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vegavega25 06-08-2019 11:17 PM

BBC, would appreciate your thoughts on this:

In order to gain the ability to withdraw cash at ATMs abroad, would you recommend sticking with CIMB StarSaver and be willing to bear the local bank withdrawal fee even if CIMB doesn't charge at a Plus ATM, OR, putting down S$15K in some useless bank account at Citibank to get their ATM card? Does going with Citibank have any distinct benefits and if so which account should one consider?

Thanks a ton.

BBCWatcher 07-08-2019 01:42 AM

Quote:

Originally Posted by vegavega25 (Post 122114906)
In order to gain the ability to withdraw cash at ATMs abroad, would you recommend sticking with CIMB StarSaver and be willing to bear the local bank withdrawal fee even if CIMB doesn't charge at a Plus ATM, OR, putting down S$15K in some useless bank account at Citibank to get their ATM card? Does going with Citibank have any distinct benefits and if so which account should one consider?

Citibank only adds value for ATM use when there's specifically a Citibank ATM overseas in locations where it's near impossible or impossible to find ATMs without locally levied operator fees, and then only when you need local cash which is a dying need. But CIMB has some of their own ATMs regionally, so this isn't much of a difference in practice.

There are better ATM cards issued elsewhere, notably from Schwab (although sadly not Schwab Singapore). The Stack prepaid Mastercard issued in Canada is pretty decent, too. These cards only really work if you've got some reasonable "financial footprint" in the particular country.

celtosaxon 12-08-2019 09:05 PM

BBC, this weekend I was looking at two areas of asset planning that I haven’t really looked at in-depth before.

One is for when my kids start college in the US around 4 years from now. First I was surprised to learn that FAFSA now takes your last 2 years of finances into consideration. I’m looking into whether it might make sense to take the bulk of our equity holdings and just pay off our mortgage to remove it from FAFSA consideration. This seems a little crazy, but it would be two kids over 6 years.

Second, I was looking at what would happen when we move back to the US during our our kid’s college years. My spouse will no longer enjoy nonresident status, so if our condo goes en-bloc while we are there, it looks like the first 3 years of US residency we could still get some capital gains exemptions (2 of the last 5 we can still claim as being resident in our Singapore home), but after that, we risk an outrageous tax bill unless we can manage to terminate residency in time.

Not sure if you have encountered or thought about these issues before, just wanted to know if you had any advice.

BBCWatcher 13-08-2019 12:44 AM

Quote:

Originally Posted by celtosaxon (Post 122209565)
One is for when my kids start college in the US around 4 years from now. First I was surprised to learn that FAFSA now takes your last 2 years of finances into consideration. I’m looking into whether it might make sense to take the bulk of our equity holdings and just pay off our mortgage to remove it from FAFSA consideration. This seems a little crazy, but it would be two kids over 6 years.

There's another form: the CSS Profile. About 400 colleges and universities use that form for their need-based financial aid calculations, and it takes home equity into account. Many will cap the amount of home equity taken into consideration, but there is some consideration.

If all you care about is federal student loan eligibility, FAFSA optimization is fine -- and accelerating repayment of a mortgage works in that respect. (Still something to ponder given that you probably have a low fixed mortgage interest rate. Versus what is effectively an interest free deferral of some university expenses.) Otherwise, the best "tricks" for these purposes are retirement account contributions (retirement assets aren't counted in either FAFSA or CSS), paying down any other debt (credit card debt, student loan debt, family debt obligations), avoiding income surges in the years covered by your FAFSA and CSS forms (e.g. avoiding large net capital gains), and liquidating any custodial accounts your children have early enough.

Quote:

Second, I was looking at what would happen when we move back to the US during our our kid’s college years. My spouse will no longer enjoy nonresident status, so if our condo goes en-bloc while we are there, it looks like the first 3 years of US residency we could still get some capital gains exemptions (2 of the last 5 we can still claim as being resident in our Singapore home), but after that, we risk an outrageous tax bill unless we can manage to terminate residency in time.
Of course that hypothetical depends on the net capital gain, which might not be as much as you might think.

