely to fill back up, in time for those university tuition costs, if you do OA to SA transfer(s). And with double spillover from MA if/when applicable. (Once your MA hits the Basic Healthcare Sum the normal flow into MA gets redirected, first to SA until the SA reaches the Full Retirement Sum, then to your OA.)

Quote:

Q5. From a retirement perpective, my 'exposure' right now is the period between 55 and 62(when i can start withdrawing SRS as well) - i will be retired and still paying mortgage.
But the mortgage is either going to be low cost still or not low cost. If it’s low cost, it won’t be a burden at all — it’ll be a blessing, because even your OA interest rate will be running ahead of it. If it’s high cost then it will make (or has already made) sense to accelerate repayment. A cheap, sustainable mortgage is a lovely thing really.

Quote:

Q6. of course, I can always only semi-retire at 55...but that's not a great option!
Because you hate your job? Fix that, now.

aaaaarrrgghhh 09-01-2019 08:52 AM

Quote:

Originally Posted by BBCWatcher (Post 118542908)
OK, but does she qualify for tax relief if she tops up her own Special Account and/or MediSave Account? Bonus interest?

>4k but < taxable

Quote:

If your mortgage interest rate is low (as today), then that means you shouldn’t accelerate repayment of your mortgage. As far as source of funds to service your mortgage at normal pace, it’s really the latter (“I was not doing anything with my cash”) that governs. But you could probably fix (or have fixed) that particular problem.
its still lower than current OA for next 3 years, so not accelerating. However OA is now lesser-returns asset than cash-diverted-to-portfolio, so might switch to paying with OA, or push OA to SA instead (which is less liquid).

Quote:

OK, but who said dividends mattered? Total returns net of costs, on a long-term basis, do.

It’s easy to have a 20% dividend rate. Just take X dollars, divide by 5, and distribute one fifth every year. That’s 20%. Can you spot the problem? ;)
Understand, just mentioned dividends because my portfolio age <1yr, and the dividends is all i can mention right now - plus as you say - in the long terms it will dividends+capital returns(which are usually positive in long term).

Quote:

How many ETFs are we talking about here? One is a typical good answer, and plural isn’t usually necessary.
I'm in developed equity(ex-US&Japan), EM equity and debt, global inflation-protected, long-duration US Treasuries, global IG, and bit of global real estate.


Quote:

Why? Hate your job? Find a better one, now.
Too late (am 45)! Actually its more of wanting to do something totally different from the industry I'm in. But my current job is a great conversion tool for human capital-to-financial capital.

Quote:

Yes, or transfer OA funds to SA (4% interest), or some of both.
I've decided to transfer OA to my wife's SA to build up to 60k quickly[edit:maybe should aim for frs for her?]

Quote:

I don’t think you use the CPFIS-OA until your SA has reached the Full Retirement Sum, meaning you’ve exhausted whatever OA to SA transfer opportunities you’re going to execute. The SA’s 4% interest is more attractive on balance.
Not sure I understood this part. I've never done any OA-to-my-SA. And I'm not sure there is any link between CPFIS-OA and FRS? My understanding is that the SA can only be topped up to the FRS, so I'm restricting self-SA topups to cash, which can get me tax relief, and diverting OA to wife's SA.

Quote:

No, the CPFIS-SA is not attractive (except for SA shielding purposes).
will look up SA-shielding (another new term!)
Quote:

Although you can use OA for university expenses (locally anyway), I don’t think it’s a terrific source of university funding. But see how quickly your OA is likely to fill back up, in time for those university tuition costs, if you do OA to SA transfer(s). And with double spillover from MA if/when applicable. (Once your MA hits the Basic Healthcare Sum the normal flow into MA gets redirected, first to SA until the SA reaches the Full Retirement Sum, then to your OA.)
Ok thanks, will run some numbers on fill-back. I was aiming for US universities, where I have to just withdraw from OA (after FRS).

Quote:

But the mortgage is either going to be low cost still or not low cost. If it’s low cost, it won’t be a burden at all — it’ll be a blessing, because even your OA interest rate will be running ahead of it. If it’s high cost then it will make (or has already made) sense to accelerate repayment. A cheap, sustainable mortgage is a lovely thing really.
The challenge will be that I'll be retired and won't have salary to pay the monthly - it will have to come out of retirement pot - which means bigger pot -which means more risk today - OR I can accelerate repayment, OR pay from OA at that time, not now.

Quote:

Because you hate your job? Fix that, now.
:-) No. you don't have to hate something to motivate you to do something else!

Thank you very much for your time - really appreciate it!

