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BBCWatcher 28-06-2018 06:48 PM

Quote:

Originally Posted by tangent314 (Post 115193700)
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 your projections are suggesting that a4973 would be wise to exit this policy, and to redeploy the proceeds into something that can reliably yield ~2.2% or more -- Singapore Savings Bonds, as an example. Is that correct?

There's an assumption here that the insurance value of this policy is not particularly useful or valuable. But is it? We're just looking at the investment side of this equation. I suppose if a4973 has plenty of assets already then the life insurance aspect of this policy really isn't interesting, but that's something to check.

tangent314 28-06-2018 07:05 PM

Yes, his XIRR with this plan, assuming the projections are met, is 2.16%, so exiting the policy and putting all the money into anything that yields more than 2.16% will get more money.

It's hard to put a dollar sum to the life insurance part. If you have noticed, the death benefit does not include column D, so in effect there is a diminishing payout.

foozgarden 28-06-2018 07:22 PM

Quote:

Originally Posted by BBCWatcher (Post 115194308)
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.

i am act working overseas with overseas earned income. but i have not come across such plans that i am eligible . unless becoz i am holding a red passport?
as cpf itself is not enough..
my goal is to have differnt "cpf" type of guaranteed income, in my retired age.
i did look at bank/insurance type annuities. but they suck. so i drop that idea.
if not convenient to share, we can take this offline.

BBCWatcher 28-06-2018 07:33 PM

Quote:

Originally Posted by foozgarden (Post 115194969)
i am act working overseas with overseas earned income. but i have not come across such plans that i am eligible . unless becoz i am holding a red passport?

It entirely depends on the country or countries. They vary, a lot. If you'd like to name the country/countries, I could look into it.

Quote:

i did look at bank/insurance type annuities. but they suck. so i drop that idea.
Yes, they generally do, I'm afraid. Offshore (outside Singapore) there are some potentially good (or even excellent) products, but those life annuities are bought and paid out in U.S. dollars, for example.

I think you just optimize and exploit CPF LIFE if that's your best life annuity choice, and it is (by far) the best option among Singapore dollar life annuities.

Lucky_Farmer 28-06-2018 08:04 PM

Hello BBCW, grateful for your thoughts on my two questions below.
1. Which annual travel insurance you currently have?
2. Please can you do a post on investment strategy, what should we invest in these days like what ST did? I have been longing for this.

foozgarden 28-06-2018 08:12 PM

Quote:

Originally Posted by BBCWatcher (Post 115195147)
It entirely depends on the country or countries. They vary, a lot. If you'd like to name the country/countries, I could look into it.


Yes, they generally do, I'm afraid. Offshore (outside Singapore) there are some potentially good (or even excellent) products, but those life annuities are bought and paid out in U.S. dollars, for example.

I think you just optimize and exploit CPF LIFE if that's your best life annuity choice, and it is (by far) the best option among Singapore dollar life annuities.

maybe i should elaborate more. i work outside sgp, but not specifically based in any country, per se. so i am all over the shop. you can call it international assignee/worker. hence, i cannot pinpoint an exact country that i work in. but it changes every time. thats why i also have a global cigna plan, annual worldwide travel ins, coz most of the time, i dont have a clue where i will end up .. more often than not, it will be a remote location.

back to the topic, i am trying not to put all my eggs into one basket. as much as i want to be optimistic about the future of the sgp govt. there are no such thing as 100%.
only death and taxes are certain.

BBCWatcher 28-06-2018 08:56 PM

Quote:

Originally Posted by Lucky_Farmer (Post 115195550)
1. Which annual travel insurance you currently have?

Bupa Global's "Basic" annual travel medical policy.

Quote:

2. Please can you do a post on investment strategy, what should we invest in these days like what ST did? I have been longing for this.
I am in broad agreement with Shiny Things.

Where we might differ a little is in the initial split between local (STI) and global stock allocations. I think ST's 50-50 local/global split is OK in retirement, for the ~30% of one's portfolio held in stocks. But I would start off in a not-to-exceed-20/minimum-80 local/global split. Then, starting at 7 to 10 years (in that range) before retirement, these gradual, steady adjustments would be executed and completed over the course of those 7 to 10 years:

(a) The overall portfolio of stocks would shift from ~80% to ~30%;
(b) The local/global split of stocks would shift from <=20% / >=80% to 50% / 50%.

In practice, that should mean that your global stock position is gradually drawn down and your local stock position stays relatively steady. So that approach happens to be rather trading efficient, too -- a happy coincidence.

Part (b) is only for those who plan to retire in Singapore. If you expect to have other plans, there'd be a different glide-to-retirement plan.