I suppose if you're concerned enough about that you could sell now (perhaps even with a leaseback), have a lower or zero net capital gain, and enjoy some Foreign Housing Exclusion years. Or remodel the heck out of the home since most of those expenses form part of the cost basis. Or both.

I don't think it's worth bending yourself into a pretzel to optimize tax. Often it makes sense to do what you want to do, enjoy life, and, OK, pay a little more tax perhaps.

Of course there's the possibility one or both children will attend a U.S. military academy, and then higher education expenses are no longer a factor, are they? ;)

celtosaxon 13-08-2019 12:06 PM

Interesting... you’ve always got great insight and have a wide perspective.

I hadn’t considered CSS because we intend to target only public universities, and since we are all moving as a family we should qualify for in-state tuition after the first year. That way, at least if we don’t get any aid or grants, it won’t break the bank. Are you familiar with any of the merit based aid? My impression is that it is very unique to the school and to the particular merit in question, and the academic ones are very competitive.

At this moment, the net gain on our property would not exceed the residential exemption if we filed MFJ, but it’s close. I think that means we are approaching a 6 figure tax bill if we lose the residential exemption. It is a condo built in the 70’s so en-bloc risk is there. For a variety of reasons (some being non-financial) I do not see us ever selling the place until we are forced to, so I guess we’ll just have to roll the dice.

BBCWatcher 13-08-2019 04:04 PM

Quote:

Originally Posted by celtosaxon (Post 122217354)
Are you familiar with any of the merit based aid? My impression is that it is very unique to the school and to the particular merit in question, and the academic ones are very competitive.

Yes, pretty much anything goes in defining "merit." Apparently there's even "merit" in Photoshopping an applicant's head onto a rower's or soccer player's body. ;)

Quote:

At this moment, the net gain on our property would not exceed the residential exemption if we filed MFJ, but it’s close. I think that means we are approaching a 6 figure tax bill if we lose the residential exemption. It is a condo built in the 70’s so en-bloc risk is there. For a variety of reasons (some being non-financial) I do not see us ever selling the place until we are forced to, so I guess we’ll just have to roll the dice.
You might be able to pull off a so-called "Section 1031 exchange" in that event, if you wish. A Section 1031 exchange would allow you to defer the capital gains -- to carry forward the original cost basis to a new piece of investment real estate. There are some tight deadlines involved to make the exchange. You are not allowed to exchange Singapore-based investment real estate for U.S.-based investment real estate, but there doesn't seem to be any restriction against exchanging for any other non-U.S.-based real estate (i.e. the replacement doesn't have to be in Singapore specifically). It seems you're also allowed to "trade down" in the exchange and pay partial capital gains tax, deferring the rest.

Certainly without an exchange the capital gains income will percolate through financial aid forms and won't be helpful if you're trying to appear less well-to-do for need-based aid. With an exchange, I'm not sure. Then again, rental income will percolate through those same forms, so that part is not helpful.

I believe with a Section 1031 exchange the biggest attainable "win" is to defer capital gains tax so long that the deferral outlasts your household, and your children (heirs) enjoy the stepped up cost basis upon inheritance. At least, I think that's how it works per current tax rules, which are always subject to change.

....Or you could dump the digs now, enjoy some Foreign Housing Exclusions, squeeze within/below the primary residence capital gains exclusion (US$500,000 per couple), get a new bite at a new capital gains exclusion in the U.S., and avoid the Singapore rental income impact on financial aid calculations. ;) En bloc value is already incorporated into the property's likely selling price, to some degree based on that probability.

celtosaxon 14-08-2019 01:17 AM

Quote:

Originally Posted by BBCWatcher (Post 122221044)
You might be able to pull off a so-called "Section 1031 exchange" in that event, if you wish. A Section 1031 exchange would allow you to defer the capital gains -- to carry forward the original cost basis to a new piece of investment real estate. There are some tight deadlines involved to make the exchange. You are not allowed to exchange Singapore-based investment real estate for U.S.-based investment real estate, but there doesn't seem to be any restriction against exchanging for any other non-U.S.-based real estate (i.e. the replacement doesn't have to be in Singapore specifically). It seems you're also allowed to "trade down" in the exchange and pay partial capital gains tax, deferring the rest.

