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BBCWatcher 20-03-2019 12:39 PM

Quote:

Originally Posted by kyojin (Post 119774783)
I'm just ready to start investing and after much reading, I'm convinced by a simple portfolio of Multiplier+SSB+ES3+IWDA/EIMI. Given that there's a high chance that I'll relocate to the US for work later in the year (Sep/Oct), I thought to hold on to offshore ETFs first and focus on ES3... and then I realized that POSB Invest-Saver excludes U.S. persons!

In one of your earlier posts, you suggested that anybody moving to the US should liquidate their high-tax positions and move them to the US for tax advantage - until returning. Example: ES3 to EWS, etc.

So here's my dilemma - should I start putting money into ES3 now? If I have to move in the next 6-9 months, then my exposure to short-term risks is quite high. Or should I wait till things are more clear on my job front and leave the cash in high interest savings/FD/SSB for now?

I would avoid investments that the U.S. tax code would classify as "PFICs" (Passive Foreign Investment Companies), assuming you'll be a U.S. tax resident (as seems likely; there are a couple exceptions though depending on your status). Offshore (non-U.S. domiciled) unit trusts, ETFs (ES3, IWDA, EIMI, MBH, etc.), REITs, and even many single "stocks" fall under PFIC rules which are quite ugly from a tax point of view.

Ordinary bank deposits, SSBs, and traditional CPF (generally not the CPF Investment Scheme) would not be classified as PFICs.

Of course you could start your investing journey via a U.S. domiciled low cost fund. You'll be subject to 30% dividend tax withholding until you land in the United States, but that's very reasonable in the circumstances.

Please do take advantage of 401(k) and IRA opportunities that you have, as soon as you land. Those are the U.S. tax advantaged retirement accounts. The "Roth" flavor (i.e. post-tax contributions, never U.S. taxed if you only make qualified withdrawals) is probably going to work better for somebody planning to retire in Singapore (or in the U.S. for that matter), but some employers don't offer Roth 401(k)s and only offer Traditional 401(k)s. Some employers don't offer 401(k)s at all, but they might offer something similar. IRAs are practically always available since those are individual, and your deadline to make an IRA contribution for 2019 (if you have enough U.S. taxable income in 2019) will be April 15, 2020. Earlier is better, but that's the deadline.

My current favorite IRA custodian is Fidelity because of their FZROX and FZILX mutual funds, which are amazing. For non-IRA investing you might want to consider one of Schwab's target retirement funds, which are also extremely low cost and really "hands off."

Quote:

Also, I'm a bit confused about capital gains taxes - i understand dividends are taxed as they are distributed, but say if I started to buy ETFs when I'm in the US and held them until I return to Singapore, then sell them when I'm no longer a US tax-resident, would I be liable for US capital gains tax?
That's generally OK, but there are a couple exceptions:

1. PFICs can be just plain nasty, as mentioned.

2. If you end up as a long-term green card holder (as the tax code defines it), then you're permanently subject to the U.S. tax system and its rules unless and until you file an "exit" return. If your net worth is high enough, there's an exit tax based on the capital gains at the time of exit.

3. Of course you could fall in love, marry, settle in Nebraska or wherever...and then owe/pay capital gains tax on appreciated assets, assessed based on the acquisition date(s) even if that was years before you stepped foot in the U.S. So you might still want to reset your cost basis (and cleanse your portfolio of PFICs) strictly before stepping foot in the U.S., even if your plan is a "temporary" stay. It's not particularly expensive to do that, generally, so I think it's worth doing.

Quote:

Originally Posted by perrinrahl (Post 119794588)
Do you have any thoughts on estate planning?

Yes, probably. What would you like to discuss?

perrinrahl 20-03-2019 05:56 PM

Quote:

Originally Posted by BBCWatcher (Post 119794898)
Yes, probably. What would you like to discuss?

I'm a novice really until my agent asked me to meet to discuss this. I haven't yet, so I wonder what are the key areas to cover and approaches. I am Singaporean, married, no children.

Thanks much.

BBCWatcher 20-03-2019 10:26 PM

Quote:

Originally Posted by perrinrahl (Post 119800944)
I'm a novice really until my agent asked me to meet to discuss this.

That sounds like a sales pitch is coming.

Do you have any concerns about what would happen if either you or your spouse were to depart Planet Earth way too early, aside from grief? Or if one of you were to become incapacitated in some way?

musicaltuna 21-03-2019 02:05 AM

Dear BBCwatcher,
I’ve been following your thread with interest & have found your advice thoughtful & sincerely hope to learn from you.