BBCWatcher 09-01-2019 12:23 PM

Quote:

Originally Posted by aaaaarrrgghhh (Post 118545434)
>4k but < taxable

OK, but you still want to pay attention to your spouse’s bonus interest if nothing else. That extra percentage point of interest, compounded, is very attractive. (See below.)

Quote:

I'm in developed equity(ex-US&Japan), EM equity and debt, global inflation-protected, long-duration US Treasuries, global IG, and bit of global real estate.
That seems complicated.

Quote:

I've decided to transfer OA to my wife's SA to build up to 60k quickly.
That’s probably OK, but take a look at cash as a source of funds and/or MediSave as a destination. These nuances are “interesting” and depend on what your spouse will likely do in the future in terms of labor market participation (or not).

I think the Special Account’s 4% interest (all but guaranteed, and a floor rate at that) is more attractive, on balance, than the CPF Investment Scheme. So I think you don’t do anything with the CPF Investment Scheme until your SA has hit the Full Retirement Sum, and it can do that, sooner, if you transfer some or all OA dollars to SA. Then, when OA dollars start piling up again, and assuming you’ve got a reasonable time horizon still in front of you, the CPF Investment Scheme (OA) gets attractive.

aaaaarrrgghhh 09-01-2019 07:32 PM

Quote:

Originally Posted by BBCWatcher (Post 118549636)
OK, but you still want to pay attention to your spouseís bonus interest if nothing else. That extra percentage point of interest, compounded, is very attractive. (See below.)

Yes - i thought I'm taking care of that by topping up her SA to 60k?Am I missing something here?


Quote:

Originally Posted by BBCWatcher (Post 118549636)
That seems complicated.

Yes. Without the reasoning behind it, it does! I could probably rationalise down by 2 funds if the right funds were available in USD on LSE, but not more.

Quote:

Originally Posted by BBCWatcher (Post 118549636)
Thatís probably OK, but take a look at cash as a source of funds and/or MediSave as a destination. These nuances are ďinterestingĒ and depend on what your spouse will likely do in the future in terms of labor market participation (or not).

You mean top up her MA? I pay for her eldershield/medishield etc from my MA currently - does her account need funds as well?

Quote:

Originally Posted by BBCWatcher (Post 118549636)
I think the Special Accountís 4% interest (all but guaranteed, and a floor rate at that) is more attractive, on balance, than the CPF Investment Scheme. So I think you donít do anything with the CPF Investment Scheme until your SA has hit the Full Retirement Sum, and it can do that, sooner, if you transfer some or all OA dollars to SA. Then, when OA dollars start piling up again, and assuming youíve got a reasonable time horizon still in front of you, the CPF Investment Scheme (OA) gets attractive.

I looked at some of the fees for CPFIS, and yes it doesn't look very attractive way to invest.
My thinking on SA is driven by the SA cash topup tax relief - I lose that if I move funds from OA to SA, or fill up MA and overflow goes to SA.
4% compared to the tax brackets we have - how does that work out?

BBCWatcher 09-01-2019 09:00 PM

Quote:

Originally Posted by aaaaarrrgghhh (Post 118557955)
Yes - i thought I'm taking care of that by topping up her SA to 60k?Am I missing something here?

No, but see below for some nuance.

Quote:

You mean top up her MA? I pay for her eldershield/medishield etc from my MA currently - does her account need funds as well?
It depends on your school of thought I suppose. I take the view that my spouse is my full partner and ought to have her own financial means, including medical savings, even if she decides to do something tragic like not being my spouse any more. (Not a prediction.) Iíll always love her. So yes, some MediSave factors into the equation. And it is a 4% interest proposition, which certainly isnít bad. There are (up to) two Basic Healthcare Sums available that could be earning 4%.

But read on....

Quote:

I looked at some of the fees for CPFIS, and yes it doesn't look very attractive way to invest.
My thinking on SA is driven by the SA cash topup tax relief - I lose that if I move funds from OA to SA, or fill up MA and overflow goes to SA.
4% compared to the tax brackets we have - how does that work out?
Youíre right, at some point you lose the tax relief opportunities. But youíre only allowed $7,000/year of tax relief, and you should balance that loss against the loss of attractive interest sooner and with compounding, plus youíve got plenty of SRS tax relief available if you wish.

And this equation can be very different for your spouse. I know at present sheís in the zero percent tax bracket (I assume), but if thatís likely to change in the future (or not) then you and she can figure out the best approach to stocking up her SA and MA.

aaaaarrrgghhh 09-01-2019 09:09 PM

Thanks. You have been most helpful!

I'll dig more into the MA options!


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