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tangent314

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Parents have tasked me to help them do something with the money in my dad's SRS account. Dad is turning 66 this year. He only started max topping up his SRS account a 3-4 years back so it's not fat or anything. Likely to be working for a couple more years... nothing set in stone yet but it's his own business so he'll retire whenever he wants to. I'm still learning lots on my own, for my own investment so I don't know what to do for someone who's already near the end of his working career.


I would say SSB seems like the most suitable investment for your Dad's SRS account since he is going to retire soon and start withdrawing from there.
 

BBCWatcher

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The only additional question I have is - if I am paid elsewhere, how does the employee contribution part of CPF go to CPF? I imagine the government wouldnt let you do just VCs, because that could lead to many a tricky situation. That said, I imagine that if I go ahead with the the half and half (SGD and USD) option that you suggested above, it could solve that issue, and also give me some flexibility on the exchange rate front.
OK, so let's assume there's a Singapore entity, you're the entity's employee in Singapore, and so it's an employer-employee arrangement with compulsory "all three" CPF account contributions. Let's further assume you and the Singapore entity agree that you'll be paid in U.S. dollars landed in a bank account in Hong Kong.

As far as I know, the arrangement I've just described is odd but legal. I'm not aware of any particular restrictions on the form (e.g. currency) or place (e.g. a bank account in Hong Kong) that your compensation must take, just that the compensation has to be translated at fair value to Singapore dollars for IRAS and CPF purposes. The Singapore corporate entity then has certain payment obligations in Singapore, in Singapore dollars. It'll have to withhold a portion of your wages (on a Singapore dollar calculated basis, so this amount will vary in U.S. dollar terms as the exchange rate varies) plus add some of its own Singapore dollars (the employer's contribution share), then send that total amount to the CPF Board, designated for crediting to your CPF accounts, within the first 14 days of the following month, every month. Mechanically, functionally, the Singapore corporate entity will need a business bank account with Singapore dollars in it -- Maybank Singapore offers a good one last I checked -- and manage that cash flow to meet its CPF obligations to/for you, plus whatever other business needs it has. The Singapore entity will also have an obligation to cut an annual income statement for you and report the same information to IRAS. The Singapore entity might very well want to hire a third party small business payroll processor in Singapore to handle these particulars.

I don't know whether a split currency compensation scheme would actually make the mechanics for the Singapore entity much easier, but potentially it could, only a little.

Thankfully my company has global insurance coverage, and I also double dipped with my own Integrated Shield rider insurance (credit my fiancee for this one).
Yes, that makes sense. To their credit, lots of employers recommend this sort of approach.

Parents have tasked me to help them do something with the money in my dad's SRS account. Dad is turning 66 this year. He only started max topping up his SRS account a 3-4 years back so it's not fat or anything. Likely to be working for a couple more years... nothing set in stone yet but it's his own business so he'll retire whenever he wants to. I'm still learning lots on my own, for my own investment so I don't know what to do for someone who's already near the end of his working career.

What's the best I can do for my dad at the moment? Will be reading up more on my own but if I could get some advice in the right direction would be very helpful.
I assume you mean "best" in terms of where/how he should invest the SRS dollars he's contributing/has contributed. If I'm understanding your question correctly, the answer really depends on how his other wealth is held/invested -- what his overall household investment portfolio looks like.

Let's suppose for example that he owns a primary residence, he (and his spouse/partner, if applicable) has (have) reasonable or better CPF balances, and he has his SRS account -- and that's pretty much it. He's age 66, so he probably ought to be fairly conservative in his investing since he's going to start drawing down assets fairly soon. "Best guess" in this example, and without real numbers, is that he'd split his SRS dollars roughly 50-50 between stocks and bonds, so maybe something like this:

30% MBH
70% LionGlobal's "All Seasons" Growth Fund (via POEMS or DollarDex)

That'd get pretty darn close to a 50-50 stock-bond split without making the math too complicated.
 

