CPFIS Question - Need Advice

[meekiatah]

Hi all

Started reading Money Mind recently and am very motivated after reading DW's blog and all the info in this section of HWZ forum.

Have this question that I hope that you guys who are more analytical can advise me.

Am approaching 40 next year. My CPF OA stands at $70k++ and CPF SA at $4k++. I know at my age now, this is a miserable amount. But, well... Time passed is like water flowing out the tap > gone forever and no use crying over it..

My available portion for investment in CPF OA is $50k for Professionally Managed Products and $25k for Stocks.

Here's what I'm thinking over and hope that you guys who are outside the picture can advise me. Please assume that I have no housing loan nor intending to purchase a hdb flat within the next 5-10 years.

1. Transfer $$$ from my CPF OA to CPF SA to make up the $60k to maximize the 5% interest from CPF. According to the press release here:

In view of the uncertainty in the global economy and low interest rate environment, the Government has decided to further extend the 4% floor rate for interest earned on all SMRA monies for another year until 31 December 2014. SMRA monies within the first $60,000 of a member’s combined balances will therefore continue to earn a 5% interest rate.

for year 2014, I will make $3,000 in interest. But, from year 2015 onwards, these money in my CPF SA will only make minimum 3.5% pa. By doing so, it will also reduce my available amount in my CPF OA.


Here's the second option that I'm considering:

2. Leave everything as it is now. As my focus is on building income from collecting dividends (hence my reference to DW's blog), I will wait for prices to dip and use the available money in CPF OA to purchase stocks. However, doing this option, I'm not sure if I can beat CPF's 5% (and 3.5% from 2015) interest rates. Yes, I'm aware that any gains or dividends resulting from my CPF investment will go back to my CPF account.



The focus here is to build a reasonable retirement fund of about, say, $500k in 15 years.


A bit about my background. I started my career in accountancy, then switch to IT, then got lost for about 10 years or so. This probably explains the miserable CPF that I have. Having "got lost" for about 10 years, my skillset in IT are not relevant anymore. Currently, my monthly income is about $1.8k. I'm saying "about" as it's daily pay contract job which don't pay CPF. My focus is on saving and building a emergency fund + investment fund from my salary.

Now approaching 40, I'm focused on building a retirement fund and am aware that I don't have many "10 years" to waste. I'm living in a room flat (my dad's) which is fully paid up and will be passed on to me in future. So, I should say there is no concern over housing. Do not have CI insurance (big regret) and don't think I can get CI insurance at affordable premium now (although I've not spoken to any FA about this). Am not married currently, but will not rule out this possibility as you won't know when the right person will appear.




Ok, that's about all that I can think of now. Maybe it's a lot that I'm asking about in this thread. But, as someone who is limited in cash and having 2 legal claims (from a traffic accident) hanging over my head, I really can't afford to pay someone for professional advice. I'll be looking at this thread closely. However, the nature of my job means that I will have limited time to respond. Hence, please don't take my infrequent response as being having no interest in this thread.

Thanks....

 

[Alfdorel]

Hi,

If you are thinking of investment for retirement savings, have it occur to you that the investment might wipe out your retirement savings as well? Many people are too focus on how investment will make money for them, but not lose money for them. Investments are not guaranteed, you may earn $400k worth of stocks in 10 years time, but what about 1 year late everything drops back to zero? In investment line, everything is possible.

Although right now there are many investment policies from different insurance companies which you can consider to buy for retirement, but the returns are not as high as you think. Over 15 years, and around $50k to invest, i doubt you can get as much as $500k in just 15 years time, unless you are willing to lose $50k in a high risk high return kind of investment.

Meanwhile, i think you should be more worried of CI coverage. What happens if you really got diagnosed of CI? All your investment in CPF you can't draw out, you will wipe off your savings, worst of all, you wouldn't be able to work to sustain your living. You may feel that it's late to start now, but it's even late if you don't start at all. Get coverage for health and then focus on savings or investment for retirement. People are willing to insure their car, their house but not themselves? You, yourself my sir, is your own money maker, no one else.

Just my two cents thoughts.

 

[meekiatah]

Alfdorel

Thanks for your reply.

Yes, I'm aware that investment can make money as well as lose money, which is why I'm trying to decide between parking my money in CPFSA for the guaranteed 5% (2014) and 3.5% (2015 onwards) or leaving it in my CPFOA for investment. At least, in CPFSA, the interest is guaranteed although not high. But, for a investment noob like me, it's a safer option for me.

I agree that it's not easy to build a $500k retirement fund from my $50k in 15 years. Maybe I should say that the $500k target is to be made up from my CPF fund + cash holding. Currently, I'm putting aside as much as 50% from my salary (50% is about $1,000) to accumulate fund for investment, while trying to pick up investment knowledge.