Background: 32 female, self-employed

Assets: Resale HDB bought at 300+K with ex, down-paid with CPF & financing bank loan
(hoping to sell off ASAP at min loss or breakeven)

CPF: Employed for a few years before venturing into business as a sole-proprietor. Have not voluntarily topped up my OA/SA, only required Medisave.

Currently,
OA: $1,345.30
SA: $6,993.93
MA: $8,132.69

Funds from CPF used to downpay my HDB:
OA: 36,980.00 (including housing grant of 20K)
Accrued Interest: 3,427.68
will return to CPF in full *hopefully* when flat is sold.

I was not money savvy & only had 50k savings at 30 years old. However, I have since managed to grow my savings with 50K in 2017 and 100K in 2018.

Crrent cash assets are at approx 200K+, & hoping to save 70K-100K p.a. over the next few years.

Started trading on the US market last year & made returns of 17.5%. I have sold off my stocks entirely, as I am apprehensive of a sudden market downturn this year.

Current liquid assets:
DBS Multiplier: 50K (2.2% int)
UOB Fixed Deposit: 20K (10-months FD, 1.8% int)
Nickel Investment: 20K (recently invested on a whim, yet to see returns)
Company account for cash flow purposes: 20K
DCA of $100 a month into Nikko STI ETF to fulfil my Multiplier account criteria.
+ 75K USD withdrawn from US trading account

Now, questions:

1. What to do with my 75K USD now that i am out of the market? My current option is CIMB FCFD with 2.9% p.a. in lieu of volatile market conditions.

2. Would you recommend me topping up my CPF OA/SA at all? I am highly un-inclined to lock my money into CPF, not sure if I can hit the Basic Retirement Sum even.

3. How do you think I should best diversify my assets to better grow my money?

Any advice from experienced gurus with insight is most welcome, & thank you in advance!

BBCWatcher 21-03-2019 07:54 AM

Quote:

Originally Posted by musicaltuna (Post 119808750)
Funds from CPF used to downpay my HDB:
OA: 36,980.00 (including housing grant of 20K)
Accrued Interest: 3,427.68
will return to CPF in full *hopefully* when flat is sold.

Right. Any liberated equity in that HDB unit will be paid first to yourself, to your CPF OA.

Any housing-related plans you’d like to mention?

Quote:

I was not money savvy & only had 50k savings at 30 years old. However, I have since managed to grow my savings with 50K in 2017 and 100K in 2018.
Better than many; congratulations.

Quote:

Started trading on the US market last year & made returns of 17.5%. I have sold off my stocks entirely, as I am apprehensive of a sudden market downturn this year.
That’s not actually the way to do this when you have decades to run until a traditional retirement age, but you probably already know that.

Quote:

Current liquid assets:
DBS Multiplier: 50K (2.2% int)
UOB Fixed Deposit: 20K (10-months FD, 1.8% int)
Nickel Investment: 20K (recently invested on a whim, yet to see returns)
I’m not familiar with that one (Nickel). What is it?

Singapore Savings Bonds are/were paying better than 1.8%. When that matures, even if you want something ultra conservative, you’ll be able to do better. (Unless you got a “Hello Kitty” tea kettle or something from UOB?)

Quote:

Company account for cash flow purposes: 20K
I wouldn’t count that one, or at least I’d put as asterisk next to it.

Quote:

DCA of $100 a month into Nikko STI ETF to fulfil my Multiplier account criteria.
Is that inside a Supplementary Retirement Scheme (SRS) account? Then you’d get some tax relief, and that’d be better.

Quote:

+ 75K USD withdrawn from US trading account....

1. What to do with my 75K USD now that i am out of the market? My current option is CIMB FCFD with 2.9% p.a. in lieu of volatile market conditions.
OK, but they’ll be “volatile” for the next 30+ years, and you’re 32. You’re currently in an age inappropriate posture for long-term savings, and you’re trying to time markets without a genie or a time machine. I don’t recommend age inappropriate portfolios or trying to time markets.

How about keeping about 75% of your savings in the markets, close your eyes (and let the program run for a couple decades), then take a look starting about 10 years before you expect to retire? For the US$75K you could spend the next, say, 10 months pushing it back into the markets (US$7.5K/month). You could earn some interest on those idle dollars along the way using short-term T-bills, for example. If you’re correct, and if the market falls this year, you’ll catch the fall as you mechanically plow US$7.5K/month into it over the next 10 months. Then keep plowing. Could you manage a S$5,000/month (S$60,000/year) pace thereafter?

