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BBCWatcher

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i guess the difference is stashing money from the endowment 6years later to another endowment which will have a guaranteed gain of 2++%pa return vs using them to do DCA on etf for the next few years.
Those aren't the only two choices. What you probably want to do is this:

1. Save at your $1,300/month pace until retirement. If you can increase that pace as you progress in your career and feel comfortable with a new, higher monthly savings flow, that'd be great.

2. In addition, when the endowment plan matures about 6 years from now, take the proceeds and also invest them in your low cost, age and risk appropriate investment portfolio. So let's suppose that's $100K worth of endowment plan at maturity, for example. If you like, you can divide that up into 10 monthly installments of $10K each. So for a 10 month period you'd add $10K to each of your regular monthly investments (regular is $1,300, or more if you're at a higher pace by then).

So it really depends if the future performance of IWDA and ES3 really justify the "risk" of not going for a guaranteed 2++% endowment return.
No, there's no requirement that you maintain an all stock portfolio. You could add in some MBH, for example, if you feel you want some Singapore dollar denominated bond exposure.

Let's suppose 6 years from now you have $100K worth of stocks (IWDA and ES3) and $100K worth of a matured endowment plan. At that point you're still at least 9 years away from retirement and more like 14 probably. Let's suppose you decide that a 70%-30% stocks-bonds split is what you want to have for this particular $200K at that particular age. (Remember, you're also dragging a lot of cash, and presumably you have CPF assets. So all that is quite conservative.) OK, you already have 50% in stocks ($100K) by then, so to get to 70% you'd take another $40K from the endowment plan and add it to your stock investing, and you'd take the other $60K and buy MBH. So for that 10 month period (as suggested above), you'd do this:

a. Regular $1,300/month (or your higher regular monthly savings flow) still goes into stocks;
b. Add another $4,000/month, split the same way across IWDA and ES3;
c. Buy $5,000/month of MBH.

After the 10 month reinvestment period has passed, you'd adjust your monthly savings flow to spread it across MBH, ES3, and IWDA to maintain your desired portfolio allocations. And you'd periodically rebalance (once or twice per year).

Make sense?
 
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yesimvested

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thats damn bloody detail... thanks and appreciate!

There is this part I can never understand how to do:

"you'd adjust your monthly savings flow to spread it across MBH, ES3, and IWDA to maintain your desired portfolio allocations. And you'd periodically rebalance (once or twice per year)"


Actually I have not commit the 100k into the endowment yet. About to do it already as im not sure for how long will Etiqa offer the 2.59%pa endowment plan.


if thats the case, i would think your recommendation will be to up the monthly DCA by another say 60% while the IWDA and ES3 are still considerably "low cost" as of now... And the balance funds to start with MBH now?

Basically to drop the whole endowment plan idea until probably when i already enter the retirement age...

Then perhaps i will do the below mthly with the 200k for the next 8 years+ and perhaps reduce the monthly investment thereafter depending on my income at that time.

IDWA - $900
ES3 - $600
MBH - $500



Those aren't the only two choices. What you probably want to do is this:

1. Save at your $1,300/month pace until retirement. If you can increase that pace as you progress in your career and feel comfortable with a new, higher monthly savings flow, that'd be great.

2. In addition, when the endowment plan matures about 6 years from now, take the proceeds and also invest them in your low cost, age and risk appropriate investment portfolio. So let's suppose that's $100K worth of endowment plan at maturity, for example. If you like, you can divide that up into 10 monthly installments of $10K each. So for a 10 month period you'd add $10K to each of your regular monthly investments (regular is $1,300, or more if you're at a higher pace by then).


No, there's no requirement that you maintain an all stock portfolio. You could add in some MBH, for example, if you feel you want some Singapore dollar denominated bond exposure.

Let's suppose 6 years from now you have $100K worth of stocks (IWDA and ES3) and $100K worth of a matured endowment plan. At that point you're still at least 9 years away from retirement and more like 14 probably. Let's suppose you decide that a 70%-30% stocks-bonds split is what you want to have for this particular $200K at that particular age. (Remember, you're also dragging a lot of cash, and presumably you have CPF assets. So all that is quite conservative.) OK, you already have 50% in stocks ($100K) by then, so to get to 70% you'd take another $40K from the endowment plan and add it to your stock investing, and you'd take the other $60K and buy MBH. So for that 10 month period (as suggested above), you'd do this:

a. Regular $1,300/month (or your higher regular monthly savings flow) still goes into stocks;
b. Add another $4,000/month, split the same way across IWDA and ES3;
c. Buy $5,000/month of MBH.