I understand the argument with the 50-50 split (currency, fundamentally), but currency simply isn't a problem until you get nearer retirement, especially with the way Singapore's currency is managed. And you're well defended on currency anyway between the ~20% that's not in stocks, including CPF assets and emergency reserve funds such as SSBs. Lack of diversification is a bigger, longer problem if a mere 30 stocks listed in a tiny country represent ~40% of your net worth for decades, and that's a much bigger gamble than the Nikkei 225 Index (Japanese stocks) which actually did tank hard and long. So I'd split the stocks as minimum 80% global index for the long run to retirement, then adjust as retirement approaches. I think that's going to be a safer and more fruitful approach, even if you expect to retire in Singapore.

Prof. Utonium 28-06-2018 09:02 PM

Setting camp.

BBCWatcher 28-06-2018 10:46 PM

Quote:

Originally Posted by foozgarden (Post 115195634)
i work outside sgp, but not specifically based in any country, per se. so i am all over the shop. you can call it international assignee/worker. hence, i cannot pinpoint an exact country that i work in.

OK, understood.

The fundamental, threshold question is whether you’ve been contributing into the social insurance systems of any countries where you work. Leaving aside the important question of whether you are obligated to, were you/are you? If you have, then it’s a good idea to try to keep records of those contributions. Then you can see where you stand at any given moment.

Let’s consider an example: the United States. The U.S. has a series of treaties with many countries called “totalization” agreements. Ordinarily you need a minimum of 40 contribution “credits,” earned by paying into the U.S. Social Security system (which is based on a payroll tax). If you have any U.S. “W-2” annual earning statements, they’ll include a box listing your Social Security contributions. You can earn a maximum of 4 credits per calendar year, and it’s hypothetically possible to earn all 4 credits if you have even one paycheck in a given calendar year. The number varies due to an inflation adjustment each year, but for reference in 2018 you earn 1 credit for every US$1,320 of gross earnings that are subject to payroll tax. So a full 4 credits in 2018 only requires US$5,280 of gross earnings from work. There are many people who meet or beat that figure in one paycheck — and a lot of people who need more than one paycheck to hit that number, of course. “Work” is quite broadly defined for purposes of payroll taxability.

But, the totalization agreements mean that you need a minimum of only 6 credits, and then U.S. Social Security can count your contributions into other treaty countries’ systems to account for the other 34. If the other treaty countries’ contributions are enough to get you to the magic 40, then you qualify for some level of U.S. Social Security retirement benefits. Having only 6 credits would likely mean a very modest monthly benefit — U.S. Social Security people do a very complicated calculation to determine that — but that’s how it works. Yes, it’s theoretically possible to have as few as two U.S. paychecks (from which payroll tax was deducted) and then qualify for U.S. retirement benefits.

And the same thing works in reverse. So, for example, if you have 8 1/2 years or more of “enough” contributions into the Japanese system, then that’d be enough, along with the 6 credits in the U.S. (totalized back in Japan) to qualify for some retirement benefits from the Japanese system. So you’d collect some from Japan and some from the U.S. in this example, when the time comes. (And with a couple other caveats and footnotes, notably that U.S. Social Security cannot pay benefits to residents of a few countries and to citizens of a slightly longer list of countries. But Singapore isn’t on either list.)

You can count multiple treaty countries if need be. So 5 years in Japan and 8 credits in the U.S. and some time over in Germany.... That sort of thing. Then you run to each of the treaty countries and file for benefits when the time comes, and they all pay, a little each.

....*And* your same or opposite sex spouse is ordinarily entitled to a U.S. spousal benefit when he/she reaches retirement, which is (ordinarily) half your U.S. retirement benefit. (The U.S. system offers spousal benefits, even if your spouse has never stepped foot in the United States.) Maybe you’re only getting US$10/month or whatever due to a limited contribution history and barely clearing the bar, but then your spouse gets US$5/month...and then shifts from US$5/month over to your US$10/month if you were to predecease him/her. And this amount is adjusted annually for inflation, so it gradually rises. AND ex-spouses sometimes qualify. No, I’m not kidding with any of this.

Anyway, keep track of where you stand right now, as best you can track it. Starting with whether you’ve even contributed at all to any other country’s social insurance system.

perrinrahl 28-06-2018 11:11 PM

Quote:

Originally Posted by BBCWatcher (Post 115196180)
I am in broad agreement with Shiny Things.

Where we might differ a little is in the initial split between local (STI) and global stock allocations. I think ST's 50-50 local/global split is OK in retirement, for the ~30% of one's portfolio held in stocks. But I would start off in a not-to-exceed-20/minimum-80 local/global split. Then, starting at 7 to 10 years (in that range) before retirement, these gradual, steady adjustments would be executed and completed over the course of those 7 to 10 years:

This is a big difference. It sounds logical but is there data to compare the performance of local vs global stocks/ETFs over the last 10-20 years?

BBCWatcher 28-06-2018 11:41 PM

Quote:

Originally Posted by perrinrahl (Post 115198467)
It sounds logical but is there data to compare the performance of local vs global stocks/ETFs over the last 10-20 years?