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I would say SSB seems like the most suitable investment for your Dad's SRS account since he is going to retire soon and start withdrawing from there.
Maybe, but "it depends." IRAS allows qualified SRS withdrawals stretched out over 10 consecutive tax years once started, and so maybe it's OK to be somewhat more aggressive but still fairly conservative. We really should consider the rest of this father's household wealth and how it's currently positioned, but we don't have that information.
 

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I would say parents are pretty cash rich, but not much investment in stocks/bonds, with 2 properties under his name iirc. Just want to ensure my dad has money to spend for his leisure activities when he retires without having to worry, if that makes sense. I'll be looking into the 30/70 split you advised and go from there! Thanks again you two!
 

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I would say parents are pretty cash rich, but not much investment in stocks/bonds, with 2 properties under his name iirc. Just want to ensure my dad has money to spend for his leisure activities when he retires without having to worry, if that makes sense.
Not really. ;) If they're "pretty cash rich" then your father already "has money to spend for his leisure activities when he retires without having to worry." Relatedly, it also means he should have ample flexibility to decide when to start withdrawing his SRS funds.

I'll be looking into the 30/70 split you advised and go from there! Thanks again you two!
What's their pile of cash yielding, if you happen to know? It's not rotting in 0.05% bank deposit accounts, is it? (Cash held in SRS accounts is that, for example.)
 

adgjl321

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Yes, it's a heck of a good deal if his Retirement Account can have a bigger balance. (It's his Retirement Account specifically. Once you reach age 55 there are no more directed Special Account top ups.) Presumably he's nearing retirement, or at least would like to retire if he could, and he's no longer a 30-something worker with decades of earning, saving, and prudent investing ahead of him to build a retirement nest egg. I really can't think of anything better than CPF Retirement Account top ups for older (ahem, mature and experienced) workers who haven't formed much (or any) independent retirement nest egg yet. (In some classic cultures and contexts, children and grandchildren -- and claims on their earnings -- are the retirement plan. That approach has always had its limitations and works even less well in modern Singapore. I'm not a big fan of it.) You just can't beat the RA's combination of 4+% interest and safety for somebody in that position.

So yes, he and everybody who loves him who can help out ought to be slamming lots of dollars into his Retirement Account, starting with at least maxing out available tax reliefs which are available as long as his RA is below the Full Retirement Sum. Here's an example assuming all these individuals pay some income tax:

1. You top up his Retirement Account by $7,000 for tax relief.

2. Your older sibling does the same thing, also for tax relief.

3. Your younger sibling is cash strapped at the moment but still qualifies for tax relief, so you hand your younger sibling $7,000 to top up your father's RA. Your younger sibling then pays you back a couple months from now, maybe sharing some of his/her tax relief with you.

4. Your father tops up his Retirement Account by $7,000 for tax relief.

Everybody does this on the second to last business day of this month (January, 2020) using PayNow QR, I'd recommend. That'll mean that the top ups start earning RA interest from February 1, 2020, while also earning whatever bank interest the funds are currently earning for most of January.

There are also possible CPF transfers available. For example, if your father has funds in his OA and SA, he can transfer those funds (drawing first from his SA, then his OA) to his Retirement Account. The portion drawn from his OA will then be upgraded from 2.5% OA interest to 4% RA interest. You, your siblings, and any other qualified family members may also be able to transfer some of your CPF dollars to your father's RA. See here for details on those rules. Those of you who have used OA dollars for housing might consider paying some or lots of those OA dollars back if the transfer to your father's RA would draw from OA, then do the transfer.

It's best to do any such transfers after cash top ups for tax relief, but transfers should also preferably be done within this month (January, 2020) to start earning RA interest as early as possible.

What does a fatter Retirement Account buy your father? It buys him a more generous income stream starting as early as his 65th birthday month, although he can defer the start of that income stream to as late as age 70. If he was born in 1957 (which is probably correct based on his current age), he'll be able to choose among four payout variations (unless he's somehow already made a payout decision): the classic Retirement Sum Scheme's fixed term payouts (which end at age 90 -- Happy 90th Birthday?) and the three CPF LIFE payout plans (with monthly payouts that end only when he ends, i.e. that last for the rest of his life). That payout plan decision comes later, a couple months before his 65th birthday at the earliest, and is a topic for another day.
Thank you! This is insanely helpful.