After the 10 month reinvestment period has passed, you'd adjust your monthly savings flow to spread it across MBH, ES3, and IWDA to maintain your desired portfolio allocations. And you'd periodically rebalance (once or twice per year).

Make sense?
 
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BBCWatcher

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Actually I have not commit the 100k into the endowment yet. About to do it already as im not sure for how long will Etiqa offer the 2.59%pa endowment plan.
Well that's an altogether different situation! So you have another S$100K in cash and no endowment. Why are you interested in an endowment plan for your retirement financial needs?

if thats the case, i would think your recommendation will be to up the monthly DCA by another say 60% while the IWDA and ES3 are still considerably "low cost" as of now... And the balance funds to start with MBH now?
So let's suppose you want that 70%-30% split at your current age, just for sake of argument. So you'd do something like this:

1. For 10 months, invest a total of $11,300 per month. $7,910 (70%) goes into stocks, and $3,390 (30%) goes into bonds. If you want to round that to $7,900 and $3,400, that's fine.

The $7,900 would be split between ES3 (or G3B) and IWDA (or VWRA), so let's suppose that's $3,000 into ES3 (or G3B) and $4,900 into IWRA or VWRA since you said you want to split it that way (in round numbers).

2. Starting in month 11, you ease back to your regular monthly savings pace of $1,300 per month, of which $400/month goes into MBH, $600/month into IWDA or VWRA, and $300/month into ES3 (or G3B). (I'm rounding to nearest hundreds here.) Except you probably wouldn't actually buy each fund every month since there's often a minimum commission to do that, but rather you'd "batch up" your purchases. (Although MBH and G3B are available through POSB Invest Saver on a monthly basis, and that's a pretty reasonable way to buy them in this dollar amount. I think FSMOne is also pretty good. Shop around.)

3. Once or twice a year you'd rebalance. (I think once a year is fine.)

Basically to drop the whole endowment plan idea until probably when i already enter the retirement age...
Why even then?

4. As you get to about 7 years before retirement, you could start making a gradual adjustment to shift the allocations away from stocks and more toward bonds so that, by retirement age, you're at something like a 30%-70% split (stocks v. bonds). But you'd use and keep the same funds. Then, in retirement, you'd have a pool of assets to draw from gradually.
 

BBCWatcher

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OK, so now you're changing the initial situation again? You now say you have S$200K of idle cash to invest, above the S$110K in cash you've previously described?

You're under 40, and even if you retire VERY early you most likely wouldn't touch your retirement savings until at least age 60. (Why age 60? Because at age 55 you may have some CPF assets you might want to use if you're retiring that early.)

If you have a lump sum to invest for long-term savings, you shouldn't take years to invest that lump sum. You should do it in a matter of months, then continue saving. So if it's $200K to invest, OK, divide that up into 12 months if you like, which is $16,667 per month. Add your regular monthly savings flow to that -- let's suppose that's $1,000/month -- and then invest $17,667 per month for the next 12 months. Then continue at $1,000/month until retirement, adjusting your monthly savings flow upward as your career progresses and you're able to pay more to yourself every month.

Choose a portfolio allocation that's appropriate for your age and risk tolerance. A 70%-30% stocks-bonds split would be rather conservative at your age, actually, but you get to make that decision. Start adjusting the portfolio allocation when you get to about 7 years before retirement.

Let's suppose you wake up 3 months from now and IWDA (or VWRA) has fallen by 20% within the past month or two. Is that bad? No, it's fabulous! That means you're buying cheaper stocks, and who doesn't like a discounted price if you're buying? But you don't want to wait too long -- like years -- to move into your desired long-term portfolio allocations, because that's reducing the time that your money has to grow until you retire. So if you want to divide up a lump sum into 6 or 10 or 12 monthly installments, that's alright, but (for example) chewing up 6 years of your ~20+ years on a low yielding endowment plan doesn't make a lot of sense to me.
 

assiak71

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got another noob question... couldnt find the answer to it from internet..

