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celtosaxon

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Thank you for sharing the information on I series bonds. Although I had heard about these, I’ve never really given them a serious look.

I’ve done some reading and it looks like these could also be a good college savings vehicle, provided our income is below the threshold and we file a joint when our kids are enrolled (a reasonable expectation).
 

EarthlyTreasure

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Hi BBC,
Assuming I have $15k in SRS with DBS, all from contribution made during Dec 2019.

If I withdraw $5k from SRS now and subsequently deposit $5k back to SRS before the end of 2020.

Will this $5k withdrawal be subjected to 5% penalty?

If yes, is this penalty applicable if my SRS maintained with OCBC or UOB too, for the same scenario.
Thank you!
 

BBCWatcher

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Assuming I have $15k in SRS with DBS, all from contribution made during Dec 2019.

If I withdraw $5k from SRS now and subsequently deposit $5k back to SRS before the end of 2020.

Will this $5k withdrawal be subjected to 5% penalty?
Yes, there's a penalty, unless you qualify for an exception. You'll be charged ordinary income tax on 100% of the $5K withdrawal, payable in arrears. If you later deposit $5K into your SRS within the same calendar year you can effectively "cancel out" the income tax (but not the penalty). The $5K SRS deposit is counted toward your annual tax relief limit ($80K) and toward your annual SRS contribution limit.

Besides the 5% penalty, this probably isn't a terrific time to be selling long-term invested assets, and the end of this year might not be (in comparison) a great time to buy them back. I'm no better at timing markets than anyone else, but "selling low, buying higher" would not be a surprising outcome.

If yes, is this penalty applicable if my SRS maintained with OCBC or UOB too, for the same scenario.
You're only allowed to have one Supplementary Retirement Scheme custodian at any one time. IRAS determines taxes, not any bank. The tax answers are the same no matter who your SRS custodian is.

I'm not sure why you need this $5K so badly, but if you're very careful shopping around then you can find some credit card balance transfer offers that'll cost less than 5%, provided you follow the lender's rules.
 
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BBCWatcher

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A Strange Morning in U.S. Treasuries

It's early morning in the United States, and according to Bloomberg here are the current U.S. Treasury yields as I write this:

3 Month: 0.43%
6 Month: 0.30%
12 Month: 0.25%
2 Year: 0.32%
5 Year: 0.40%
10 Year: 0.48%
30 Year: 0.88%

Now take a look at the TIPS:

5 Year: -0.76%
10 Year: -0.84%
20 Year: -0.26%
30 Year: -0.64%

This is just bonkers. It should be a "fun" Monday in the U.S. financial markets, the world's largest.
 
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moolala

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It's early morning in the United States, and according to Bloomberg here are the current U.S. Treasury yields as I write this:

3 Month: 0.43%
6 Month: 0.30%
12 Month: 0.25%
2 Year: 0.32%
5 Year: 0.40%
10 Year: 0.48%
30 Year: 0.88%

Now take a look at the TIPS:

5 Year: -0.76%
10 Year: -0.84%
20 Year: -0.26%
30 Year: -0.64%

This is just bonkers. It should be a "fun" Monday in the U.S. financial markets, the world's largest.

able to share what are you looking at?
Will add liquidity to ur position :)
 

BBCWatcher

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able to share what are you looking at?
Will add liquidity to ur position :)
I've added the link to Bloomberg's U.S. Treasuries Web site.

It'll be a wild ride today, but it's not the first, won't be the last, and the strategy is the same. The only tweak I've made is to "program" a ~6% higher monthly savings flow into long-term investments starting this month. "Stay the course." We're likely to enjoy some discounted shares to buy.
 

celtosaxon

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I've made that change, boosting the monthly purchase flow by ~6% effective later this month (March, 2020).

Do you execute your regular monthly purchases on a specific date?

I target the last day of the month +/- 2 business days, but no wiggle room outside of that.
 

moolala

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has the yield curve inverted?
Meaning recession coming?

Sorry, I forgot which curve invert which curve

is it 30 year under 2 year?
 

Extech

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Hi BBWatcher,

Dad just sold condo and downgraded to HDB, have about 500k sales proceed remaining. As he has already reached FRS in his CPF, CPF Board told him that he can choose to take the sales proceeds in cash. Alternatively, he can put it in his OA- however, if he wishes to withdraw it in the future, he needs to fully deplete the amount in his SA before I can withdraw from OA. Any advice what to do with the money- withdraw or put in OA? Would like to seek your opinion on the matter
 

ftpofmpo

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Yes.