Certainly without an exchange the capital gains income will percolate through financial aid forms and won't be helpful if you're trying to appear less well-to-do for need-based aid. With an exchange, I'm not sure. Then again, rental income will percolate through those same forms, so that part is not helpful.

I believe with a Section 1031 exchange the biggest attainable "win" is to defer capital gains tax so long that the deferral outlasts your household, and your children (heirs) enjoy the stepped up cost basis upon inheritance. At least, I think that's how it works per current tax rules, which are always subject to change.

I hadn’t even thought about the potential interplay between housing and schooling. This could have a compounding effect, but who knows how much aid we might qualify for, if not at least there is in-state tuition.

I was completely unaware of the 1031 exchange... guess I need to study up. Thanks for the advice as usual!

isaacsayshi 15-08-2019 11:56 PM

Sorry just probably doesn't have to do with investment. But... On job decision

If a person anticipate that a recession is coming, and had wanted to get a higher salary job next year after bonus period in April.

should he or she start applying for job first now since he/she feels that applying for new jobs nearer to recession is going to be tough, or stay in his current job for job security purpose ( n endure a lower salary)?

BBCWatcher 16-08-2019 07:54 AM

Quote:

Originally Posted by isaacsayshi (Post 122264500)
If a person anticipate that a recession is coming, and had wanted to get a higher salary job next year after bonus period in April.

should he or she start applying for job first now since he/she feels that applying for new jobs nearer to recession is going to be tough, or stay in his current job for job security purpose ( n endure a lower salary)?

The “correct” answer is situational — “it depends.” You’re solving and re-solving an optimization problem involving a “basket” of estimated probabilities, your tastes and preferences, your risk tolerance, and lots of other variables. However, you should be able to gather as much information as you can, specifically by quietly, discreetly exploring alternative opportunities, assuming you’re able to do that. (In some industries and situations it’s not possible or at least difficult.)

BBCWatcher 16-08-2019 08:26 AM

So here’s an interesting idea — new to me, invented a relatively few years ago — that perhaps one of my readers could adapt to Singapore: the Life Plan Community.

Life Plan Communities are typically not-for-profit, and the deal works like this. At or above a specific age (55 is a popular number), and while in decent or better health, you and your spouse (who can be younger) pay an entry fee to live in a Life Plan Community. The entry fee may or may not be partially refundable if you leave the community (including to your estate upon death). You also pay a monthly fee that’s adjusted annually for inflation, and if you exhaust your savings you’re allowed to stay for life (and your spouse’s life, if you enter with your spouse). In exchange, in the “Type A” variant, you get independent living, assisted living, skilled nursing care (nursing home), rehabilitation, memory therapies and supervision (dementia) — whatever care you need, for life, except for acute medical care (hospitalization, surgery) which is still provided in a nearby, existing hospital — that part doesn’t change, although the caregivers in the community obviously coordinate. All the degrees of care (except hospital care) are provided on campus, usually in your own home or, in the case of skilled nursing (nursing home), right alongside, next door. This is called “aging in place.”

You also get (again, “Type A”) a meal plan (and usually pretty posh — in-house chef), excursions, shopping shuttles, at least weekly home cleaning, linen and towel laundry service (long stay hotel-style housekeeping services), movie nights and other entertainment, a gym, a pool, concierge services, clubs, etc., etc. All at no additional charge. A few things would typically be additional charge, such as salon visits (getting your hair dyed if you want that, but haircuts are included), spa treatments, pet care (pets are allowed and even encouraged, but shampoos for your pets would typically be extra charge), foreign/long distance excursions, and florist services, as examples. Utilities are typically included, except for international phone charges. Home furnishings mostly not included, because the idea is to preserve a familiar home environment — bring the furniture you like. Homes are thoughtfully “senior friendly” with hand rails, a call button/pull cord, fold down seat in the shower, ramps instead of steps, and so forth.