May i know approximately how many percent of dividends will we get quarterly from the below etfs? (i understand that the dividends will be reinvested)

1)IWDA (after 15% withholding)
2)ES3
3)MBH

the reason im asking this is to understand if there is a possibility to "live off" dividends when its time to retire.

for example: if the average dividend per quarter for the 3 etf combined is 1%. And i have approximately 500k combined in them. Quarterly i be able to get a dividend of $5000. Coupled with CPF life, i think it be pretty decent to just live off dividends without touching the nest egg at all.

im a noob.. be gentle :)
1% per quarter means 4% per year. Of course it wont be so high unless you are >90% in reits

In short, when drawing down, do the reverse of accumulating. Sell the leading asset(s) monthly/quarterly according to AA
 

assiak71

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ah ok... so how many percent are people historically getting per individual etf listed below? would u know?

also.. whats AA? (noob question)

thanks

All the dividend yields can be found by searching. E.g. for ES3 and MBH just sum up the past 12mth dividend and divide by current price

AA = asset allocation
 

BBCWatcher

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May i know approximately how many percent of dividends will we get quarterly from the below etfs? (i understand that the dividends will be reinvested)
1)IWDA (after 15% withholding)
This fund holds most stocks listed across all of the "developed" countries' stock markets. All the dividends that these stocks pay are reinvested in the fund, less applicable dividend taxes in the countries where these stocks are listed. It's all automatic, the dividends vary, and the dividend tax rates vary. Currently IWDA's underlying gross dividend yield is about 2% per year.

ES3 does not reinvest dividends; it distributes them. Please review fund publications if you'd like past dividend distribution details, and please note that this fund's dividend distributions are planned for twice per year but subject to the fund manager's discretion. That is, the fund manager decides whether, when, and how much to distribute dividends, and the fund manager is under no particular obligation to distribute what the underlying shares themselves distribute. For example, the fund manager could elect to accept scrip dividend offers in lieu of cash dividends. (And we should be grateful the fund manager gets to make such decisions, hopefully intelligently.)

Same thing, except MBH is managed by Nikko AM and has planned, discretionary, annual dividend distributions.

the reason im asking this is to understand if there is a possibility to "live off" dividends when its time to retire.
That's not a particularly interesting question to answer, actually. All three of these funds are highly liquid, and all you should really care about is total long-term returns, inclusive of manually and automatically reinvested dividends. When you're ready to draw down assets in retirement, you can do that through any combination of discretionary distributed dividends (without reinvestment) and share sales.

Don't worry about it, in other words.
 
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BBCWatcher

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Here's another quick update....

It's another January, so here's what I'm up to (in no particular order):

1. My spouse and I have already put the wheels in motion to make the maximum U.S. IRA contributions for 2020. (It takes a few steps and some days to do that, mechanically, but I start the process as early as allowed.)
Well underway.

2. We'll make our CPF top ups for tax relief at the end of this month.
All done, although one of us might have some "gap filling" MediSave top ups later in the year.

5. I'm penciling in two family vacations for 2020, and I'm keeping an eye on airfares.
And now keeping an eye on the 2019-nCoV-related disruptions. :s11:

6. I'm checking my immunizations to see if any boosters are due in 2020. (Tetanus, maybe?)
All good, including Tetanus.

Don't forget about other important investments. For example, it's good to learn how to swim if you or a loved one haven't learned yet. Also, Valentine's Day is coming up on February 14. :D
 

Lucky_Farmer

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Hi BBCWatcher,

There has been talk about a potential downturn of the economy because of the corona virus. Do you have any general advice for us in this market? Is putting monies into gold a good short term option? I have seen people suggesting buying GLD through IB as a hedge at this point. Please can you let us know your thoughts. Sorry if you have written it elsewhere. I went back a few pages but could not find anything on this.
 

assiak71

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Hi BBCWatcher,

There has been talk about a potential downturn of the economy because of the corona virus. Do you have any general advice for us in this market? Is putting monies into gold a good short term option? I have seen people suggesting buying GLD through IB as a hedge at this point. Please can you let us know your thoughts. Sorry if you have written it elsewhere. I went back a few pages but could not find anything on this.