The yield curve has inverted, yes. That typically means market consensus forecasts a recession, but that's not the same thing as guaranteeing a recession.

i think shinystuff said that inversion might be contributed by convexity hedging (relevant to mortgage securities) when interest rates fall. somewhat esoteric but not new
 

BBCWatcher

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Dad just sold condo and downgraded to HDB, have about 500k sales proceed remaining. As he has already reached FRS in his CPF, CPF Board told him that he can choose to take the sales proceeds in cash. Alternatively, he can put it in his OA- however, if he wishes to withdraw it in the future, he needs to fully deplete the amount in his SA before I can withdraw from OA. Any advice what to do with the money- withdraw or put in OA? Would like to seek your opinion on the matter
Here are some options that likely rank ahead of OA repayment:

1. He could top up his Retirement Account as high as the Enhanced Retirement Sum.

2. He could do the same for his spouse/partner. A portion of this top up might be eligible for tax relief.

3. He could top up his and his spouse’s/partner’s MediSave Accounts, but each of these top ups must fit within the CPF Annual Limit and Basic Healthcare Sum. There’s potential tax relief here.

4. If there’s still any room left below the CPF Annual Limit, he could make “all three” voluntary contributions to his and his spouse’s/partner’s accounts. At least some portion of these top ups will land in the Special Accounts.
 

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Hi BBCWatcher

Thanks very much for all your input on this forum – I feel like I have learned quite somewhat (even with my limited financial understanding) but I do have to admit that I have been quite haphazard with my life so far and am trying to get things straightened out as soon as I can. I am therefore hoping for some feedback on my next steps.

As background, I am a 34 year old Singaporean earning approximately S$16k/month. Single with no current plans to get married or have kids in the foreseeable future. I somehow cobbled together the following assets and liabilities:

- Cash - approximately S$350k sitting in a bank account
- SRS - S$15.3k that is still sitting as cash
- ES3 - approximately S$100k with SCB
- IWDA - approximately US$25k with IB (just started this year)
- CPF - approximately S$30k in OA; S$35k in SA and S$45k in MA
- Rental - approximately S$1.5k/month
- Mortgage - approximately S$800k at 1.98% (about S$3k/month)
- Insurance - AXA Shield (Plan A)

I have a few specific questions (but would, of course, also appreciate any other insights you may have):

1. I know you are a strong proponent of DII and believe that it is foundational. Given that CareShield Life is starting in a bit (albeit without too much details yet), is it still a necessity to get a private DII? If so, what would you recommend as probably the best one we currently have in Singapore? (I think I read somewhere a while ago that you favoured GE Pay Assure, but cannot seem to find the entry anymore and could be mistaken).

2. I recognise that I am holding a bit too much cash right now. I was intending to use some when purchasing my property but realised that taking up a 1.98% loan probably makes more sense at this point in time (if interest rates go up, I can refinance or prepay?). What should my next steps on investments generally be (working on the assumption that I have S$8k/month for investment after deducting rent, mortgage and general expenses)?

I am guessing that I will need 6 months of emergency monies (S$16k x 6 = S$96k) to be held in relatively liquid asset – SSB?

I am probably over-weighted on ES3 (too much local exposure, but that was all I knew when I first started investing in things a few years ago), so should stop accumulating more and simply DCA monthly into IWDA. Given the recent market volatility, I am a bit hesitant to throw in a lump sum of S$250k at one go – would doing S$10-20k/month be wise? Or would you recommend investing more a month even if I am phasing in gradually?

I should also probably get MBH for the bond leg – maybe 14% if calculating based on 120 – 34 years old? But this also ties in with my next question regarding SRS.

3. Should I be using my SRS to buy ES3/MBH? I understand that the bond leg is meant to also serve as a war chest. But how does that work if the SRS is siloed by itself? If I should be treating the SRS as a separate pile of monies that cannot be intermingled, should my SRS investments then mirror somewhat my general investments? Grateful for your thoughts on this.

4. Should I be using cash or OA to finance my mortgage? With OA's yield currently being higher than my mortgage, is it accurate to say that if I use my OA, that leaves my cash free to earn yields higher than OA's 2.5% (of course assuming with hope that I get my life straightened out)? Should it always be OA in all instances then (since if mortgage is higher than OA's yield, then all the more reason I should be investing my cash to earn yields higher than OA's 2.5%)?

Is there something else that I need to consider with keeping my OA intact (maybe this ties in with my next question regarding CPF generally)?

5. If I am currently hitting the CPF annual limit, it seems that I cannot avail myself to the various CPF voluntary contributions (MA or all 3 accounts). Is it accurate to say that if I do any voluntary contributions myself before the end of the year, then, when the CPF annual limit is hit before the end of the year, my employer no longer needs to contribute what it would have to otherwise? If so, will not make sense for me to make any voluntary contributions at all.