So my Dad's RA is almost maxed out, but my Mum is far from it. So will look to divert some resources to my Mum's.

On my Dad, anything else he can do further given his RA is close to maxed out?
 

BBCWatcher

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So my Dad's RA is almost maxed out, but my Mum is far from it. So will look to divert some resources to my Mum's.
That'd be prudent, especially if her RA is below the FRS (not counting interest) and thus there's a tax relief opportunity. Some "rough balance" between spouses makes a lot of sense.

On my Dad, anything else he can do further given his RA is close to maxed out?
That's rather uncommon. Are you sure his RA principal (interest doesn't count for these purposes) has reached the current Enhanced Retirement Sum (ERS)? That's his actual top up limit, and even once his RA reaches the ERS he can keep topping up his RA as the ERS increases.
 

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Bbcw, how would you suggest to invest $200k with 15 to 20 years horizon?
There's not enough information to say. What's supposed to happen after those 15 to 20 years -- what are these funds supposed to buy then? For example, are these savings earmarked for a newborn's, infant's, or toddler's higher education (university) in (also for example) the United States?
 

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There's not enough information to say. What's supposed to happen after those 15 to 20 years -- what are these funds supposed to buy then? For example, are these savings earmarked for a newborn's, infant's, or toddler's higher education (university) in (also for example) the United States?

The funds could be use for education , or if not required it can be left to grow
 

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The funds could be use for education , or if not required it can be left to grow
Well, if you assume the funds are equally likely to be spent on general expenses -- so no particular, different country/currency bias (e.g. "there's a greater chance these particular dollars will be spent on university tuition costs in the United States") -- then you'd just invest these funds the same way you would your other long-term savings, assuming you're happy with whatever you're currently doing in that respect. (The time horizon is long enough.) And there are plenty of threads and discussions about how to invest long-term savings in prudent ways, such as splitting an investment portfolio between stocks and bonds in percentage allocations that make sense given the time horizon.
 

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Bbcw, what would you recommend to double my account in 10yrs time in the most risk free way?
 

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Hi BBCW. My wife and I find that the 5% interest for the first $60k in the CPF and SA attractive. Is it sensible to do a cash top-up of $60k to our baby's CPF SA and/ or MA account? If yes, to which account is better - SA or MA? We can do the top-ups over many years using a combination of his Ang Bao monies and our monies.

(Anything beyond $60k is not attractive anymore, as he will be eligible for income tax relief by doing CPF top-ups himself when he starts earning a salary.)

Or, is buying IWDA for him the better option?

There is no specific eventual objective for this sum of money. But we are looking at keeping the monies there for the long term, and for as long as the monies are not needed.

Thank you.
 
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BBCWatcher

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Bbcw, what would you recommend to double my account in 10yrs time in the most risk free way?
OK, let's suppose you're talking about nominal Singapore dollars. In order to double S$X after 10 years you'd need an annually compounded growth rate of 7.18% net of costs.

Now let's look at the lowest available risk, Singapore dollar denominated investment: the 10 year Singapore Government Security (bond), a general debt obligation of the Government of Singapore backed by its full faith and credit. According to the Monetary Authority of Singapore's data for January 10, 2020, the 10 year bond (actually about 9 1/2 years to maturity) on the secondary market is yielding about 1.74%.

In order to get a market yield higher than 1.74%, you have to assume a lot of risk. For perspective, Hyflux issued perpetual bonds that promised 6% coupons. Hyflux didn't live up to its promise.

A well diversified, accumulating (or automatic dividend reinvesting) stock index fund stands a reasonable chance of yielding 7.18% over the next 10 years, but that's certainly not guaranteed.

My wife and I find that the 5% interest for the first $60k in the CPF and SA attractive. Is it sensible to do a cash top-up of $60k to our baby's CPF SA and/ or MA account?
It makes tons of sense in the scenario when a Singaporean citizen child is born and lives overseas, outside Singapore, and has two citizenships. This government currently insists that the child "choose sides" upon reaching adulthood. If the child is highly likely to choose Belgian citizenship (a random example), then that young adult ends up with a huge pile of Singapore dollars growing at 4+% per year that can be withdrawn at any time, as long as they're withdrawn in their entirety (a single lump sum). That's a heck of a good deal, really, even if the interest is taxed in that child's/young adult's country.