Listen to jack bogle

Stay the course
 

lemniscate

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Hi BBCWatcher, I was recently admitted to a US university for a master degree, which typically recommends the students to undergo an internship before graduation (and I plan to get some working experience over there as well). For some background, I'm an Indonesian national and a Singapore PR.

I recall that I've signed forms with banks/brokers stating that I'm not a US resident, US person or resident alien (I can't recall the exact terms), would working or doing paid internships and therefore paying US taxes change this?

Most of my investments are in IB (IWDA/EIMI etc) and SSB, considering that the US has capital gain taxes, what are the things that I should look for prior to my arrival in the US? I'd appreciate if you can point me to some additional resources to read as well.

Thank you!
 

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Hi BBCWatcher,

About the Singapore 6 month T bill, is the cut-off yield that is announced at close of auction the yield the successful applicant will receive?
Thanks in advance.

They announce 3 types of yield:
Average yield
Median yield
Cut-off yield
 
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BBCWatcher

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Hi BBCWatcher, I was recently admitted to a US university for a master degree, which typically recommends the students to undergo an internship before graduation (and I plan to get some working experience over there as well). For some background, I'm an Indonesian national and a Singapore PR.

I recall that I've signed forms with banks/brokers stating that I'm not a US resident, US person or resident alien (I can't recall the exact terms), would working or doing paid internships and therefore paying US taxes change this?
What’ll be your U.S. visa type?

About the Singapore 6 month T bill, is the cut-off yield that is announced at close of auction the yield the successful applicant will receive?
If you place a noncompetitive bid, yes. That’s the only type of bid individual investors should be making.
 

lemniscate

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What’ll be your U.S. visa type?

It should be F-1 visa, and the program qualifies for the STEM OPT extension (total of 36 months allowance to work after completing the program - during which ex-students typically try to get sponsorship for H-1B).
 

BBCWatcher

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It should be F-1 visa, and the program qualifies for the STEM OPT extension (total of 36 months allowance to work after completing the program - during which ex-students typically try to get sponsorship for H-1B).
OK. On a F-1 you won’t be subject to the U.S. tax system except for your U.S. income, and as long as too much time hasn’t passed. Nonetheless, you may still wish to make your assets “U.S. tax friendly” before flying to the U.S. in case you decide to stay longer (perhaps a lifetime?) and assuming you’re allowed to do that.

Look for my recent post in answer to a prospective J-1 visa holder since those rules and opportunities are pretty similar.
 

lemniscate

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OK. On a F-1 you won’t be subject to the U.S. tax system except for your U.S. income, and as long as too much time hasn’t passed. Nonetheless, you may still wish to make your assets “U.S. tax friendly” before flying to the U.S. in case you decide to stay longer (perhaps a lifetime?) and assuming you’re allowed to do that.

Look for my recent post in answer to a prospective J-1 visa holder since those rules and opportunities are pretty similar.

Thanks, I'll look at your recent posts.

I'm still reading on the details of the different visas, but ultimately I would definitely like to get a few years of relevant working experience over there - and I'm not opposed to the idea of staying for a long time. So yes I'd like to make my assets US tax friendly as you've put it, rather than having to worry about it later on when I actually convert to an H-1B or even other visas.

Edit: I appreciate the advice on setting a financial footprint in the US (US bank accounts, credit cards), that's what I plan to do. I might also use IB to transfer my tuition and living cost as it's quite a bit cheaper than other options (SGD from SG bank > SGD in IB > USD in IB > USD to US bank, after I open an account there).

If I understand correctly, I won't need to do anything to my IWDA/EIMI portfolio while I'm on F-1, and I should use the available plans (e.g. 401(k)) with tax advantages when I do start working in the US?
 
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BBCWatcher

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If I understand correctly, I won't need to do anything to my IWDA/EIMI portfolio while I'm on F-1, and I should use the available plans (e.g. 401(k)) with tax advantages when I do start working in the US?
You won't need to do anything with non-U.S. funds such as IWDA and EIMI, but those funds (and others like them) are U.S. tax "hostile" to U.S. persons. The only way they work is if you never become fully subject to the U.S. tax code. For example, if you remain on your F-1 visa for 4 years, maybe earn a little bit of U.S. income working for the university (within the bounds allowed on your F-1), then you leave.