If the above is the case, it seems like the only CPF play I can make is to transfer my OA to my SA to earn the higher guaranteed 4%. Given that it is irreversible, I am just not too sure when I should be comfortable to make such transfer – I guess I have to consider the response to question 4 first.

Thanks very much again!
 

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As background, I am a 34 year old Singaporean earning approximately S$16k/month. Single with no current plans to get married or have kids in the foreseeable future. I somehow cobbled together the following assets and liabilities:
- Cash - approximately S$350k sitting in a bank account
- SRS - S$15.3k that is still sitting as cash
- ES3 - approximately S$100k with SCB
- IWDA - approximately US$25k with IB (just started this year)
- CPF - approximately S$30k in OA; S$35k in SA and S$45k in MA
I think there's a good argument here in favor of transferring that S$30K in your OA into SA, and for continuing monthly transfers. You've got gobs and gobs of liquidity plus a high income, so you don't actually need OA as OA.

- Rental - approximately S$1.5k/month
- Mortgage - approximately S$800k at 1.98% (about S$3k/month)
- Insurance - AXA Shield (Plan A)
[....]
1. I know you are a strong proponent of DII and believe that it is foundational. Given that CareShield Life is starting in a bit (albeit without too much details yet), is it still a necessity to get a private DII?
Yes. CareShield Life is a welcome improvement, but its definition of disability is extremely narrow, and even if it does pay something it's only a tiny fraction of that S$16K/month income you're currently earning.

If so, what would you recommend as probably the best one we currently have in Singapore? (I think I read somewhere a while ago that you favoured GE Pay Assure, but cannot seem to find the entry anymore and could be mistaken).
Yes, Great Eastern seems to offer the best T&Cs, but all of the DII policies are better than none.

2. I recognise that I am holding a bit too much cash right now. I was intending to use some when purchasing my property but realised that taking up a 1.98% loan probably makes more sense at this point in time (if interest rates go up, I can refinance or prepay?).
I think that makes sense, assuming you've got a long-term perspective and reasonable discipline. At present it looks like we could even see some lower mortgage interest rates.

What should my next steps on investments generally be (working on the assumption that I have S$8k/month for investment after deducting rent, mortgage and general expenses)?
Really just shift into an age-appropriate "2 fund" or "3 fund" portfolio allocation, I'd say. The typical portfolio allocation guidance is that you're currently too light on stocks and, within stocks, too light on the global stocks allocation. Fortunately for you, by sheer coincidence, this appears to be an excellent time to fix that.

I am guessing that I will need 6 months of emergency monies (S$16k x 6 = S$96k) to be held in relatively liquid asset – SSB?
Actually, it's best to base your emergency reserve on your monthly household spending. So if you're figuring you need S$8K/month to keep your household of one afloat, then S$96K would be equivalent to 12 months. That's usually a very good buffer, and most people aren't that well buffered. Also, conceivably you could reduce monthly household expenses below S$8K in an emergency, but let's use S$96K as a target.

Some of that S$96K would be held in an ordinary bank account, and if you can eke out a bit of extra interest for behaviors you would have anyway (such as a salary deposit), great, no problem. So maybe S$50K in SSBs?

I am probably over-weighted on ES3 (too much local exposure, but that was all I knew when I first started investing in things a few years ago), so should stop accumulating more and simply DCA monthly into IWDA. Given the recent market volatility, I am a bit hesitant to throw in a lump sum of S$250k at one go – would doing S$10-20k/month be wise? Or would you recommend investing more a month even if I am phasing in gradually?
Sure, that's fine. For example, if you're planning to reposition S$250K into stocks, on top of your monthly savings flow, then you might split that up into 16 installments of S$15,625 each.

I wouldn't blame you if you feel like crawling into a cave (so to speak) since the world seems so crazy at this instant, so I would also nail down some DII and drop $7,000 into your CPF Special Account for tax relief, and you should get quite a bit of tax relief at your income level. Also, if your variable pay (commissions, bonus, 13th month, etc.) is less than $30,000 then you should have some room below the CPF Annual Limit. If so, you could take a look at making a MediSave deposit for some more tax relief. Once your MediSave Account hits the Basic Healthcare Sum and your Special Account hits the Full Retirement Sum -- which shouldn't happen too terribly long from now with contributions from work, OA to SA transfers, and top ups with tax relief -- your OA will start swelling. And at that point you could start servicing your mortgage (at regular pace: 1.98% or similar is really nice) using OA dollars, then have that much more available for plowing into long-term savings outside CPF.