Yes, there are such data. The global stocks have done somewhat better on a total return basis, last I checked. But I’m not influenced too much by that comparison since the past is not necessarily the future.

When you invest in a global stock index, you’re investing in a big basket of publicly traded companies that do business around the world, even some in Singapore. You’re not investing in a currency. You’re investing in global commerce and its long-term future prospects, fundamentally. And I like doing that for money that has decades and at least 7 years more to run. So then why would I want to overweight one small country’s 30 top stocks among those thousands? And the answer is....well, I don’t know why. Currency, OK I guess, but THAT much overweighting for currency reasons, that far ahead of drawdown? The overweighting itself is perilous since I’d be diluting the diversification. And to presume you’re going to retire in Singapore is, well, presumptuous when you’re so far out from retirement.

Lucky_Farmer 29-06-2018 02:14 AM

Thanks, BBCWatcher. All good points and I think it makes sense to keep the portfolio "mainly global" at the beginning.

Following up questions:
3. In terms of individual stocks, do you keep any ETF/other forms of investments other than IWDA, ES3, A35. etc.? The reason I asked because I just wondered if there is a better option out there and it is always better to diversify.

4. Should I (non-singaporean, works in Singapore, 31, decent insurances in place, emergency funds in an account generating 3.2% interest) do anything differently? With more than 20 years left before retirement, should I spend a portion of my portfolio into slightly riskier investment options?

BBCWatcher 29-06-2018 07:04 AM

Quote:

Originally Posted by Lucky_Farmer (Post 115200307)
3. In terms of individual stocks, do you keep any ETF/other forms of investments other than IWDA, ES3, A35. etc.?

I, personally? I’m a U.S. person, so all of those (IWDA, ES3, A35) are inappropriate for me.

I’m not a huge fan of A35. SSBs are likely better when you’re starting out. You and a spouse/partner can amass $200K of them, and that’s 20% of a $1 million household portfolio, so that’s a lot. (And I think it’s reasonable to count most of CPF as the bond-like part of your portfolio.) Past that you could take a look at some mix of Singapore government bonds (medium term, initial auction, held to maturity), A35, and the London-traded fund CORP. I really wish there were an investment grade, low cost, corporate, Singapore dollar bond index fund available, but evidently the SGD bond market is too thin for that. :(

Quote:

4. Should I (non-singaporean, works in Singapore, 31, decent insurances in place, emergency funds in an account generating 3.2% interest) do anything differently? With more than 20 years left before retirement, should I spend a portion of my portfolio into slightly riskier investment options?
The answer is going to be different depending on whether you’re a non-Singaporean PR expecting to retire in Singapore (or LVTP-holding spouse of a Singaporean or PR with the same expectation), or somebody expecting or required to retire elsewhere.

If you’re expecting to retire in Singapore then you apply a “Singapore skew” around the edges. Your bond and bond-like holdings have a Singapore dollar flavor, in particular. If you’re going to retire in another currency zone then you do things a bit differently. And, if you’re a U.S. person (or expect to be soon), then that’s another set of differences. The general principles are the same, but the specific vehicles might vary.

If you have ~20 years to retirement then yes, you should be relatively aggressively positioned. Vanguard’s “Target” funds stay in an 80-20 stock-bond split until 7 years before retirement, then they spend 7 years downshifting to a 70-30 stock-bond split, whereupon they’re designed to support 20+ years of withdrawals (a 70-30 split is a good one for a medium-to-long term income fund). If you’re a little more conservative you might start the downshifting as early as 10 years before retirement, or you might glide to 80-20 in “income mode,” or some of both. But I like Vanguard’s approach in those funds, so I’d do something like that. That’s slightly different than the traditional age-minus-percentage “rule of thumb,” but only slightly. It’s the same basic principle. So right now, with 20 years left to run before retirement, you have...what percentage of your total investments/savings in stocks or stock-like assets? (Stock-like assets would include things like REITs.)

a4973 29-06-2018 08:04 AM

Quote:

Originally Posted by tangent314 (Post 115194664)
Yes, his XIRR with this plan, assuming the projections are met, is 2.16%, so exiting the policy and putting all the money into anything that yields more than 2.16% will get more money.

It's hard to put a dollar sum to the life insurance part. If you have noticed, the death benefit does not include column D, so in effect there is a diminishing payout.

hi the previous BI was truncated , many apologies
here is the full BI
https://imgur.com/a/pkp0rLy
comments please

tangent314 29-06-2018 10:21 AM

I'd recommend learning to use the TVM calculator, it's really helpful with a lot of situations. You are getting a rate of about 2.4% between age 53 and 85, then about 3.31% between 85 and 100. It's ok, but you can easily do much better and get more flexibility on how and when you want to take your money out. But first of all you need to ask yourself, what your intention with this plan? Is it to save for your retirement spending?


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