If you think you might stay -- you meet the love of your life and get married, for example -- then you don't want to be holding non-U.S. funds like IWDA or EIMI since they're considered "Passive Foreign Investment Companies" (PFICs). Even things that seem like simple stocks often are PFICs. So, strictly before you become a U.S. person -- and highly preferably sometime the calendar year before -- I would exit those positions and recast them into a more U.S. tax friendly posture. One simple way to do that is to sell both IWDA and EIMI and reinvest the proceeds in VT, Vanguard's U.S. domiciled Total World Stock ETF listed on the New York Stock Exchange.

There doesn't seem to be any limitation on F-1 visa holders participating in U.S. tax advantaged accounts such as IRAs, 401(k)s, 403(b)s, and 529s as long as you otherwise qualify. It'd be a good idea to avail yourself of those opportunities if you can, if you qualify.

Note that you're evidently allowed to enter the Diversity Immigrant Visa lottery every October. Note also that you'll likely have some future difficulties renewing your Re-Entry Permit (REP) for your Singapore Permanent Residence if/when you're no longer a de facto resident of Singapore.
 

lemniscate

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If you think you might stay -- you meet the love of your life and get married, for example -- then you don't want to be holding non-U.S. funds like IWDA or EIMI since they're considered "Passive Foreign Investment Companies" (PFICs). Even things that seem like simple stocks often are PFICs. So, strictly before you become a U.S. person -- and highly preferably sometime the calendar year before -- I would exit those positions and recast them into a more U.S. tax friendly posture. One simple way to do that is to sell both IWDA and EIMI and reinvest the proceeds in VT, Vanguard's U.S. domiciled Total World Stock ETF listed on the New York Stock Exchange.

There doesn't seem to be any limitation on F-1 visa holders participating in U.S. tax advantaged accounts such as IRAs, 401(k)s, 403(b)s, and 529s as long as you otherwise qualify. It'd be a good idea to avail yourself of those opportunities if you can, if you qualify.

Thanks for the confirmation. I think closing my IWDA/EIMI positions in the preceding calendar year might be a good idea. I'll also do some more research on the different tax advantaged accounts.

Note that you're evidently allowed to enter the Diversity Immigrant Visa lottery every October. Note also that you'll likely have some future difficulties renewing your Re-Entry Permit (REP) for your Singapore Permanent Residence if/when you're no longer a de facto resident of Singapore.

Losing my Singapore permanent residency (rightly so) is a trade off I've considered and accepted before applying for further study abroad. Even if I return to Singapore before my 5-year REP expires and get employed here again, it would probably be hard for the ICA to justify renewing my REP given the 2-3 years of missing "economic contribution" to Singapore.

If I eventually end up going back to Singapore for whatever reason, and lose my PR then I'll have to settle for an EP and possibly reapply for PR (I just hope that losing my current PR due to lack of presence in Singapore wouldn't put me on ICA's blacklist for work permits, but of course no one knows about that).

Thank you for your advice. I've been reading many of your past posts in the forum, from investments, CPF to insurance. You've been a great help!
 

BBCWatcher

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Losing my Singapore permanent residency (rightly so) is a trade off I've considered and accepted before applying for further study abroad. Even if I return to Singapore before my 5-year REP expires and get employed here again, it would probably be hard for the ICA to justify renewing my REP given the 2-3 years of missing "economic contribution" to Singapore.
It's up to the Immigration and Checkpoints Authority, but I think you'd be likely to get at least a one year renewal in the scenario you describe. Spending a couple years getting a Master's degree overseas to improve one's knowledge is a perfectly reasonable thing for PRs to do, and I expect the government understands that.

Note that technically you don't need a Re-Entry Permit as long as you scoot back to Singapore before your REP expires and stay physically in Singapore. You only need a valid, unexpired REP to re-enter Singapore, exactly as described. If you never leave Singapore, then you never need to re-enter. Yes, this includes taking the bus to Johor or the ferry to Batam.
 
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