Quote:

2. Would you recommend me topping up my CPF OA/SA at all? I am highly un-inclined to lock my money into CPF, not sure if I can hit the Basic Retirement Sum even.
Well, consider this: any additional dollars you put in will, at the moment, earn 5% interest. (You haven’t even maxed out bonus interest yet.) Nothing else you’re doing is earning 5% or even 4% interest, is it? You have no assured retirement income at the moment, and you’re a single female Singaporean living in one of the highest cost countries/cities in the world with 30+ years of medical science advancements ahead before you even come close to a traditional retirement age. And you’re a small business owner/sole proprietor who could conceivably get wiped out in a court judgment or creditor dispute, except for your meagre CPF assets.

....Yeah, I think it’s a good idea to take some of that CPF deal. We can quibble about how much, but zero additional (MediSave only) sure seems like the wrong answer.

I’m also a really strong supporter of adequate Disability Income Insurance, as you probably know. Everything you’re describing — your life plan — critically depends on your earning potential.

perrinrahl 21-03-2019 09:26 AM

Quote:

Originally Posted by BBCWatcher (Post 119806040)
That sounds like a sales pitch is coming.

Do you have any concerns about what would happen if either you or your spouse were to depart Planet Earth way too early, aside from grief? Or if one of you were to become incapacitated in some way?

Totally, so my interest in speaking to the agent is zero (not personal, she is a decent agent).

My main interest is if one of us dies, the other should get the estate with minimum of fuss. We should both be able to support ourselves on our own incomes/savings anyway. And if the remaining person dies, that the money will go somewhere we desire, which may not be family, which may be to some cause etc. This would be the secondary concern.

Is estate planning necessary? And should it be done by an attorney rather than insurance agent?

BBCWatcher 21-03-2019 11:57 AM

Quote:

Originally Posted by perrinrahl (Post 119810855)
My main interest is if one of us dies, the other should get the estate with minimum of fuss....

CPF nominations, wills, advance medical directives (AMDs), and simple "open in an emergency" lists of account numbers should take care of all the big stuff anyway.

I'm assuming genuine baseline insurance necessities are already covered. For example, if the household cannot self-insure then a popular approach is to have term life insurance policies to help the surviving spouse with the rest of the mortgage. Which is not to say that the surviving spouse should dump all the life insurance proceeds into paying off the mortgage instantly. Ordinary/normal investment considerations apply at that point, notably that it's prudent to service low cost debt at standard pace if you're going to invest/save in reasonable, reliable ways.

Quote:

Is estate planning necessary?
I'd say not so much in Singapore for Singaporeans with local and even some overseas assets (the straightforward ones), especially before children come along. There are no inheritance, estate, or gift taxes in Singapore, and those are ordinarily the key contributors to "estate planning" as such. "Estate awareness" should be fine.

If/when your life situation gets more complicated -- or if it already is -- then estate considerations might also get more complicated. For example, if you relocate to another country with different estate rules/taxes, then some adjustments are merited, probably before relocating (and as part of the relocation decision).

perrinrahl 22-03-2019 10:53 AM

Quote:

Originally Posted by BBCWatcher (Post 119813471)
I'd say not so much in Singapore for Singaporeans with local and even some overseas assets (the straightforward ones), especially before children come along. There are no inheritance, estate, or gift taxes in Singapore, and those are ordinarily the key contributors to "estate planning" as such. "Estate awareness" should be fine.

Insurance wise we are fine. Thanks man, this is a good start for my understanding.

lingalong 22-03-2019 10:37 PM

Hi BBCwatcher, and fellow contributors

Big fan of the thread, and appreciate all your contribution thus far.

Am currently holding a portfolio of purely SGX listed stocks, close to 70k~ consisting mainly of traditional blue chip/REITs.

However after looking around online, I have realised that I should begin taking on some overseas exposure since I essentially 0%, plus CPF is technically a local bond holding (ish)

I am planning to begin by purchasing ETFs such as IWDA/LCWD and slowly branching into emerging market and possibly Gold/Gold miners. All of which to be done monthly or quarterly.

Is there anything I should look out for, pitfall to watch out in going forward with this?

Happy to take any tips or criticisms. Thanks

BBCWatcher 23-03-2019 08:18 AM

Quote:

Originally Posted by lingalong (Post 119841841)
I am planning to begin by purchasing ETFs such as IWDA/LCWD and slowly branching into emerging market and possibly Gold/Gold miners. All of which to be done monthly or quarterly.