Point noted about investment policy and CI coverage. I'm not really thinking about ILP at all as I feel that insurance and investment should not really be linked together. CI is something that I had but "lost it" during the years that I "got lost". A big regret as that policy is something that I took during my teenage years and the premium is pretty low. Now, unless I can get my emergency fund set aside, I can't think of undertaking a recurring payment as my job is not permanent. Haizz...

 

[peacefulday]

since i got no commitment on my housing too, i'd transferred my QA to SA in order to achieve a 4~5% pa guaranteed interest in return.

take a $60k in yr SA as an example, not a compound calculate and in a 15years time you will receive $45k. Yield returned will be 75%.

Yes, DW had a good dividend investment portfolio with 6~7% (due to REITs stocks) and unrealised profit near to 21% till date (could be fluctuating). But bear in mind, to achieve that unless one need to have a same capital and same purchase stock value as he did. Timing is very important.

If there is a guarantee 5% for cash investment just as CPF SA give, i will definitely show hand my cash...lol. Thus, I needed to find ways to make cash work even harder as FD only give a guarantee of 1%+ interest as now.

Buy term self invest, Buy government link stocks although it's not likely to achieve yr 500k target but at least it's safer.

just my 2 cents opinion

 

[NiteX2]

It's good that you found your way back, good job!

If you are very sure that you will not need your cpf OA for housing purposes at all, then it would make sense to transfer them into your SA account to accumulate money faster. There is no indication that the interest rates from the account will be reduced starting 2015 and I see no reason to as well since interest rates are at record low levels.

Main thing now is to get yourself a shield plan to cover against medical expenses. After which you can look into getting a term cover against critical illness while you build up your cash for retirement.

I will try to generate a quote for you when I'm free tonight for term coverage.

 

[chopra]

agent, first thing is not to generate; is to find out what insurance he got. there is a 10% chance (according to our prime minister) that he does not have a min of medishield. you trying to smoke issit? medishield for a 1.8k income earner might be good enough.

don't offer "free" advice, vulture agent.

 

[chopra]

ts, I have to be frank here. your earning is uncertain and you want ci coverage.

for what purpose? touch wood, if you have ci, do you plan to use the money for self or pass to others? if latter, are you ok to wait a few years , to pass them the money when you die (assuming a few years left)?


on investment. you need to read up more. as you do not have enough and you are in a mid life stage, you need to put more into bonds and fixed deposit. cpf sa in fact is good enough. don't compare with dw as he is 10years younger, so can stomach more recession than you.

good luck in your planning. posting here is a good start.

lastly, I prefer meepok.

 

[NiteX2]

agent, first thing is not to generate; is to find out what insurance he got. there is a 10% chance (according to our prime minister) that he does not have a min of medishield. you trying to smoke issit? medishield for a 1.8k income earner might be good enough.

don't offer "free" advice, vulture agent.

Please do not do selective reading in future mr know it all. TS already mentioned his policies all poof during the years he got lost. If he has a genuine concern to want to be covered, why should you stop him? Are you going to pay him if sth should happen? It's like someone wants to see doctor, but you tell him not to cos he "wouldn't" be able to afford it

Stop doing your personal attacks, lurker

 

[meekiatah]

Please do not do selective reading in future mr know it all. TS already mentioned his policies all poof during the years he got lost. If he has a genuine concern to want to be covered, why should you stop him? Are you going to pay him if sth should happen? It's like someone wants to see doctor, but you tell him not to cos he "wouldn't" be able to afford it

Stop doing your personal attacks, lurker

NiteX2

Sorry that I neglect to mention that although my insurance policies are gone now, I do have incomeshield plan that is paid via medisave yearly automatically.

My apologise if this lead to any misunderstanding.

 

[meekiatah]

agent, first thing is not to generate; is to find out what insurance he got. there is a 10% chance (according to our prime minister) that he does not have a min of medishield. you trying to smoke issit? medishield for a 1.8k income earner might be good enough.

don't offer "free" advice, vulture agent.

Bro

Thanks for the headsup. I do have inconeshield that is paid via medisave. My fault that I neglect to mention it in the first part.

 

[meekiatah]

ts, I have to be frank here. your earning is uncertain and you want ci coverage.

for what purpose? touch wood, if you have ci, do you plan to use the money for self or pass to others? if latter, are you ok to wait a few years , to pass them the money when you die (assuming a few years left)?


on investment. you need to read up more. as you do not have enough and you are in a mid life stage, you need to put more into bonds and fixed deposit. cpf sa in fact is good enough. don't compare with dw as he is 10years younger, so can stomach more recession than you.

good luck in your planning. posting here is a good start.

lastly, I prefer meepok.

Thanks for the frankness.

Am posting thisduring my toilet break at work hence can't do a detailed reply. Will follow up when I get home tonight.