I should also probably get MBH for the bond leg – maybe 14% if calculating based on 120 – 34 years old?
Maybe, probably, a bit, eventually, but CPF SA and MA are bond-like, and they're better in terms of yield and tax relief.

But this also ties in with my next question regarding SRS.
3. Should I be using my SRS to buy ES3/MBH?
Yes, I think so.

I understand that the bond leg is meant to also serve as a war chest. But how does that work if the SRS is siloed by itself? If I should be treating the SRS as a separate pile of monies that cannot be intermingled, should my SRS investments then mirror somewhat my general investments? Grateful for your thoughts on this.
It's much the same with CPF monies. And the fundamental answer is that you should still have enough flexibility to rebalance your portfolio periodically (annually, let's suppose). But if you don't, OK, so be it, the tax relief is still valuable.

4. Should I be using cash or OA to finance my mortgage? With OA's yield currently being higher than my mortgage, is it accurate to say that if I use my OA, that leaves my cash free to earn yields higher than OA's 2.5% (of course assuming with hope that I get my life straightened out)? Should it always be OA in all instances then (since if mortgage is higher than OA's yield, then all the more reason I should be investing my cash to earn yields higher than OA's 2.5%)?
As I mentioned above, I think you slam your MA and SA hard (regular contributions, OA to SA transfers, and top ups with tax relief), then start servicing your mortgage once your OA starts to fill up again from paychecks. When you have gobs of liquidity and a high income, you're entitled to play that particular game and play it well.

Is there something else that I need to consider with keeping my OA intact (maybe this ties in with my next question regarding CPF generally)?
Liquidity for purposes of servicing your mortgage, but you've got that.

5. If I am currently hitting the CPF annual limit, it seems that I cannot avail myself to the various CPF voluntary contributions (MA or all 3 accounts).
Are you? If your variable pay is under $30,000, you should have some room below the CPF Annual Limit.

Is it accurate to say that if I do any voluntary contributions myself before the end of the year, then, when the CPF annual limit is hit before the end of the year, my employer no longer needs to contribute what it would have to otherwise? If so, will not make sense for me to make any voluntary contributions at all.
No, your compulsory contributions are always made. You're not going to lose anything that way. However, if, for example, you exceed the CPF Annual Limit by making a too large voluntary contribution into your MediSave Account, the overage will be returned to you without interest.

If the above is the case, it seems like the only CPF play I can make is to transfer my OA to my SA to earn the higher guaranteed 4%. Given that it is irreversible, I am just not too sure when I should be comfortable to make such transfer – I guess I have to consider the response to question 4 first.
That's not the only play. You can also deposit $7,000 directly into your Special Account for tax relief. Yes, these are irreversible, but you're very well compensated with 4% interest and, if you keep this up for just a few years, with a Full Retirement Sum-funded Retirement Account at age 55 plus lots of dollars available for withdrawal at age 55+ plus lots of tax relief along the way, which you can also save and invest. As long as you're maintaining adequate or better liquidity throughout -- and goodness knows you've got that already since you're in absolutely no danger of missing a $3K/month mortgage payment -- it's all good.

CPF SA is essentially like a 20 year bond for you (a weirdly high yielding one with a purchase rebate), and CPF MA is weirdly high yielding prepaid medical spending card, also with a purchase rebate.

watching this video makes me worry about investing in usd...
What do you mean when you say "investing in USD"? Do you mean buying U.S. Treasuries, or buying a fund that invests in U.S. dollar denominated corporate bonds? Is that what you plan to do (or are doing) and, if so, why?
 
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celtosaxon

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watching this video makes me worry about investing in usd...

BBCW, will like to hear ur views.. thanks

https://youtu.be/DaPmKXWL8c8

Sadly, there are a lot of “low information” people out there who swallow that stuff up... hook line and sinker!

The counter argument is that lower borrowing costs and lower energy costs end up being a huge benefit to both businesses and consumers. Those lower costs help keep inflation low and allow faster economic expansion... and we enter a new golden economic age! ;)

What will really happen? Probably something less spectacular... but far from the fiction spewed in that video! Some of the statements in there are just laughable.
 

moolala

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Hey BBC, do you have any idea how ETN work?

Does the issuer pump money daily into the ETN? Some are designed to be held only daily so it's hard to comprehend who is the one giving value to the prices

As I understand it, it's basically a debt that matures. So my question becomes where's the money coming from on a daily basis?

For eg TVIX
Basically is it like a pump and dump kind of play i.e.by traders? Or does the issuer actually pump in the cash to support the prices?
 
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