Otherwise, this topic has come up before. I sit firmly on the fence, basically. I don't think it's a crazy idea -- a 5% yield certainly is attractive -- but I also don't think it's the best idea in general. Children, especially newborns, have incredibly long time horizons -- the longest among the living. So they and their parents ought to take advantage of that. If you want to use CPF as something of the "bond leg" of a child's long-term investment portfolio, meaning ~10% of the child's portfolio, that'd make sense. No, you cannot rebalance to/from CPF accounts, but that's OK.

If yes, to which account is better - SA or MA? We can do the top-ups over many years using a combination of his Ang Bao monies and our monies.
I vote for MA ahead of SA in this situation. MediSave dollars can be useful at any/every age.

(Anything beyond $60k is not attractive anymore, as he will be eligible for income tax relief by doing CPF top-ups himself when he starts earning a salary.)
Well, 4% straight up is still attractive. The 10 year Singapore Government Security is yielding 1.74% as I write this and for comparison.

Or, is buying IWDA for him the better option?
Or VWRA. I'd lean that way, yes. Even for university-related savings there's an initial ~20 year time horizon from birth, and that's plenty long enough to invest some portion in stocks.

Actually, the government's 100% matching funds offer for Child Development Accounts is quite compelling. I'd collect every matching dollar available if you haven't already.
 

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thanks BBC again for your awesome advices.

As you were saying to use non-SRS funds to invest in US Treasury, could you kindly advise the most cost effective way to do so?

Is there a floating bond ETF as i got a gut feeling that current rates are too low and will rise in the future?
thanks
 

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good evening, BBCW. has been reading last few weeks. would like to know what you recommend for a newbie to invest in. currently only have fsmone, but have posb and maybank accounts. quite interested in MBH and IWDA, would like to know your suggestions and advices. thanks!
 

cassowary18

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good evening, BBCW. has been reading last few weeks. would like to know what you recommend for a newbie to invest in. currently only have fsmone, but have posb and maybank accounts. quite interested in MBH and IWDA, would like to know your suggestions and advices. thanks!

You should read Shiny Things's book, Rich By Retirement.

http://richbyretirementbook.com/
 

BBCWatcher

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As you were saying to use non-SRS funds to invest in US Treasury, could you kindly advise the most cost effective way to do so?

Is there a floating bond ETF as i got a gut feeling that current rates are too low and will rise in the future?
Assuming you’re a non-U.S. person, examples include IB01, IBTA, CBU7, CBU0, and DTLA, all traded on the London Stock Exchange and depending on what maturities of U.S. Treasuries you want.

good evening, BBCW. has been reading last few weeks. would like to know what you recommend for a newbie to invest in. currently only have fsmone, but have posb and maybank accounts. quite interested in MBH and IWDA, would like to know your suggestions and advices. thanks!

You should read Shiny Things's book, Rich By Retirement.

http://richbyretirementbook.com/
That’s not a bad idea, then tweak the advice to your own situation and to current offers. I prefer not overweighting the STI stocks as much/as early as ST recommends. As far as offers, Maybank has unfortunately ended its monthly program, but POSB and OCBC have added MBH to theirs.
 

arcaninx

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Thanks BBCW.

When i was abt to execute my trade, i noted that SCB charges abt 0.8% of fees. By right , it should be 0.20% only. After searching scb web, i noted that there are additional fees for LSE.

Is there no way to avoid these fees?

whDFP4D.jpg


Assuming you’re a non-U.S. person, examples include IB01, IBTA, CBU7, CBU0, and DTLA, all traded on the London Stock Exchange and depending on what maturities of U.S. Treasuries you want.




That’s not a bad idea, then tweak the advice to your own situation and to current offers. I prefer not overweighting the STI stocks as much/as early as ST recommends. As far as offers, Maybank has unfortunately ended its monthly program, but POSB and OCBC have added MBH to theirs.
 
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