Residents are involved in governance at least to a meaningful extent, if they want to be. In many communities neighbors check in on each other, and there’s often a daily “breakfast check”: if you don’t show up for breakfast or say “hello” to staff by 10 a.m., a staff member or neighbor comes to your home to see how you’re doing.

Loosely speaking, Life Plan Communities are like CPF LIFE on steroids. Instead of merely assuring a particular monetary outcome for life, they assure a particular lifestyle outcome for life, for you and for your significant other.

It seems like this could work really well in Singapore. CPF would be really well aligned with both the entry fee and the monthly charge, and there’s also often a lot of home equity available for an entry fee — or children could pitch in, enjoy a HDB unit in a mature estate without having to wait for a BTO in the “wrong” area, while their elders are completely cared for, for life, and in style.

Has something like this been tried yet? Does it exist? Would it work here, or would it need to be adapted?

pathfinder6 22-08-2019 12:40 PM

Hi BbcWatcher I think there are studio 'apartments' built in SG with elderly friendly features, there's even a kampung style setup in the North launched a few years back, no subscription program to tap on using the RA though. (First thing that came to mind when I read your latest post was some comedy where some jock thought it be a good idea to sell elderly scooters in such a setup and amidst other benefits)



I'm hoping to get some advice / help on next steps of working towards a decent retirement:

* Late 30s SGrean
* bad news - has a lost decade plus of settling down, getting a mortgage, car loan, endowment plans, building up a warchest + emergency funds while dabbling in SSB, SGS, ES3, and reits
* good news (hopefully) - some money available for investing for the next 2 decades, qualifying for .18% /no min. commission with SCB, signed up for Aviva GTL, took up another TL with FWD, discovered ST and BBCW this month when searching on passive portfolio
* Managed to top off SA to FRS this year
* Paying mortgage monthly by cash, did some projections it seems possible to hit 1m in OA and SA combined by 55. If withdrawal age doesn't change (big if), and assuming FRS is 300k by then, plan is to use withdrawn sum to pay off mortgage.

The missus and I have this agreement before we tied the knot, where she prefers a low touch approach to finance and she'd cover the bailout aspect in case of emergencies. Still I have been squirreling away spare cash /bonuses.

Leaving her money out of the picture, I'm looking at:

DBS Multiplier 50k (daily a/c)
Citi Maxigain 100k (emergency fund a/c)
CIMB Starsaver 150k (warchest a/c)
ES3 30k
SSB/SGS 30k
Reits etc 50k

Say I let cpf and ssb/sgs take care of bond aspect in my portfolio, how should I allocate into the 80/20 setup of IWDA and ES3? Lump sum over 6-9 months for the 200k, with SCB for ES3 and iB for IWDA?

I probably went overboard with the emergency fund account but at the same time maxed the step up interest, should I withdraw funds for investing considering my 20+ years investment horizon can potentially beat the 2+% pa from Citi?

Apologies for long post (I hope this doesn't void my club membership or make me ineligible for one).

BBCWatcher 22-08-2019 08:25 PM

Quote:

Originally Posted by pathfinder6 (Post 122371457)
* Managed to top off SA to FRS this year

That's notable -- congratulations.

Quote:

* Paying mortgage monthly by cash, did some projections it seems possible to hit 1m in OA and SA combined by 55. If withdrawal age doesn't change (big if), and assuming FRS is 300k by then, plan is to use withdrawn sum to pay off mortgage.
Yeah, about that: don't, not in the current or a similar mortgage interest rate environment. Your SA+OA will be earning a blended interest rate of somewhere between 2.5% and 4%, and the first dollars you withdraw have to come from SA (4% earning). So you're going to use 4%, or nearly 4%, interest dollars to pay off a 2% mortgage? Does. Not. Compute. Enjoy that interest rate spread as long as it lasts!