One fund, typically IWDA, is enough. Don’t worry about the emerging markets until you get into the six figures, and even then it’s optional. I’d skip the gold completely.

lingalong 23-03-2019 12:30 PM

Quote:

Originally Posted by BBCWatcher (Post 119845419)
One fund, typically IWDA, is enough. Don’t worry about the emerging markets until you get into the six figures, and even then it’s optional. I’d skip the gold completely.

Okay so just one fund. Do you think I should sell the local holdings and slowly shift it into a global fund? Or keep things as they are and slowly build up on the fund?

Would a composition of CPF+SSB/Local/Global of 20,40,40 respectively be ideal?

For reference, am around 30 years old now:s12:

BBCWatcher 23-03-2019 01:01 PM

Quote:

Originally Posted by lingalong (Post 119849204)
Or keep things as they are and slowly build up on the fund?

This’ll be fine.

Quote:

Would a composition of CPF+SSB/Local/Global of 20,40,40 respectively be ideal?
Ideal for long-term savings with an expectation of retiring in Singapore, I assume you’re asking. I prefer capping the ES3/G3B (locally listed stocks) portion at 20% of total at this stage, so something like 20-15-65 feels better to me. Assuming a typical/classic age 65 retirement you’d start gradually adjusting that ratio from age 55, 58, or somewhere in between so that you’re in a more income-oriented posture by age 65. At 65 you’d be at something like 70-15-15. And if you noticed the locally stocks percentage stays the same, and that works/is easier.

lingalong 23-03-2019 01:11 PM

Quote:

Originally Posted by BBCWatcher (Post 119849676)
This’ll be fine.


Ideal for long-term savings with an expectation of retiring in Singapore, I assume you’re asking. I prefer capping the ES3/G3B (locally listed stocks) portion at 20% of total at this stage, so something like 20-15-65 feels better to me. Assuming a typical/classic age 65 retirement you’d start gradually adjusting that ratio from age 55, 58, or somewhere in between so that you’re in a more income-oriented posture by age 65. At 65 you’d be at something like 70-15-15. And if you noticed the locally stocks percentage stays the same, and that works/is easier.

I see. And the reason for 20-15-65 as you mentioned in previous post is because at this age, growth/appreciation of capital is better than dividend correct?

Likewise, by the time I am 65, it shifts to me becoming more dividend dependent rather than risk taking on growth

I hope I got that correct? :s22:

ktyandkyc 23-03-2019 03:30 PM

BBC, I been heavily vested in iwda only at around usd 150k but would think it's high time to start put in EIMI. Any thoughts on the allocation or any other alternative. I could put in 50k she and Im around 35 this year. Thanks

ktyandkyc 23-03-2019 03:36 PM

Quote:

Originally Posted by BBCWatcher (Post 119739777)
For some reason some people like to see my personal rate of return data. OK, here are the latest conveniently accessible figures through the end of February, 2019, across the three investment firms that hold the bulk of my household's wealth. My last update was through July, 2018, so this update is after the September to December, 2018, U.S. stock market correction. These figures represent annualized total account returns ("money returns") in nominal U.S. dollars. There will be some capital gains tax or ordinary income tax due upon future sale, please note. After tax dividends have been almost entirely reinvested in full since the accounts were opened. (I say "almost" because there's one small, strange exception at Schwab.) Only Vanguard provides an easy way to look up a 10 year number while the others report from account inception.

Vanguard

10 Year: 8.9%
5 Year: 5.7%
3 Year: 9.0%
1 Year: 0.6%

Fidelity

Inception: 4.77%
5 Year: 5.85%
3 Year: 11.16%
1 Year: 2.10%

Caveat: A small portion (less than 5%) of my Fidelity holdings is not reflected in the above figures. That portion only came into existence fairly recently, and due to an apparent quirk in their online system it won't show up in the above figures for some more months. If it were included in the 1 Year figure then that figure would be a little higher, still 2.X%.

Schwab

Inception: 12.66%
3 Year: 19.40%
1 Year: -0.66%

The total account values are in approximately these ratios (Vanguard:Fidelity:Schwab): 16:8:1. Savings continue to flow every month into Fidelity and Vanguard.

I have absolutely no complaints. None of this stuff is "rocket science." It's just the natural outcome of regular, dogged monthly savings for many years into a very small number of low cost, well diversified funds.

Wow how do u open these accounts?


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