If you've got some other dollars earning 1% (for example) that have no higher calling, different story. Probably not, though. There's nothing wrong with a ~2% mortgage, assuming you're responsible.

Quote:

The missus and I have this agreement before we tied the knot, where she prefers a low touch approach to finance and she'd cover the bailout aspect in case of emergencies. Still I have been squirreling away spare cash /bonuses.
OK, ostensibly this agreement means you can have a somewhat more aggressive investment posture than typical advice would suggest, but that's up to you.

Quote:

Leaving her money out of the picture, I'm looking at:
DBS Multiplier 50k (daily a/c)
Citi Maxigain 100k (emergency fund a/c)
CIMB Starsaver 150k (warchest a/c)
ES3 30k
SSB/SGS 30k
Reits etc 50k
OK, so obviously this posture is pretty darn conservative for somebody in his late 30s who is investing for retirement. Also please bear in mind that your OA dollars are available to service your mortgage in an emergency. (You can switch from cash servicing to conserve cash in such an event.)

Quote:

Say I let cpf and ssb/sgs take care of bond aspect in my portfolio, how should I allocate into the 80/20 setup of IWDA and ES3? Lump sum over 6-9 months for the 200k, with SCB for ES3 and iB for IWDA?
Sure, that seems reasonable. Shiny Things and I have a friendly, minor disagreement about the preferred ES3:IWDA ratio. I prefer leaning more into IWDA while early to mid investing, then gradually easing back into a 50-50 ratio in the few years before retirement.

Quote:

I probably went overboard with the emergency fund account but at the same time maxed the step up interest, should I withdraw funds for investing considering my 20+ years investment horizon can potentially beat the 2+% pa from Citi?
Yes, that's a very reasonable forecast.

pathfinder6 22-08-2019 08:51 PM

Appreciate your feedback BBCWatcher, managed to execute my first trade on IB for IWDA today. Boring is good hur hur hur..

flowerpalms 23-08-2019 03:28 PM

Hi BBC, is me

Did you see my PM to you abt my insurance changes?

Anyway i am following shinys book as i am a noob invester. As the mbke is discontinued, shiny suggested best alternative is posb IS. Is it ok to use posb IS and iwda with scb?
G3b 40
A35 40
Iwda 20

Following shinys book, i have the 40 40 20 allocation. Can i ask if i invest 1k per month, is it workable? And also what confuses me is that after i reach 40 40 20 in the 5th month, shiny says in the book to buy whichever asset is short of to meet the target percentages.

Does this mean that after i reach my target percentages of 40 40 20, i do not have to invest 1k per month already? But just have to see whichever asset do not meet the 40 40 20 and just top up money?

Pls advise me how i can do this as for a start i have a lump sum 3k ready but moving forward i can do 1k per month paycheck to paycheck. Pls advise me...

BBCWatcher 23-08-2019 08:57 PM

Quote:

Originally Posted by flowerpalms (Post 122390143)
Did you see my PM to you abt my insurance changes?

No, but I’m slow in responding to private messages anyway — and don’t encourage them.

Quote:

Anyway i am following shinys book as i am a noob invester. As the mbke is discontinued, shiny suggested best alternative is posb IS. Is it ok to use posb IS and iwda with scb?
G3b 40
A35 40
Iwda 20
I prefer SSBs over A35, but it’s not a strong preference.

Quote:

Following shinys book, i have the 40 40 20 allocation. Can i ask if i invest 1k per month, is it workable? And also what confuses me is that after i reach 40 40 20 in the 5th month, shiny says in the book to buy whichever asset is short of to meet the target percentages.
G3B and A35 flow through POSB Invest Saver at $400/month each, so that’s viable. That leave $200/month for IWDA. You’d batch that up into something like a pair of $1,200 purchases of IWDA via Standard Chartered (one every six months), and that’ll work.

If you get bonuses or windfalls just use those to rebalance, but you don’t have to be maniacal about it.


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